-----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, GH9vx1EL9RiSBRrsE7fcdQiopnilid62dOvQLF4Glu+/5/MiSMdvVp+E0Iu7o8jf c9F6JZC10u3yclwIcQpwLw== 0000950168-99-001290.txt : 19990428 0000950168-99-001290.hdr.sgml : 19990428 ACCESSION NUMBER: 0000950168-99-001290 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATHEY PRODUCTS CORP CENTRAL INDEX KEY: 0000008109 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 360753480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12649 FILM NUMBER: 99602106 BUSINESS ADDRESS: STREET 1: RTE 1A NORTH STREET 2: P O BOX 669 CITY: RALEIGH STATE: NC ZIP: 27602 BUSINESS PHONE: 9195565171 MAIL ADDRESS: STREET 1: ROUTE 1A NORTH STREET 2: P O BOX 669 CITY: RALEIGH STATE: NC ZIP: 27602 10-Q 1 ATHEY PRODUCTS CORPORATION 10-Q UNITED STATES SECURITIES AND 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, 1999___________________________ 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 1-2723 ATHEY PRODUCTS CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 36-0753480 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1839 South Main Street, Wake Forest, North Carolina 27587-9289 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: 919-556-5171 Not Applicable - -------------------------------------------------------------------------------- Former name, former address and former fiscal year if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- Number of $2.00 par value Common Shares Outstanding as of March 31, 1999: 3,805,608 -------------- ---------- ATHEY PRODUCTS CORPORATION I N D E X Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets as of March 31, 1999 (unaudited) and December 31, 1998 3 - 4 Statements of Operations for the three months ended March 31, 1999 (unaudited) and March 31, 1998 (unaudited) 5 Statements of Cash Flows for the three months ended March 31, 1999 (unaudited) and March 31, 1998 (unaudited) 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II. OTHER INFORMATION 11 - 12 2
ATHEY PRODUCTS CORPORATION BALANCE SHEETS - -------------------------------------------------------------------------------------------------------------- March 31, 1999 December 31, 1998 ----------------- ----------------- (Unaudited) (Audited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 693,535 $ 143,391 Accounts receivable (less allowances for doubtful accounts of $285,280 for 1999 and 1998) 3,258,506 2,974,180 Inventories 15,173,870 16,466,109 Prepaid expenses 221,852 43,153 Deferred income taxes 107,489 107,489 --------------------------------------- Total current assets 19,455,252 19,734,322 --------------------------------------- OTHER ASSETS: Other 2,230 2,230 --------------------------------------- Total other assets 2,230 2,230 --------------------------------------- PROPERTY, PLANT AND EQUIPMENT: Land and land improvements 47,785 47,785 Buildings and building improvements 3,940,997 3,929,722 Machinery and equipment 5,056,004 5,043,279 --------------------------------------- 9,044,786 9,020,786 Less accumulated depreciation (5,513,573) (5,421,676) --------------------------------------- Total property, plant and equipment net 3,531,213 3,599,110 --------------------------------------- $ 22,988,695 $ 23,335,662 =======================================
See notes to financial statements. 3
ATHEY PRODUCTS CORPORATION BALANCE SHEETS - ------------------------------------------------------------------------------------------------------- March 31, 1999 December 31, 1998 ----------------- --------------------- (Unaudited) (Audited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowing $ 5,000,000 $ 4,391,000 Accounts payable 2,845,617 3,542,854 Employee compensation and amounts withheld 456,912 438,424 Other accrued expenses 289,020 320,733 Warranty reserve 1,807,944 1,746,166 ----------------- ----------------- Total current liabilities 10,399,493 10,439,177 ----------------- ----------------- NONCURRENT LIABILITIES: Deferred income taxes 107,489 107,489 ----------------- ----------------- Total noncurrent liabilities 107,489 107,489 ----------------- ----------------- SHAREHOLDERS' EQUITY: Common stock, par value $2 per share: Authorized 10,000,000 shares; Issued 4,020,459 shares 8,040,918 8,040,918 Additional paid-in capital 16,218,394 16,218,394 Retained earnings (deficit) (10,849,041) (10,541,758) Less cost of 214,851 common shares in treasury (928,558) (928,558) ----------------- ----------------- Total shareholders' equity 12,481,713 12,788,996 ----------------- ----------------- $ 22,988,695 $ 23,335,662 ================= =================
See notes to financial statements. 4
ATHEY PRODUCTS CORPORATION STATEMENTS OF OPERATIONS - ----------------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended March 31, 1999 March 31, 1998 ------------------- ------------------- (Unaudited) (Unaudited) NET SALES $ 9,568,046 $ 7,048,468 Cost of goods sold 8,125,025 5,518,988 ------------------- ------------------- Gross profit 1,443,021 1,529,480 Selling, administrative and engineering expenses 1,664,518 1,562,208 ------------------- ------------------- Loss from operations (221,497) (32,728) Other income 13,776 7,133 Other expenses 99,562 1,085 ------------------- ------------------- Loss before income tax benefit (307,283) (26,680) Income tax benefit - (9,000) ------------------- ------------------- NET LOSS $ (307,283) $ (17,680) =================== =================== NET LOSS PER SHARE $ (0.08) $ - =================== =================== WEIGHTED AVERAGE SHARES OUTSTANDING 3,805,608 3,805,608 =================== ===================
See notes to financial statements. 5
ATHEY PRODUCTS CORPORATION STATEMENTS OF CASH FLOWS - ------------------------------------------------------------------------------------------------------------- Three Months Ended Three Months Ended March 31,1999 March 31,1998 ---------------- ---------------- (Unaudited) (Unaudited) OPERATING ACTIVITIES: Net loss $ (307,283) $ (17,680) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 91,897 117,252 Provision for deferred income tax - (9,000) Changes in operating assets and liabilities: Accounts receivable (284,326) (732,670) Inventories 1,292,239 453,091 Prepaid expenses (178,699) 174,745 Accounts payable (697,237) (548,761) Employee compensation and amounts withheld 18,488 38,670 Other accrued expenses (31,713) 244,356 Warranty reserve 61,778 94,449 ---------------- ---------------- Net cash used in operating activities (34,856) (185,548) ---------------- ---------------- INVESTING ACTIVITIES: Purchase of plant equipment (24,000) (62,043) ---------------- ---------------- Net cash used in investing activities (24,000) (62,043) ---------------- ---------------- FINANCING ACTIVITIES: Proceeds from line of credit 609,000 2,237,000 Repayment of line of credit - (1,521,000) Excess of outstanding checks over bank balance - (457,538) Principal paid on obligations under capital lease - (10,871) ---------------- ---------------- Net cash provided by financing activities 609,000 247,591 ---------------- ---------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 550,144 - CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 143,391 6,880 ---------------- ---------------- CASH AND CASH EQUIVALENTS END OF PERIOD $ 693,535 $ 6,880 ================ ================ SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 100,032 $ 5,244 ================ ================
See notes to financial statements. 6 ATHEY PRODUCTS CORPORATION NOTES TO FINANCIAL STATEMENTS I. The condensed financial statements included herein have been prepared by Athey Products Corporation (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K for the year ended December 31, 1998. II. The financial information reflects all adjustments which are, in the opinion of Management, necessary to a fair presentation of the results for the interim period presented. III. Earnings per share are computed on the basis of the weighted average number of shares outstanding during the period, which were 3,805,608 both in 1999 and 1998. 7 ATHEY PRODUCTS CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The forward-looking statements included in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, which reflect management's best judgment based on factors currently known, involve risks and uncertainties. Words such as "expects", "anticipates", "believes", "intends", and "hopes", variations of such words and similar expressions are intended to identify such forward-looking statements. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including but not limited to, the factors discussed in such section. Forward-looking information provided by the Company in such section pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors. RESULTS OF OPERATIONS Three Months Ended March 31, 1999 ("First Quarter 1999") as compared to Three Months Ended March 31, 1998 ("First Quarter 1998") The Company's net sales for the First Quarter of 1999 were $9,568,046, a 35.7% increase from the $7,048,468 recorded in the First Quarter of 1998. The $2,519,578 increase in net sales was primarily attributable to a 45.3% increase in the number of sweeper units shipped. The Company entered into the First Quarter of 1999 with an order backlog of approximately $12,700,000. Plant productivity improvements started late in 1998 have begun to shorten the sweeper manufacturing cycle, which also contributed to the increased production of sweepers during the First Quarter. Sales orders remained strong during the First Quarter of 1999 and at March 31 1999, the Company had a backlog of orders it believed to be firm of approximately $14,532,000. Cost of goods sold as a percentage of net sales was 84.9% in the First Quarter of 1999 as compared to 78.3% in the First Quarter of 1998. While the Company continued to experience some of the production inefficiencies that impacted the last three quarters of 1998, plant productivity was improved in the First Quarter of 1999 due to fewer delays in receiving manufactured parts and other production schedule adjustments. The Company's selling, administrative and engineering expenses were $1,664,518, and increase of $102,310 or 6.5% from the $1,562,208 recorded in the First Quarter of 1998. However, as a percentage of net sales, these expenses decreased to 17.4% of net sales in the First Quarter of 1999 from 22.2% of net sales for the First Quarter of 1998. The overall increase was primarily due to higher warranty expenses as the Company continued its Campaign warranty program. 8 Other expenses were $99,562 in the First Quarter of 1999 compared to $1,085 in the First Quarter of 1998. This increase is primarily due to increased interest expense on the Company's larger short-term borrowings outstanding during the quarter. The net loss after income tax benefit for the First Quarter of 1999 was $307,283 or $.08 per share, as compared to a net loss after income tax benefit $17,680 or $0.00 per share for the First Quarter of 1998. EFFECTS OF INFLATION The Company attempts to minimize the impact of inflation on production and operating costs through cost control programs and productivity improvements. Over the past three years, the rate of inflation has not had a significant impact on the Company's operations. Prices paid for raw materials and other manufacturing inputs have remained fairly stable throughout this period. On a longer-term basis, the Company has demonstrated an ability to adjust the selling prices of its products in reaction to changing costs. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1999, the Company had working capital of $9,055,759; the ratio of current assets to current liabilities was 1.9 to 1; and the debt to equity ratio was .84 to 1. This compares to working capital of $9,295,145; a ratio of current assets to current liabilities of 1.9 to 1; and a debt to equity ratio of .82 to 1 at December 31, 1998. At March 31, 1999, cash and cash equivalents were $693,535, as compared to $143,391 at December 31, 1998. During the First Quarter of 1999, the Company experienced a higher level of usage of its credit line to support cash flow requirements. The Company has generally relied upon internally generated funds and short-term bank borrowings to satisfy working capital requirements to fund capital expenditures. At March 31, 1999, the Company had fully utilized its $5,000,000 secured line of credit with a financial institution. This secured line of credit is for general working capital purposes and will expire June 15, 1999. This credit line bears interest at the financial institution's prime rate plus one percent and is secured by a first lien position on all accounts receivable, inventory, equipment and other assets, as well as a security interest and deed of trust on the Company's real estate located in Wake Forest, North Carolina. At March 31, 1999, the Company was negotiating with a new lender for a new credit facility that would increase the Company's available credit line. On March 19, 1999, the Company had obtained an expression of interest from this new potential lender. This expression of interest is subject to further negotiations and due diligence procedures, and no assurance can be given that the Company will obtain a new line of credit in the future. If the Company is unable to obtain a new line of credit, its ability to finance its day to day operations could be adversely affected. 9 YEAR 2000 ISSUE The Company has assessed its Year 2000 exposure and determined the consequences that any Year 2000 problems might have on the Company's business, results of operations or financial condition, or cause the Company to incur potential liability to third parties if its computer systems are not Year 2000 compliant. As part of its assessment, the Company canvassed its customers and suppliers and reviewed the Year 2000 disclosures of certain publicly-traded entities that provide or have provided the Company with computer and financial services, including computer equipment and software, to determine whether Year 2000 issues will have a material effect on the Company or such third parties. Based on the results of its assessment, the Company believes its computer software and equipment will be Year 2000 compliant. The Company has, however, developed a contingency plan in the event its expectations regarding the Year 2000 problem are incorrect. Because of the uncertainly surrounding the Year 2000 problem, however, the Company can give no assurances that its assessment or its contingency plan will avoid potential, material effects of the Year 2000 problem. The Company does not anticipate that any incremental expenditures it may incur as a result of Year 2000 issues will be material. The Company uses certain accounting, word processing and inventory management software as part of its day-to-day operations. Although a shutdown of all its computer systems could cause delays in production or shipments of products to customers, the Company does not expect such an interruption. In a worst case scenario, Year 2000 problems affecting the Company, the Company's bank accounts or the business operations of the Company's customers could materially, adversely affect the Company's production operation or its ability to meet its obligations to third parties. Nevertheless, in the event that Year 2000 problems have a material effect on the Company, its customers or service providers, the Company expects to have sufficient cash reserves and inventory to meet its payroll and various other obligations pending resolution of any significant Year 2000 issues. 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings. None Item 2. Changes in Securities and Use of Proceeds. None Item 3. Defaults upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. (a) No exhibits have been filed as part of this Report. (b) No reports on Form 8-K have been filed during for the Quarter for which this report is filed. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ATHEY PRODUCTS CORPORATION Date: 04/27/99 /s/ Thomas N. Nelson ------------------------------- Thomas N. Nelson President and Treasurer Date: 04/27/99 /s/ William H. Warden ------------------------------- William H. Warden Director of Finance 12 EX-27 2 EXHIBIT 27.1
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 693,535 0 3,523,694 285,280 15,173,870 19,455,252 9,044,786 5,513,573 22,988,695 10,399,493 0 0 0 8,040,918 4,440,795 22,988,695 9,568,046 0 8,125,025 1,664,518 (14,246) 0 100,032 (307,283) 0 (307,283) 0 0 0 (307,283) (.08) (.08)
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