-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JtsPo1CYyCHWUGKny7XWxo3fTykW8Ihxe5z2DTjWqLHbOlynH49BFhuWUoGE5n+s j9XR7UNhiMx/79YuZPlGuA== 0000003941-98-000015.txt : 19981130 0000003941-98-000015.hdr.sgml : 19981130 ACCESSION NUMBER: 0000003941-98-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED PRODUCTS CORP /DE/ CENTRAL INDEX KEY: 0000003941 STANDARD INDUSTRIAL CLASSIFICATION: 3523 IRS NUMBER: 380292230 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05530 FILM NUMBER: 98751103 BUSINESS ADDRESS: STREET 1: 10 S RIVERSIDE PLZ STREET 2: SUITE 400 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3124541020 10-Q 1 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR ( ) 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 1-5530 ALLIED PRODUCTS CORPORATION ------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 38-0292230 ------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 10 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606 - - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (312) 454-1020 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 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 requirement for the past 90 days. Yes x No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 11,818,609 common shares, $.01 par value, as of October 31, 1998. ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION --------------------- ITEM 1.FINANCIAL STATEMENTS INTRODUCTION CONDENSED CONSOLIDATED BALANCE SHEETS- September 30, 1998 and December 31, 1997 CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three and Nine Months Ended September 30, 1998 and 1997 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-Nine Months Ended September 30, 1998 and 1997 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PART II.OTHER INFORMATION ----------------- ITEM 1.NOT APPLICABLE ITEM 2.NOT APPLICABLE ITEM 3.NOT APPLICABLE ITEM 4.NOT APPLICABLE ITEM 5.OTHER INFORMATION ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K SIGNATURES ---------- EXHIBIT INDEX -------------- PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES INTRODUCTION The condensed consolidated financial statements included herein (as of September 30, 1998 and for the three and nine months ended September 30, 1998 and 1997) have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments which are, in the opinion of management, necessary to present fairly the condensed consolidated financial information required therein. All such adjustments are of a normal, recurring nature. The information as of December 31, 1997 is derived from the audited year end balance sheet for that year. 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, although 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. The results of operations for the three and nine month periods ended September 30, 1998 and 1997 are not necessarily indicative of the results to be expected for the full year. ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS
September 30, 1998 December 31, 1997 -------------------- ------------------- Current Assets: Cash and cash equivalents ........................ $ 428,000 $ 609,000 -------------------- ------------------- Notes and accounts receivable, less allowances of $699,000 and $531,000, respectively ........... $ 64,928,000 $ 54,729,000 -------------------- ------------------- Inventories: Raw materials .................................. $ 10,015,000 $ 6,193,000 Work in process ................................ 107,855,000 58,090,000 Finished goods ................................. 16,155,000 14,419,000 --------------------- ------------------- $134,025,000 $ 78,702,000 --------------------- ------------------- Deferred tax asset ................................ $ 12,773,000 $ 12,773,000 -------------------- ------------------- Prepaid expenses .................................. $ 540,000 $ 415,000 -------------------- ------------------- Total current assets ........................ $212,694,000 $ 147,228,000 -------------------- ------------------- Plant and Equipment, at cost: Land ........................................... $ 2,366,000 $ 2,243,000 Buildings and improvements ..................... 56,589,000 40,750,000 Machinery and equipment ........................ 62,088,000 51,339,000 -------------------- ------------------- $ 121,043,000 $ 94,332,000 Less-Accumulated depreciation and amortization .. 47,792,000 48,811,000 -------------------- ------------------- $ 73,251,000 $ 45,521,000 -------------------- ------------------- Other Assets: Deferred tax asset ............................. $ 4,071,000 $ 4,071,000 Deferred charges (goodwill), net of amortization 6,173,000 1,491,000 Other .......................................... 2,629,000 1,472,000 -------------------- ------------------- $ 12,873,000 $ 7,034,000 -------------------- ------------------- $ 298,818,000 $ 199,783,000 ==================== ===================
The accompanying notes to consolidated financial statements are an integral part of these statements. ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' INVESTMENT
September 30, 1998 December 31, 1997 -------------------- ------------------- Current Liabilities: Revolving credit agreement ........................ $ 116,000,000 $ 50,400,000 Current portion of long-term debt ................. 388,000 268,000 Accounts payable .................................. 50,560,000 19,923,000 Accrued expenses .................................. 26,493,000 25,145,000 -------------------- ------------------- Total current liabilities .................. $ 193,441,000 $ 95,736,000 -------------------- ------------------- Long-term debt, less current portion shown above .... $ 1,168,000 $ 670,000 -------------------- ------------------- Other long-term liabilities ......................... $ 10,646,000 $ 10,353,000 -------------------- ------------------- Commitments and Contingencies Shareholders' Investment: Preferred stock: Undesignated-authorized 1,500,000 shares at September 30, 1998 and December 31, 1997; none issued ............................ $ -- $ -- Common Stock, par value $.01 per share; authorized 25,000,000 shares; issued 14,047,249 shares at September 30, 1998 and December 31, 1997 ...... 140,000 140,000 Additional paid-in capital ....................... 94,309,000 94,709,000 Retained earnings ................................ 41,578,000 40,428,000 -------------------- ------------------- $ 136,027,000 $ 135,277,000 Less: Treasury stock, at cost: 2,160,740 and 2,144,263 shares at September 30, 1998 and December 31, 1997, respectively ................ (42,464,000) (42,253,000) -------------------- ------------------- Total shareholder's equity ................. $ 93,563,000 $ 93,024,000 -------------------- ------------------- $ 298,818,000 $ 199,783,000 ==================== ===================
The accompanying notes to consolidated financial statements are an integral part of these statements. ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME(LOSS)
Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 1998 1997 1998 1997 ------------- ------------- ------------- ------------- Net sales ........................... $ 77,184,000 $ 63,714,000 $ 229,000,000 $ 213,497,000 Cost of products sold ............... 81,071,000 47,515,000 194,953,000 160,064,000 ------------- ------------- ------------- ------------- Gross profit(loss) ................ $ (3,887,000) $ 16,199,000 $ 34,047,000 $ 53,433,000 ------------- ------------- ------------- ------------- Other costs and expenses: Selling and administrative expenses $ 9,571,000 $ 9,217,000 $ 27,101,000 $ 26,485,000 Interest expense .................. 1,802,000 847,000 4,339,000 2,499,000 Other (income) expense, net ....... 379,000 (1,623,000) (1,485,000) (1,082,000) ------------- ------------- ------------- ------------- $ 11,752,000 $ 8,441,000 $ 29,955,000 $ 27,902,000 ------------- ------------- ------------- ------------- Income (loss) before taxes .......... $ (15,639,000) $ 7,758,000 $ 4,092,000 $ 25,531,000 Provision (credit) for income taxes . (5,343,000) 2,745,000 1,513,000 9,141,000 ------------- ------------- ------------- ------------- Net income (loss) and comprehensive net income(loss) .................. $ (10,296,000) $ 5,013,000 $ 2,579,000 $ 16,390,000 ============= ============= ============= ============= Earnings (loss) per common share: Basic $ (0.86) $ 0.42 $ 0.22 $ 1.35 ============= ============= ============= ============= Diluted $ (0.86) $ 0.41 $ 0.21 $ 1.32 ============= ============= ============= ============= Weighted average shares outstanding: Basic 11,914,000 12,091,000 11,920,000 12,165,000 ============= ============= ============= ============= Diluted 11,996,000 12,358,000 12,069,000 12,412,000 ============= ============= ============= ============= Dividends per common share $ 0.04 $ 0.04 $ 0.12 $ 0.11 ============= ============= ============= =============
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, ------------------------------- 1998 1997 ------------- -------------- Cash Flows from Operating Activities: Net income ........................................................ $ 2,579,000 $ 16,390,000 Adjustments to reconcile net income to net cash provided from (used for) provided from operating activities: Gains on sales of operating and nonoperating assets ............ (1,962,000) (151,000) Depreciation and amortization .................................. 4,406,000 3,840,000 Amortization of deferred charges ............................... 240,000 133,000 Deferred income tax provision .................................. 958,000 8,065,000 Changes in noncash assets and liabilities, net of noncash transactions: (Increase) in accounts receivable ........................... (7,710,000) (9,572,000) (Increase) in inventories ................................... (52,387,000) (12,079,000) (Increase) decrease in prepaid expenses ..................... (107,000) 16,000 Increase (decrease) in accounts payable and accrued expenses 30,143,000 2,418,000 Other,net ...................................................... (713,000) 65,000 ------------- ------------- Net cash provided from (used for) operating activities ............ $ (24,553,000) $ 9,125,000 ------------- ------------- Cash Flows from Investing Activities Additions to plant and equipment .................................. $ (31,411,000) $ (10,165,000) Payment for businesses acquired ................................... (10,953,000) -- Proceeds from sales of plant and equipment ........................ 3,373,000 414,000 ------------- ------------- Net cash used for investing activities ............................ $ (38,991,000) $ (9,751,000) ------------- ------------- Cash Flows from Financing Activities: Borrowings under revolving credit agreement ....................... $ 131,400,000 $ 83,100,000 Payments under revolving credit agreement ......................... (65,800,000) (67,000,000) Payments of short and long-term debt .............................. (202,000) (145,000) Purchase of treasury stock ........................................ (1,171,000) (15,995,000) Dividends paid .................................................... (955,000) (811,000) Stock option transactions ......................................... 91,000 1,147,000 ------------- -------------- Net cash provided from financing activities .......................... $ 63,363,000 $ 296,000 ------------- -------------- Net (decrease) in cash and cash equivalents .......................... $ (181,000) $ (330,000) Cash and cash equivalents at beginning of year ....................... 609,000 833,000 ------------- -------------- Cash and cash equivalents at end of period ........................... $ 428,000 $ 503,000 ============= ==============
The accompanying notes to condensed consolidated financial statements are an integral part of the statements Allied Products Corporation and Consolidated Subsidiaries Notes to Condensed Consolidated Financial Statements (1) Accrued Expenses ---------------- The Company's accrued expenses consist of the following: 9/30/98 12/31/97 ------------ ------------ Salaries and wages $ 7,726,000 $ 5,560,000 Warranty 5,290,000 4,938,000 Self insurance accruals 1,576,000 2,858,000 Pensions, including retiree health 5,642,000 6,439,000 Taxes, other than income taxes 1,812,000 1,158,000 Environmental matters 1,403,000 1,810,000 Other 3,044,000 2,382,000 ------------ ------------ $ 26,493,000 $ 25,145,000 ============ ============ (2) Earnings Per Common Share ------------------------- During 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128)--Earnings per Share. Earnings per common share and weighted average shares outstanding for the three and nine months ended September 30, 1997 have been restated to reflect the effect of adopting the provisions of this accounting standard. Basic earnings per common share for the periods in 1998 is based on the average number of common shares outstanding (11,914,000 and 11,920,000 for the three and nine months ended September 30, 1998, respectively). Diluted earnings per common share for the same periods is based on the average number of common shares outstanding, as noted above, increased by the dilutive effect of outstanding stock options (82,000 and 149,000 for the three and nine months ended September 30, 1998, respectively). Basic earnings per common share for the periods in 1997 is based on the average number of common shares outstanding (12,091,000 and 12,165,000 for the three and nine months ended September 30, 1997, respectively). Diluted earnings per common share for the same periods in 1997 is based on the average number of common shares outstanding, as noted previously, increased by the dilutive effect of outstanding options (267,000 and 247,000 for the three and nine months ended September 30, 1997, respectively). (3) Treasury Shares --------------- During the third quarter of 1998, the Company's Board of Directors authorized the purchase of up to 500,000 additional shares of the Company's outstanding common stock subject to prevailing market conditions. See Note 10 regarding an Amendment to the Amended and Restated Credit Agreement and the availability of funds related to these future treasury stock purchases. (4) Acquisitions ------------ During the second quarter of 1998, the Company acquired substantially all of the assets and assumed certain liabilities of Great Bend Manufacturing Company (Great Bend) located in Great Bend, Kansas. Great Bend manufactures and sells tractor-mounted front-end loaders which are used principally in agricultural applications. The Company also acquired in the second quarter of 1998 substantially all of the assets of Universal Turf Equipment Corporation (Universal Turf) located in Opp, Alabama. Universal Turf manufactures and sells turf maintenance implements including reel mowers, verti-cut mowers, reel grinders and spraying equipment. The impact of these acquisitions on the consolidated operating results of the Company in the third quarter and nine month periods of 1998 is not considered significant. (5) Dispositions/Sales of Assets ---------------------------- "Other (income) expense, net" for the nine months ended September 30, 1998 includes gains of approximately $1,962,000 ($10,000 loss in the third quarter) primarily related to the sale of idle facilities. (6) Revised Cost Estimate --------------------- During the latter part of the third quarter of 1998, the Company recorded a pretax charge of $16,023,000. This charge stems primarily from revised cost estimates for several newly designed, automated, multi-station transfer presses currently in production at the Verson division. The need for the revised cost estimates was identified in the third quarter 1998 and reflects the impact of production bottlenecks in the assembly process as well as greater than anticipated increases in subcontracting costs. These factors are all directly attributable to the strain on engineering and manufacturing resources caused by Verson's recent significant increase in orders. In addition to the impact on third quarter earnings, the revised cost estimates are expected to result in lower margins at the Verson division until the presses currently in production are completed. Completion of production for the majority of these presses is anticipated to occur by the end of the second quarter of 1999. The Company, as part of the estimate revision process, has reviewed all work currently in process, all committed press orders and all future business currently being quoted. Based on this review, the Company is confident that the scope of the problem has been identified and that appropriate actions are being aggressively implemented. (7) Contingent Liabilities ---------------------- The Company is involved in a number of legal proceedings as a defending party, including product liability and environmental matters for which liability is reasonably possible. However, after consideration of relevant data (consultation with legal counsel and review of insurance coverage, accruals, etc.), management believes that the eventual outcome of these matters will not have a material adverse effect on the Company's financial position or its ongoing results of operations. Reference is made to Note 10 of Notes to Consolidated Financial Statements in the Company's 1997 Annual Report on Form 10-K as it relates to a note receivable taken in connection with the sale of the business and assets of the former Littell division. Collections from this note in the nine months ended September 30, 1998 totaled $520,000 ($130,000 in the third quarter) and were included in "Other (income) expense." Reference is made to Note 10 of Notes to Consolidated Financial Statements in the Company's 1997 Annual Report on Form 10-K as it relates to the sale by the Company of a site in Coldwater, Ohio that was contingent on the issuance by the State of Ohio, Ohio Environmental Protection Agency, of a covenant not to sue. On March 31, 1998, the Ohio Environmental Protection Agency issued the covenant not to sue. The Company closed on the sale of this facility for cash in the amount of $3,156,000 on May 13, 1998. At September 30, 1998, the Company was contingently liable for approximately $938,000 primarily relating to outstanding letters of credit. (8) Income Taxes ------------ The provision (credit) for income taxes in the nine months ended September 30, 1998 and 1997 is based upon the Federal statutory rates adjusted for items that are not subject to taxes. See Note 4 of Notes to Consolidated Financial Statements in the Company's 1997 Annual Report on Form 10-K for a further discussion related to income taxes. (9) Summary of Other (Income) Expense --------------------------------- Other (income) expense for the three and nine month periods ended September 30, 1998 and 1997 consists of the following:
For the three months ended For the nine months ended 9/30/98 9/30 97 9/30/98 9/30/97 ----------- ----------- ----------- ----------- Interest income ........ $ (59,000) $ (46,000) $ (146,000) $ (86,000) Goodwill amortization .. 108,000 44,000 240,000 133,000 Net (gain) loss on sales of operating and non- operating assets ...... 10,000 (8,000) (1,962,000) (151,000) Litigation settlements/insurance provision ............. 314,000 81,000 883,000 638,000 Payments received on long-term notes receivable reserved for as uncollectible ...... (130,000) (1,695,000) (520,000) (2,195,000) Other miscellaneous .... 136,000 1,000 20,000 579,000 ----------- ----------- ----------- ----------- $ 379,000 $(1,623,000) $(1,485,000) $(1,082,000) =========== =========== =========== ===========
(10) Financial Arrangements ---------------------- On June 30, 1998 the Company entered into Amendment No. 3 to the Amended and Restated Credit Agreement. The amendment provides for an increase to $145,000,000 (from $125,000,000) of borrowings and/or letters of credit at either a floating prime or fixed LIBOR (with the rate dependent on the ratio of Funded Debt to Operating Cash Flow) rate. The funds may be used for future working capital needs of the Company, fixed asset additions and possible acquisitions. On August 21, 1998, the Company entered into Amendment No. 4 to the Amended and Restated Credit Agreement. The Amendment provides for up to $152,500,000 (from $145,000,000) of borrowings and/or letters of credit at either a floating prime or fixed LIBOR (with rate dependent on the ratio of Funded Debt to Operating Cash Flow) rate. The funds associated with this increase will be used for the additional purchases of the Company's stock. During the third quarter of 1998, the Company entered into an interest rate lock in conjunction with a $75,000,000 private placement agreement that was in process. The Company anticipated that by entering into a private placement agreement, favorable fixed interest rates could be obtained on a long-term basis and that exposure to floating interest rates under the Amended and Restated Credit Agreement (which would be reduced by the the principal amount of the private placement) would be reduced. After entering into the interest lock, interest rates continued to decrease. Hedging losses totaling $4,136,000 associated with the interest rate lock agreement have been deferred at September 30,1998 as the agreement was designated as a hedge with respect to the private placement in process. The interest rate lock agreement has been extended and now expires on November 20, 1998. The Company has the right to further extend this agreement or to make a payment (based on then current interest rates) in settlement of this agreement. Subsequent to the end of the third quarter of 1998, the Company decided to suspend its efforts to secure financing through a private placement. Hedging losses at the point of suspension were reduced to approximately $2,352,000 and will be recorded in the fourth quarter of 1998. The Company will record additional charges or credits monthly based on changes in current interest rates until a final settlement of the agreement is effective. Also during 1998, the Company entered into an interest rate swap agreement for $50,000,000 as part of the Amended and Restated Credit Agreement Under the terms of this swap agreement, which expires on May 14, 2001, the Company has fixed the interest rate on that portion of the Amended and Reststed Credit Agreement. Remaining balances under the Amended and Reststed Credit Agreement bear interest at either a floting prime or fixed LIBOR (with the rate dependent on the ratio of Funded Debt to Operating Cash Flow) rate. The interest rate under the swap agreement exceeds the average barrowing rate under the portion of the Amended and Restated Credit Agreement not covered by the swap agreement by .61% as of September 30, 1998. This rate differential is being recorded as interest expense on a monthly basis. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS - - ----------------- During the latter part of the third quarter of 1998, the Company recorded a pretax charge of $16,023,000. This charge stems primarily from revised cost estimates for several newly designed, automated, multi-station transfer presses currently in production at the Verson division. The need for the revised cost estimates was identified in the third quarter of 1998 and reflects the impact of production bottlenecks in the assembly process as well as greater than anticipated increases in subcontracting costs. These factors are all directly attributable to the strain on engineering and manufacturing resources caused by Verson's recent significant increase in orders. In addition to the impact on third quarter earnings, the revised cost estimates are expected to result in lower margins at the Verson division until the presses currently in production are completed. Completion of production for the majority of these presses is anticipated to occur by the end of the second quarter of 1999. The Company, as part of the estimate revision process, has reviewed all work currently in process, all committed press orders and all future business currently being quoted. During the second quarter of 1998, the Company acquired substantially all of the assets and assumed certain liabilities of Great Bend Manufacturing Company (Great Bend) located in Great Bend, Kansas. Great Bend manufactures and sells tractor-mounted front-end loaders which are used principally in agricultural applications. The Company also acquired in the second quarter of 1998 substantially all of the assets of Universal Turf Equipment Corporation (Universal Turf) located in Opp, Alabama. Universal Turf manufactures and sells turf maintenance implements including reel mowers, verti-cut mowers, reel grinders and spraying equipment. The impact of these acquisitions on the consolidated operating results of the Company in the third quarter and first nine months of 1998 is not considered significant. The Universal Turf product lines were integrated into the operations of the Bush Hog division. During the fourth quarter of 1997, the Company sold for cash substantially all of the assets of its Coz division. The purchaser also assumed certain specified liabilities associated with this division. "Earnings (loss) per common share" and "Weighted average shares outstanding" have been restated for the three and nine months ended September 30, 1997 to reflect the effect of adopting Statement of Financial Accounting Standards No. 128 - Earnings per Share. First Nine Months of 1998 Compared to First Nine Months of 1997 - - --------------------------------------------------------------- Net sales for the nine-month period ending September 30, 1998 were $229,000,000 compared to net sales of $213,497,000 reported in the first nine months of 1997. Increased sales at all of the Company's operating divisions more than offset the loss of revenue associated with the Company's former Coz division, which was sold in the fourth quarter of 1997. Income before taxes in the first nine months of 1998 was $4,092,000 compared to income before taxes of $25,531,000 reported in the same nine-month period of the prior year. The majority of the decrease in 1998 was related to the $16,023,000 charge for revised cost estimates described above. Net income was $2,579,000 ($.21 per common share-diluted) in the first nine months of 1998 compared to net income of $16,390,000 ($1.32 per common share-diluted) in the first nine months of 1997. At the Bush Hog and Great Bend divisions,combined net sales increased over 15% in the first nine months of 1998 compared to the first nine months of the prior year. Approximately 40% of this increase was related to the acquisition of the Great Bend and Universal Turf operations in the second quarter of 1998. The remainder of the increase was principally associated with increased cutter sales at the Bush Hog division which benefitted from increased demand in the first half of 1998. Cutter sales during this period benefitted from a reduction of the cattle herd liquidation cycle. Cattle ranchers use the cutters for grazing pasture maintenance. Cutter sales in 1998 were also favorably affected by new/redesigned products for the turf and landscaping market for utilization by commercial turf (sod) growers and for golf course maintenance. Since the end of the second quarter of the current year, cutter sales have been negatively affected by lower prices for major crops (corn, wheat, soybeans) and livestock commodities. Strong crop yields in the Midwest and fewer exports are expected to keep crop and live stock commodity prices at a low level for the next several months. Loader sales have also increased in the current year, with the majority of the increase related to the acquisition of the Great Bend division as noted above. Gross profits increased in the first nine months of 1998 compared to the first nine months of the prior year. This increase was primarily related to the effects of increased sales as discussed above. Gross profit margins remained constant between the two nine-month periods. Margin improvements related to favorable manufacturing variances (resulting from increased facility utilization and increased labor efficiencies) were offset by the effect of the mix of products sold in each period. At the Verson division, sales increased 23% in the first nine months of 1998 compared to the first nine months of 1997. Revenue and profits are recognized on a percentage of completion basis for press production at this division. The increase in net sales was principally related to increased press production in the current year. During the middle part of this year, the division received a major order for presses totaling approximately $80,000,000. Other significantly large press orders were received during 1997. During 1998, all of these large press orders were in production, resulting in increased sales. Gross profits and gross profit margin decreased during the 1998 nine-month period compared to the same nine months of 1997. The majority of the decrease was related to a $16,023,000 charge recorded in the third quarter of the current year and discussed above. Additional decreases were associated with the mix of presses in production (the majority of revenue in 1998 was related to newly designed presses resulting in manufacturing inefficiencies and increased engineering/design costs), increased subcontracting costs, costs related to the hiring and training of manufacturing personnel and lack of adequate assembly area. The division has identified these issues and, during the fourth quarter of 1998, anticipates bringing on line a $28,000,000 assembly area expansion which will approximately double the division's current assembly area. Warranty costs have also increased in the current year due to the increased sales volume noted above. These increased costs were partially offset by the settlement of a claim against a third party, which negatively impacted periods prior to 1997. Selling and administrative expenses increased in the first nine months of 1998 to $27,101,000 from $26,485,000 reported in the first nine months of 1997. As a percent of net sales, these costs have decreased to 11.8% in 1998 compared to 12.4% in 1997. At the agricultural equipment divisions, selling expenses increased due to the impact of increased sales (commissions) and the acquisition of the Great Bend and Universal Turf operations. Selling expenses at the Verson division increased due to the establishment of an international sales and marketing department (primarily salaries and travel costs). On a consolidated basis, administrative expenses have decreased in 1998. Cost increases related to normal staff expenses and to legal fees associated with the settlement of a claim at the Verson division and the acquisition of the Great Bend division were offset by the impact of certain Corporate Office retirements in late 1997 and the sale of the Coz division. Interest expense in the first nine months of 1998 was $4,339,000 compared to interest expense of $2,499,000 reported in the first nine months of the prior year. Increased borrowing needs were related to higher consolidated receivable levels (primarily associated with Bush Hog's increased sales volume) and increased inventory levels (primarily associated with the Verson division where orders for a total of 10 multi-station transfer presses are currently in production and some shipment delays have occurred). Other borrowing needs included fixed asset additions over the past twelve months, including the Verson plant expansion, the impact of decreased customer deposits and progress payments against press orders at the Verson division, and the acquisitions of Great Bend and Universal Turf in the second quarter of 1998. Interest expense in the first nine months of 1998 was partially offset by the capilalization of $637,000 of interest costs relating to the Company's building expansion project at the Verson division. Reference is made to Note 9 of Notes to Condensed Consolidated Financial Statements for an analysis of Other (income) expense in the first nine months of 1998 and 1997. Third Quarter of 1998 Compared to Third Quarter of 1997 - - ------------------------------------------------------- Net sales in the third quarter of 1998 were $77,184,000 compared to net sales of $63,714,000 reported in the third quarter of 1997. Loss before income taxes in the third quarter of 1998 was $15,639,000 compared to income before taxes of $7,758,000 reported in the third quarter of the prior year. The majority of the decrease related to a charge of $16,023,000 recorded in the third quarter of 1998 for revised cost estimates at the Verson division as described above. Net loss was $10,296,000 ($.86 per common share-diluted) in the third quarter of 1998 compared to net income of $5,013,000 ($.41 per common share-diluted) in the third quarter of 1997. Agricultural equipment (Bush Hog and Great Bend) sales increased 10% in the third quarter of 1998 compared to the same quarter of the prior year. The increase was primarily related to the acquisitions of Great Bend and Universal Turf as previously discussed. Rotary cutter sales decreased in the third quarter of 1998 due to the impact of lower prices that farmers and ranchers are receiving for major crop and livestock commodities. Parts sales also decreased in the current year's third quarter. Other product line sales (loaders, tillers, backhoes, etc.) increased slightly in the third quarter of the current year. Gross profits and gross profit margins have decreased in the third quarter of 1998 compared to the third quarter of the prior year. Production levels have been reduced in the current year's third quarter resulting in less favorable manufacturing variances. The mix of products sold was also less favorable in the third quarter of 1998. At the Verson division, sales have increased by over 60% in the third quarter of 1998 compared to the third quarter of the prior year. Production continues on major press orders from each of the major U.S. automobile manufacturers. Gross profits and gross profit margins have decreased in the third quarter of 1998. The majority of the decrease in the gross profit was related to a $16,023,000 charge recorded during the third quarter of this year as discussed above. Margins on sales currently in process are lower than margins on sales in process in the third quarter of the prior year. Margins were impacted by several factors including increased manufacturing and engineering subcontracting costs (compared to internal costs to manufacture and design), lack of adequate assembly facilities (an assembly facility addition is currently being constructed) and costs to hire and train qualified manufacturing employees to handle the increased production levels. Selling and administrative expenses have increased slightly in the third quarter of 1998 ($9,571,000) compared to the third quarter of 1997 ($9,571,000). As a percent of net sales, these expenses decreased to 12.4% in the 1998 third quarter compared to 14.5% in the third quarter of the prior year. Over 90% of the increase in these costs was related to the acquisition of the Great Bend and Universal Turf operations in 1998. Increases at the Verson division in selling costs (due to the impact of the establishment of an international sales and marketing department) and administrative costs (due to the expanded operations including the upgrading of its management information systems) were offset by the effect of the sale of the Coz division noted above. Interest expense in the third quarter of 1998 was $1,802,000 compared to interest expense of $847,000 reported in the third quarter of 1997. Increased borrowing needs were related to increased receivable levels at the Bush Hog division, increased inventory levels at the Verson division, fixed asset additions at both the Bush Hog and Verson divisions and the acquisitions of Great Bend and Universal Turf. Interest expense was partially offset by the capitalization of $335,000 of interest costs relating to the Company's building expansion project at the Verson division. Reference is made to Note 9 of Notes to Condensed Consolidated Financial Statements for an analysis of Other (income) expense in the third quarter of 1998 and 1997. FINANCIAL CONDITION AND LIQUIDITY - - --------------------------------- Working capital at September 30, 1998 was $19,253,000 (current ratio of 1.10 to 1.0) compared to working capital of $51,492,000 (current ratio of 1.54 to 1.0) at December 31, 1997. Net receivables increased by $10,199,000 since the end of 1997. The majority of the increase was related to the agricultural equipment divisions where record nine month sales have been recorded by the Bush Hog division. Cash collections are dependent upon the retail sale of the product by dealers. Dealer sales have decreased in the third quarter of 1998 due to the impact of lower prices the farmers/ranchers are receiving for major crops and livestock commodities. Extended payment terms are offered to dealers in the form of floor plan financing which is customary in the industry. Receivables also increased with the acquisition of the Great Bend division. On a consolidated basis, inventory levels have increased $55,323,000 since the end of 1997. Approximately 90% of the increase was related to the Verson division and was the direct result of the number and extent of jobs in process, the impact of decreased customer deposits and progress payments against press orders and the effects of delivery date extensions. The acquisitions of Great Bend and Universal Turf also resulted in increased consolidated inventories. The consolidated increase in the accounts payable level ($30,637,000) since the end of 1997 was principally associated with the Verson division where production levels have increased significantly during 1998. Fixed asset additions in the first nine months of 1998 (excluding acquisitions) totaled $31,411,000. The majority of these additions were represented by construction costs associated with a $28,000,000 expansion project at the Verson division. This project will more than double the size of Verson's assembly facility and increase the division's capacity by approximately 35%. This, combined with the division's focused factory concept and the overall strengthening of its infrastructure, are intended to help alleviate capacity constraints at this operation. Expenditures for production machinery and equipment at all manufacturing divisions were also made in the first nine months of 1998. It is anticipated that the equipment will result in reduced manufacturing costs and improvements in product quality. Net borrowings under the Company's Amended and Restated Credit Agreement increased by $65,600,000 since the end of 1997. These borrowings were used to finance working capital needs and fixed asset additions noted above. As of September 30, 1998, the Company had cash balances of $428,000 and additional funds of $34,663,000 available under its Amended and Restated Credit Agreement. Additional capital will be required to complete the expansion project at the Verson division as noted above. During the third quarter of 1998, the Company entered into Amendment No. 4 to the Amended and Restated Credit Agreement. The amendment provides for up to $152,500,000 (from $145,000,000) of borrowings and/or letters of credit at either a floating prime or fixed LIBOR (with the rate dependent on the ratio of Funded Debt to Operating Cash Flow) rate. During the third quarter of 1998, the Company's Board of Directors authorized the purchase of up to 500,000 additional shares of the Company's outstanding common stock subject to prevailing market conditions. The funds associated with the above noted amendment to the Amended and Restated Credit Agreement will be used for these stock purchases. The Company believes the cash flow from operations and funds available under the Amended and Restated Credit Agreement are adequate to finance its operations and capital expenditures in the near future. At September 30, 1998, the Company was not in compliance with two provisions under the Amended and Restated Credit Agreement. Subsequent to the end of the third quarter of 1998, the lenders waived compliance with the related provisions solely for the quarter ended September 30, 1998. In addition, the amount under the Amended And Restated Credit Agreement was reduced to $145,000,000. Reference is made to Note 10 of Notes to Condensed Consolidated Financial Statements regarding the Company's hedging activities in relation to a private debt placement agreement which was in process at September 30, 1998 and subsequently suspended on November 11, 1998. IMPACT FROM NOT YET EFFECTIVE RULES - - ----------------------------------- In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 131 - Disclosures about Segments of an Enterprise and Related Information. This statement establishes standards for the way that public business enterprises report information about operating segments in interim financial reports issued to shareholders subsequent to initial annual financial statements disclosure. It also establishes standards for related disclosures about products and services, geographic areas and major customers. This statement is effective on an annual basis for financial statements for periods beginning after December 15, 1997. Interim reporting requirements begin in 1999. Comparative information for earlier years is also to be presented. In February 1998, the FASB issued SFAS No. 132 -Employers' Disclosures about Pensions and Other Postretirement Benefits. This statement revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of these plans. It standardizes the disclosure requirements for pension and other postretirement benefits to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis, and eliminates certain disclosures that are no longer as useful as they were when other related SFAS were issued. The Company is in the process of evaluating the impact of these statements on its financial reporting. In June 1998, the FASB issued SFAS No. 133 - Accounting for Derivative Instruments and Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. The Company is in the process of evaluating the impact of this statement on its financial reporting. YEAR 2000 COMPLIANCE - - -------------------- Many older computer software programs refer to years in terms of their final two digits only. Such programs may interpret the year 2000 to mean the year 1900 instead. If not corrected, these programs could cause date-related transaction failures. The Company's program to address the year 2000 compliance issue is broken down into the following major categories: 1. Financial related hardware/software. 2. Manufacturing/engineering process controls. 3. Equipment manufactured for sale. 4. Outside source suppliers. The general phases common to all of the above categories are: 1. Identifying items that are not year 2000 complaint. 2. Assigning priorities to identified items, including the assessment of items material to the operations of the Company. 3. Repairing or replacing material items determined not to be year 2000 complaint. 4. Testing of material items repaired or replaced. As of September 30, 1998, the Company has completed the identification process in relation to three of the four categories noted above. Outside service bureau financial software currently in place has been determined and tested to be year 2000 compliant. The Company has recently purchased and installed financial software which is year 2000 compliant. Divisions not currently using year 2000 compliant software will be utilizing these new programs. Payroll services for the Company are currently being provided by an outside service. Payroll software is not year 2000 compliant. The Company is in the process of having this software upgraded by the end of 1998. Financial hardware is currently being tested for compliancy. The majority of the hardware has been purchased within the last two years and is believed to be compliant. Certification of compliance and subsequent testing needs to be completed. Older hardware will be replaced over the next year as part of ongoing upgrade programs. Manufacturing/engineering process controls and equipment includes equipment to manufacture and design products sold by the Company. Design equipment used in the engineering of agricultural equipment has been determined and tested to be year 2000 compliant. At the Verson division, design equipment not year 2000 compliant has yet to be identified and prioritized. The Company is in the process of selecting outside experts to identify, repair or replace and test the equipment (hardware and software) which is not compliant at this time. This process should be completed by the first quarter of 1999. The Company does not have a significant amount of manufacturing equipment with embedded computer chips or hardware/software which would present a problem at the beginning of the year 2000. Compliancy certificates have been received from the equipment manufacturers and all testing, where necessary, should be completed by the end of the first quarter of 1999. None of the equipment manufactured by Bush Hog and Great Bend include hardware/software or embedded computer chips. Stamping presses manufactured by the Verson division contain software and embedded computer chips. However, neither of these items effect the operation of the presses as it relates to year 2000 issues. The Company believes that it has little, if any, exposure related to equipment manufactured by its divisions in relation to the year 2000 issue. The Company has identified outside vendors which provide services which, if not year 2000 compliant, could have an effect on the operations of the Company. Sources include banking, investment, pension obligations, insurance, etc. During the fourth quarter of 1998, these service providers will be asked to update the Company on the status of their year 2000 compliance. The Company will then need to evaluate these responses and determine if a contingency plan would be necessary should the vendor not be compliant. The total cost associated with required modifications to become year 2000 compliant is not expected to be material to the Company's financial position. Through September 30, 1998, the Company has spent approximately $250,000 on the project to become year 2000 compliant. This amount does not include the cost of internal efforts to complete the project. The costs associated with the replacement of computerized systems, hardware or equipment, substantially all of which is capitalized, are not included in the above estimate as such replacements or upgrades were necessary to operate efficiently and such costs would have been incurred even if year 2000 compliance was not an issue. The Company anticipates that an additional $250,000 may be spent in completing the year 2000 compliance project. These costs are being funded through operating cash flow. The Company's year 2000 compliance program is an ongoing process and the estimates of costs and completion dates for various components of the program described above are subject to change. The Company is in the process of developing contingency plans should year 2000 compliance not be achieved in a timely manner. The Company believes its greatest risk of exposure to noncompliance (in relation to year 2000 issues over which the Company has control) is associated with financial related hardware and software. While significant progress toward compliance has been made over the past year, failure to obtain compliance could result in the delay of the reporting of financial results. The Company, at this time, is unable to determine the impact of non year 2000 compliance by outside venders. In many instances, the use of alternative vendors who are year 2000 compliant would be considered. The above expectations are subject to uncertainties. For example, if the Company was affected by the inability of suppliers or major customers to continue operations due to such a problem, the Company could experience interruption in some aspects of its activities, which could materially impact our results of operations or financial condition. The Company believes that with the completion of the year 2000 project, as scheduled, the possibility of significant interruptions of normal operations should be reduced. SAFE HARBOR STATEMENT - - --------------------- Statements contained within the Management Discussion and Analysis of Financial Condition and Results of Operations that relate to future operating periods are subject to risks and uncertainties that could cause actual results to differ from management's projections. Operations of the Company include the manufacturing and sale of agricultural and industrial machinery. In relation to the Bush Hog and Great Bend divisions, forward-looking statements involve certain factors that are subject to change. These elements encompass interrelated factors that affect farmers and cattle ranchers' confidence, including demand for agricultural products, grain stock levels, commodity prices, weather conditions, crop and animal diseases, crop yields, farm land values and government farm programs. Other factors affecting all operations of the Company include actions of competitors in the industries served by the Company, production difficulties including capacity and supply constraints, labor relations, interest rates, the ability of the Company to identify and correct any year 2000 issues in a timely manner and other risks and uncertainties. The Company's outlook is based upon assumptions relating to the factors discussed above. PART II - OTHER INFORMATION Item 5 Other Information ----------------- Reference is made to Note 10 Financial Arrangements of " Notes to Condensed Consolidated Financial Statements" and Exhibit 10 for information related to the Amendment to the Amended and Restated Credit Agreement. Item 6. Exhibit and Reports on Form 8-K ------------------------------- (a) Exhibits - See Exhibit Index included herein. (b) Reports on Form 8-K - There were no reports on Form 8-K for the three months ended September 30, 1998. 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. ALLIED PRODUCTS CORPORATION --------------------------- (REGISTRANT) November 13, 1998 /s/ Robert J. Fleck - - ----------------- ------------------- Robert J. Fleck Vice President- Accounting and Chief Accounting & Administrative Officer November 13,1998 /s/ Mark C. Standefer - - ---------------- ----------------- Mark C. Standefer Vice President, General Counsel & Secretary ALLIED PRODUCTS CORPORATION INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION OF EXHIBITS - - ----------- ----------------------- 10 Material Contract - Amendment No. 4 to the Credit Agreement 27 Financial Data Schedules EX-10 2 AMENDMENT #4 TO CREDIT AGREEMENT AMENDMENT NO. 4 TO CREDIT AGREEMENT, DATED AS OF AUGUST 23, 1996 This Amendment No. 4 (this "Amendment"), dated as of August 21, 1998, is made by and among ALLIED PRODUCTS CORPORATION, a Delaware corporation (the "Company"), the financial institutions party hereto (the "Banks"), and Bank of America National Trust and Savings Association (as successor by merger to Bank of America Illinois), as agent for the Banks (in such capacity, the "Agent"). Terms defined in the Credit Agreement shall have the same respective meanings when used herein and the provisions of Section 13 of the Credit Agreement shall apply, mutatis mutandis, to this Amendment. W I T N E S S E T H: -------------------- WHEREAS, the parties hereto are parties to that certain Amended and Restated Credit Agreement, dated as of August 23, 1996, (as amended or modified and in effect on the date hereof, the "Existing Credit Agreement" and as amended and modified by this Amendment, the "Credit Agreement"); WHEREAS, the Company has requested that the Banks and the Agent agree to amend and modify the Existing Credit Agreement as described herein; and WHEREAS, the Banks and the Agent are willing to amend and modify the Existing Credit Agreement on the terms and conditions contained herein; NOW, THEREFORE, in consideration of the premises, the mutual covenants herein contained and other good and valuable consideration (the receipt, adequacy and sufficiency of which is hereby acknowledged), the parties hereto, intending legally to be bound, hereby agree as follows: 1. Amendments. Subject to the satisfaction of the conditions precedent set forth in Section 5 below, the Existing Credit Agreement is hereby amended as follows: (a) Section 1.1.3 of the Existing Credit Agreement shall be amended by deleting each reference to $145,000,000 contained therein and replacing it with $152,500,000. -1- (b) Clause (b) of Section 6.1 of the Existing Credit Agreement shall be deleted in its entirety and replaced with the following: "(b) On each Commitment Reduction Date set forth below (each called a "Commitment Reduction Date"), the aggregate Commitments of the Banks shall be automatically and permanently reduced, pro rata, in an amount sufficient to reduce the aggregate Commitments of the Banks to the principal amount set forth opposite such Commitment Reduction Date: Commitment Maximum Commitments ------------------- Reduction Date -------------- October 31, 1998 $145,000,000 March 31, 1999 $100,000,000 On any date that the aggregate unpaid principal amount of the Revolving Loans plus the aggregate Stated Amount of all Letters of Credit exceeds the aggregate Commitment of the Banks, the Company shall immediately repay the Revolving Loans in an amount equal to such excess." (c) Section 10.19 of the Existing Credit Agreement is deleted in its entirety and replaced with the following: "Section 10.19 Use of Proceeds. To the extent the principal amount --------------- of Revolving Loans plus the Stated Amount of Letters of Credit exceeds $100,000,000, cause an amount of proceeds at least equal to such excess to be used by the Company's Verson Division ("Verson") for the purpose of funding working capital with respect to active and outstanding binding purchase contracts (of at least corresponding size in the aggregate) between Verson and Ford Motor Company, Chrysler Corporation and General Motors, in each case for the purchase of new steel presses, it being understood that (i) in the case of contracts with Chrysler Corporation, such contracts shall be in excess of $10,000,000 and shall not provide for progress payments, and (ii) prior to the use of such proceeds, the Company shall furnish to each Bank summaries of such contracts together with payment schedules and such other information as either Bank may request in connection therewith; provided that notwithstanding the foregoing, up to $7,500,000 of the -2- principal of such proceeds in excess of $100,000,000 may be used to repurchase common stock of the Company in accordance with Section 10.9" ------------ (d) Exhibit A to the Existing Credit Agreement is deleted in its entirety and replaced with Exhibit A attached hereto. 2. Documents Remain in Effect. Except as amended and modified by -------------------------- this Amendment, the Existing Credit Agreement remains in full force and effect and the Company confirms that its representations, warranties, agreements and covenants contained in, and obligations and liabilities under, the Credit Agreement and each of the other Loan Documents are true and correct in all material respects as if made on the date hereof, except where such representation, warranty, agreement or covenant speaks as of a specified date. 3. References in Other Documents. References to the Existing ------------------------------- Credit Agreement in any other document shall be deemed to include a reference to the Credit Agreement, whether or not reference is made to this Amendment. 4. Representations. The Company hereby represents and --------------- warrants to the Banks and the Agent that: (a) The execution, delivery and performance of this Amendment and the Restated Notes (as hereinafter defined) are within the Company's corporate authority, have been duly authorized by all necessary corporate action, have received all necessary consents and approvals (if any shall be required), and do not and will not contravene or conflict with any provision of law or of the Certificate of Incorporation or By-laws of the Company or its Subsidiaries, or of any other agreement binding upon the Company or its Subsidiaries or their respective property; (b) This Amendment and the Restated Notes constitute the legal, valid, and binding obligations of the Company, enforceable against the Company in accordance with its terms; and (c) no Default has occurred and is continuing or will result from this Amendment or the Restated Notes. -3- 5. Conditions Precedent. The effectiveness of this Amendment is --------------------- subject to the receipt by the Agent of each of the following, each appropriately completed and duly executed as required and otherwise in form and substance satisfactory to the Agent: (a) Certified copies of resolutions of the Board of Directors of the Company authorizing or ratifying the execution, delivery and performance by the Company of this Amendment and the Restated Notes; (b) A certificate of the President or a Vice-President of the Company that all necessary consents or approvals with respect to this Amendment and the Restated Notes have been obtained; (c) A certificate of the Secretary or Assistant Secretary of the Company, certifying the name(s) of the officer(s) of the Company authorized to sign this Amendment, the Restated Notes and the documents related hereto on behalf of the Company; (d) Restated Revolving Notes, in the form attached hereto as Exhibit B, payable to the order of each Bank in principal amount equal to such Bank's aggregate Commitment; (d) An opinion of Mark Standefer covering those matters set forth in clauses (a) and (b) of Section 4 and such other legal matters as the Agent or its counsel may request; and (e) Such other instruments, agreements and documents as the Agent may reasonably request, in each case duly executed as required and otherwise in form and substance satisfactory to the Banks. 6. Miscellaneous. ------------- (a) Section headings used in this Amendment are for convenience of reference only, and shall not affect the construction of this Amendment. (b) This Amendment and any amendment hereof or supplement hereto may be executed in any number of counterparts and -4- by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. (c) This Amendment shall be a contract made under and governed by the internal laws of the State of Illinois, without giving effect to principles of conflicts of laws. (d) All obligations of the Company and rights of the Banks and the Agent, that are expressed herein, shall be in addition to and not in limitation to those provided by applicable law. (e) Whenever possible, each provision of this Amendment and the Restated Notes shall be interpreted in such manner as to be effective and valid under applicable law; but if any provision of this Amendment or the Restated Notes shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment or the Restated Notes. (f) This Amendment and the Restated Notes shall be binding upon the Company, the Banks and the Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Banks and the Agent and their respective successors and assigns. * * * -5- IN WITNESS WHEREOF, the parties hereto have caused the execution and delivery hereof by their respective representatives thereunto duly authorized as of the date first herein appearing. ALLIED PRODUCTS CORPORATION By: /S/ RICHARD A. DREXLER ------------------------------- Name: RICHARD A. DREXLER ------------------------------- Title: CHAIRMAN & CEO --------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois), as Agent By: /S/ SEAN GRIMES ------------------------ Name: SEAN GRIMES ------------------------ Title: AGENCY OFFICER ---------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (as successor by merger to Bank of America Illinois), in its individual corporate capacity By: /S/ RHOMES RITTER -------------------------- Name: RHOMES RITTER -------------------------- Title: VICE PRESIDENT --------------------------- LASALLE NATIONAL BANK By: /S/ MARY LOU BARTLETT ------------------------------ Name: MARY LOU BARTLETT ------------------------------ Title: VICE PRESIDENT --------------------------- EXHIBIT A COMMITMENT LIMITS AND PERCENTAGES
Column I: Column II: Column III: Column IV: Amount of Amount of Letter Total Amount of Name of Bank Revolving Loan of Credit Commitments Percentage Commitment Commitment BANK OF AMERICA $106,750,000 $14,000,000 $106,750,000 70% NATIONAL TRUST AND SAVINGS ASSOCIATION LASALLE NATIONAL BANK $ 45,7500,000 $ 6,000,000 $ 45,750,000 30% ------------- ----------- ------------ --- TOTALS $ 152,500,000 $ 20,000,000 $152,500,000 100%
EXHIBIT B FORM OF RESTATED REVOLVING NOTE $ __________________ August __, 1998 Chicago, Illinois On or before the Revolving Termination Date (as defined in the Credit Agreement referred to below), the undersigned, for value received, promises to pay to the order of __________________ at the principal office of __________________________ (the "Bank"), in Chicago, Illinois _______________ Dollars ($_______) or, if less, the aggregate unpaid amount of all Revolving Loans made by the payee to the undersigned pursuant to the Credit Agreement (as shown in the records of the payee or, at the payee's option, on the schedule attached hereto and any continuation thereof). The undersigned further promises to pay interest on the unpaid principal amount of each Revolving Loan evidenced hereby from the date of such Revolving Loan until such Revolving Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America. This Restated Revolving Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Amended and Restated Credit Agreement, dated as of August 23, 1996, as amended (herein, as further amended or otherwise modified from time to time, called the "Credit Agreement"), between the undersigned, various banks (including the payee) and Bank of America National Trust and Savings Association, as agent for the Banks, to which Credit Agreement reference is hereby made for a statement of the terms and provisions under which this Restated Revolving Note may or must be paid prior to its due date or may have its due date accelerated. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement. In addition to and not in limitation of the foregoing and the provisions of the Credit Agreement, the undersigned further agrees, subject only to any limitation imposed by applicable law, to pay all reasonable expenses, including reasonable attorneys' fees and legal expenses, incurred by the holder of this Restated Revolving Note in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise. This Restated Revolving Note is made under and governed by the internal laws of the State of Illinois. -2- This Restated Revolving Note is issued in replacement of a Revolving Note issued pursuant to the Credit Agreement on June 30, 1998. The indebtedness evidenced by this Note represents an extension and renewal of indebtedness owing to the payee. ALLIED PRODUCTS CORPORATION By: ___________________________ Title: ________________________ -3- Schedule Attached to Restated Revolving Note dated August 21, 1998 of THE COMPANY payable to the order of - - -------------------------------------------------------------------------------- Date and Amount Date and Amount of Revolving Loan of Repayment or or of Conversion from of Conversion into Unpaid another type of Revolving another type of Interest Principal Notation Made Loan Revolving Loan Period Balance by 1. FLOATING RATE LOANS - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- 2. EURODOLLAR LOANS - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- RESTATED REVOLVING NOTE $ 106,750,000 August 21, 1998 Chicago, Illinois On or before the Revolving Termination Date (as defined in the Credit Agreement referred to below), the undersigned, for value received, promises to pay to the order of Bank of America National Trust and Savings Association (the "Bank"), at its office located at 231 South LaSalle Street, Chicago, Illinois, One Hundred Six Million Seven Hundred Fifty Thousand Dollars ($106,750,000) or, if less, the aggregate unpaid amount of all Revolving Loans made by the payee to the undersigned pursuant to the Credit Agreement (as shown in the records of the payee or, at the payee's option, on the schedule attached hereto and any continuation thereof). The undersigned further promises to pay interest on the unpaid principal amount of each Revolving Loan evidenced hereby from the date of such Revolving Loan until such Revolving Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America. This Restated Revolving Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Amended and Restated Credit Agreement, dated as of August 23, 1996, as amended (herein, as further amended or otherwise modified from time to time, called the "Credit Agreement"), between the undersigned, various banks (including the payee) and Bank of America National Trust and Savings Association, as agent for the Banks, to which Credit Agreement reference is hereby made for a statement of the terms and provisions under which this Restated Revolving Note may or must be paid prior to its due date or may have its due date accelerated. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement. In addition to and not in limitation of the foregoing and the provisions of the Credit Agreement, the undersigned further agrees, subject only to any limitation imposed by applicable law, to pay all reasonable expenses, including reasonable attorneys' fees and legal expenses, incurred by the holder of this Restated Revolving Note in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise. This Restated Revolving Note is made under and governed by the internal laws of the State of Illinois. -2- This Restated Revolving Note is issued in replacement of a Restated Revolving Note issued pursuant to the Credit Agreement on June 30, 1998. The indebtedness evidenced by this Note represents an extension and renewal of indebtedness owing to the payee. ALLIED PRODUCTS CORPORATION By: ___________________________ Title: ________________________ -3- Schedule Attached to Restated Revolving Note dated August 21, 1998 of THE COMPANY payable to the order of Bank of America National Trust and Savings Association - - -------------------------------------------------------------------------------- Date and Amount Date and Amount of Revolving Loan of Repayment or or of Conversion of Conversion Unpaid from another type into another type Interest Principal Notation Made of Revolving Loan of Revolving Loan Period Balance by 1. FLOATING RATE LOANS - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- 2. EURODOLLAR LOANS - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- RESTATED REVOLVING NOTE $ 45,750,000 August 21, 1998 Chicago, Illinois On or before the Revolving Termination Date (as defined in the Credit Agreement referred to below), the undersigned, for value received, promises to pay to the order of LaSalle National Bank (the "Bank"), at its offices located at 120 South LaSalle Street, Chicago, Illinois 60603, Forty-Five Million Seven Hundred Fifty Thousand Dollars ($45,750,000) or, if less, the aggregate unpaid amount of all Revolving Loans made by the payee to the undersigned pursuant to the Credit Agreement (as shown in the records of the payee or, at the payee's option, on the schedule attached hereto and any continuation thereof). The undersigned further promises to pay interest on the unpaid principal amount of each Revolving Loan evidenced hereby from the date of such Revolving Loan until such Revolving Loan is paid in full, payable at the rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful money of the United States of America. This Restated Revolving Note evidences indebtedness incurred under, and is subject to the terms and provisions of, the Amended and Restated Credit Agreement, dated as of August 23, 1996, as amended (herein, as further amended or otherwise modified from time to time, called the "Credit Agreement"), between the undersigned, various banks (including the payee) and Bank of America National Trust and Savings Association, as agent for the Banks, to which Credit Agreement reference is hereby made for a statement of the terms and provisions under which this Restated Revolving Note may or must be paid prior to its due date or may have its due date accelerated. Terms used but not otherwise defined herein are used herein as defined in the Credit Agreement. In addition to and not in limitation of the foregoing and the provisions of the Credit Agreement, the undersigned further agrees, subject only to any limitation imposed by applicable law, to pay all reasonable expenses, including reasonable attorneys' fees and legal expenses, incurred by the holder of this Restated Revolving Note in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by acceleration or otherwise. This Restated Revolving Note is made under and governed by the internal laws of the State of Illinois. -2- This Restated Revolving Note is issued in replacement of a Restated Revolving Note issued pursuant to the Credit Agreement on June 30, 1998. The indebtedness evidenced by this Note represents an extension and renewal of indebtedness owing to the payee. ALLIED PRODUCTS CORPORATION By: ___________________________ Title: ________________________ -3- Schedule Attached to Restated Revolving Note dated August 21, 1998 of THE COMPANY payable to the order of LaSalle National Bank - - -------------------------------------------------------------------------------- Date and Amount of Date and Amount Revolving Loan or of Repayment or of Conversion from of Conversion into Unpaid another type of another type of Interest Principal Notation Made Revolving Loan Revolving Loan Period Balance by 1. FLOATING RATE LOANS - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- 2. EURODOLLAR LOANS - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- - - --------------------------------------------------------------------------- EX-27 3 FDS --
5 THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 AND THE CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000003941 ALLIED PRODUCTS CORPORATION 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 428 0 65,627 699 134,025 212,694 121,043 47,792 298,818 193,441 1,168 0 0 140 93,423 298,818 229,000 229,000 194,953 194,953 29,955 161 4,339 4,092 1,513 2,579 0 0 0 2,579 0.22 0.21
EX-27 4 FDS --
5 ***RESTATED FINANCIAL DATA SCHEDULE*** -------------------------------- THIS STATEMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997 AND THE CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED STATEMENT OF CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000003941 ALLIED PRODUCTS CORPORATION 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 503 0 63,065 685 68,869 146,459 97,225 52,777 199,017 93,107 344 0 0 140 93,915 199,017 213,497 213,497 160,064 160,064 27,902 106 2,499 25,531 9,141 16,390 0 0 0 16,390 1.35 1.32
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