What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-11 compared with 2021-05-14 · 60 added, 61 removed, 119 unchanged (50% of the section changed)

42 unchanged sentences

pandemic, including impacts on its employees, customers, suppliers and financial results.

As of the date of issuance of these Condensed Consolidated Financial Statements, the Company’s operations have not been significantly impacted.

As of the date of issuance of the Condensed Consolidated Financial Statements for the quarter and nine months ended June 30, 2021, the Company’s operations have not been significantly impacted.

However, the full impact of the COVID-19

pandemic continues to evolve subsequent to the quarter ended March 31, 2021 and as of the date these Condensed Consolidated Financial Statements are issued.

pandemic continues to evolve subsequent to the quarter and nine months ended June 30, 2021 and as of the date the Condensed Consolidated Financial Statements are issued.

As such, the full magnitude that the COVID-19

5 unchanged sentences

Results of Operations

Quarter Ended March 31, 2021 versus March 31, 2020

Net revenues for the quarters ended March 31, 2021 and March 31, 2020 were $21,352,000 and $25,993,000, respectively, a decrease of $4,641,000.

The reduced revenues reflect a decrease in equipment sales recognized over time over the comparative quarter in the prior year.

During the quarter ended March 31, 2021, the Company generated approximately $1.6 million in paver parts sales.

As a percent of sales, gross profit margins were 28.8% in the quarter ended March 31, 2021, compared to 28.2% in the quarter ended March 31, 2020.

During the quarter ended March 31, 2021, the Company continued to experience higher manufacturing costs associated with steel and OEM parts pricing, as well as unabsorbed manufacturing labor and overhead expenses related to the paver line.

The negative effect of these higher manufacturing costs on the quarter ended March 31, 2021, was offset by improved margins on certain equipment sales recognized over time and increased parts sales, in dollars and as a percentage of total net revenues, at higher margins.

Product engineering and development expenses increased $380,000 to $1,069,000 for the quarter ended March 31, 2021, as compared to $689,000 for the quarter ended March 31, 2020, due primarily to engineering wages related to the paver line.

Selling, general and administrative (“SG&A”) expenses increased by $1,277,000 to $3,838,000 for the quarter ended March 31, 2021, compared to the quarter ended March 31, 2020.

The increase in SG&A expenses was primarily due to expenses related to the paver line and professional fees to support business development efforts.

Operating income decreased from $4,088,000 for the quarter ended March 31, 2020 to $1,239,000 for the quarter ended March 31, 2021, due primarily to the operational and start-up

costs related to the Blaw-Knox acquisition and professional fees to support business development efforts.

For the quarter ended March 31, 2021, interest and dividend income, net of fees, was $327,000 as compared to $763,000 in the quarter ended March 31, 2020.

Quarter Ended June 30, 2021 versus June 30, 2020

Net revenue for the quarter ended June 30, 2021 was $24,919,000, as compared to $22,940,000 for the quarter ended June 30, 2020, an increase of $1,979,000, or 8.6%.

The increase in net revenue was due to paver equipment and parts sales of approximately $2.3 million in the quarter ended June 30, 2021, compared with no paver revenues in the quarter ended June 30, 2020.

As a percent of net revenue, gross profit margins were 22.5% in the quarter ended June 30, 2021 compared to 23.5% in the quarter ended June 30, 2020.

During the quarter ended June 30, 2021, the Company continued to experience higher manufacturing costs associated with steel and OEM parts pricing, as well as unabsorbed manufacturing labor and overhead expenses related to the paver line.

The negative effect of these higher manufacturing costs on the quarter ended June 30, 2021, was partially offset by improved margins on certain equipment sales recognized over time and increased parts sales, in dollars and as a percentage of total net revenues, at higher margins.

Product engineering and development expenses increased by $327,000 to $1,176,000 for the quarter ended June 30, 2021, as compared to $849,000 for the quarter ended June 30, 2020, due primarily to engineering wages related to the paver line.

Selling, general and administrative (“SG&A”) expenses increased by $680,000 to $3,202,000 for the quarter ended June 30, 2021, as compared to $2,522,000 for the quarter ended June 30, 2020.

The increase in SG&A expenses was primarily due to expenses related to the paver line.

Operating income decreased from $2,014,000 for the quarter ended June 30, 2020 to $1,227,000 for the quarter ended June 30, 2021, due primarily to the operational costs related to the Blaw-Knox acquisition.

For the quarter ended June 30, 2021, interest and dividend income, net of fees, from the investment portfolio was $306,000, as compared to $512,000 in the quarter ended June 30, 2020.

The higher income in fiscal 2020 reflects the impact from a larger investment in corporate bonds and a higher average yield to maturity.

The fiscal 2021 corporate investment bonds were reduced as the related investments were partially liquidated to fund the Blaw-Knox acquisition.

The net realized and unrealized gains on marketable securities were $1,294,000 for the quarter ended March 31, 2021 versus net realized and unrealized losses of $(5,670,000) for the quarter ended March 31, 2020.

The fiscal 2020 investment losses reflect the decline in the domestic equity markets from the impact of the COVID-19

The effective income tax rate for the quarter ended March 31, 2021, and benefit for the quarter ended March 31, 2020, was 20.0% based on the expected annual effective income tax rate.

Net income for the quarter ended March 31, 2021 was $2,288,000 or $0.16 basic and diluted earnings per share versus a net loss of $(655,000) or $(0.04) basic and diluted loss per share for the quarter ended March 31, 2020.

Six Months Ended March 31, 2021 versus March 31, 2020

Net sales for the six months ended March 31, 2021 and 2020 were $40,316,000 and $44,023,000, respectively, a decrease of $3,707,000.

The reduced revenues reflect a decrease in equipment sales recognized over time over the comparative period in the prior year partially offset by improved parts and component sales, including $1.6 million in paver parts sales.

Gross profit margins decreased to 22.6% in the six months ended March 31, 2021 from 26.5% in the six months ended March 31, 2020.

The gross profit margins for the six months ended March 31, 2021 were negatively impacted by approximately $2.6 million of unabsorbed manufacturing labor and overhead expenses related to the paver line.

In addition, increases in steel and OEM parts prices contributed to the lower overall gross margins during the six months ended March 31, 2021.

Product engineering and development expenses increased $459,000 in the six months ended March 31, 2021, compared to the six months ended March 31, 2020 due primarily to engineering wages related to the paver line.

SG&A expenses increased $2,089,000 in the six months ended March 31, 2021, compared to the six months ended March 31, 2020.

Net realized and unrealized gains on marketable securities were $1,386,000 for the quarter ended June 30, 2021 versus net unrealized and realized gains of $2,888,000 for the quarter ended June 30, 2020.

The investment gains for the quarter ended June 30, 2020 reflect a recovery in the domestic equity markets after the initial declines from the impact of the COVID-19

pandemic in the quarter ended March 31, 2020.

The effective income tax rate for the quarters ended June 30, 2021 and 2020 was 20.0%.

Net income for the quarter ended June 30, 2021 was $2,335,000, or $0.16 per diluted share, versus $4,322,000, or $0.29 per diluted share, for the quarter ended June 30, 2020.

Nine Months Ended June 30, 2021 versus June 30, 2020

Net revenue for the nine months ended June 30, 2021 and 2020 were $65,235,000 and $66,963,000, respectively, a decrease of $1,728,000.

The reduced revenues reflect a decrease in equipment sales recognized over time compared to the same period in the prior year partially offset by improved parts and component sales, including $3.9 million in paver equipment and parts sales for the nine months ended June 30, 2021, compared with no paver revenues for the nine months ended June 30, 2020.

Gross profit margins decreased to 22.6% in the nine months ended June 30, 2021 from 25.5% in the nine months ended June 30, 2020.

The gross profit margins for the nine months ended June 30, 2021 were negatively impacted by approximately $3.4 million of unabsorbed manufacturing labor and overhead expenses related to the paver line.

In addition, increases in steel and OEM parts prices contributed to the lower overall gross margins during the nine months ended June 30, 2021.

Product engineering and development expenses increased by $785,000 in the nine months ended June 30, 2021, compared to the nine months ended June 30, 2020 due primarily to engineering wages related to the paver line.

SG&A expenses increased $2,770,000 in the nine months ended June 30, 2021, compared to the nine months ended June 30, 2020.

The increase in SG&A expenses was primarily due to expenses related to the paver line and professional fees to support business development efforts.

The Company had operating income of $181,000 for the six months ended March 31, 2021 versus $5,260,000 for the six months ended March 31, 2020, due primarily to the operational and start-up

The Company had operating income of $1,407,000 for the nine months ended June 30, 2021 versus $7,274,000 for the nine months ended June 30, 2020.

The decrease in operating income was due primarily to the operational and start-up

costs related to the Blaw-Knox acquisition and professional fees to support business development efforts.

For the six months ended March 31, 2021, interest and dividend income, net of fees, from the investment portfolio was $641,000, as compared to $1,395,000 for the six months ended March 31, 2020.

Interest income for the six months ended March 31, 2021, also included $456,000 of interest collected from a customer.

The higher income from the investment portfolio in fiscal 2020 reflects the impact from a larger investment in corporate bonds and a higher average yield to maturity.

For the nine months ended June 30, 2021, interest and dividend income, net of fees, from the investment portfolio was $1,437,000, as compared to $1,907,000 for the nine months ended June 30, 2020.

Interest income for the nine months ended June 30, 2021, also included $456,000 of interest collected from a customer.

The higher interest income from the investment portfolio in fiscal 2020 reflects the impact from a larger investment in corporate bonds and a higher average yield to maturity.

The fiscal 2021 corporate bonds were reduced as the related investments were partially liquidated to fund the Blaw-Knox acquisition.

Net realized and unrealized income on marketable securities was $3,488,000 for the six months ended March 31, 2021 versus net realized and unrealized losses of $(4,353,000) for the six months ended March 31, 2020.

Net realized and unrealized income on marketable securities was $4,873,000 for the nine months ended June 30, 2021 versus net realized and unrealized losses of $(1,465,000) for the nine months ended June 30, 2020.

The fiscal 2020 investment losses reflect the decline in the domestic equity markets from the impact of the COVID-19

The effective income tax rate for the six months ended March 31, 2021 and March 31, 2020 was 20.0%.

Net income for the six months ended March 31, 2021 was $3,839,000, or $0.26 per diluted share, versus $1,834,000, or $0.12 per diluted share for the six months ended March 31, 2020.

The effective income tax rate for the nine months ended June 30, 2021 and June 30, 2020 was 20.0%.

Net income for the nine months ended June 30, 2021 was $6,174,000, or $0.42 per diluted share, versus $6,156,000, or $0.42 per diluted share, for the nine months ended June 30, 2020.

Liquidity and Capital Resources

The Company generates capital resources through operations and returns on its investments.

The Company had no long-term or short-term debt outstanding at March 31, 2021 or September 30, 2020.

As of March 31, 2021, the Company has funded $85,000 in cash deposits at insurance companies to cover related collateral needs.

The Company had no long-term or short-term debt outstanding at June 30, 2021 or September 30, 2020.

As of June 30, 2021, the Company has funded $85,000 in cash deposits at insurance companies to cover related collateral needs.

In April 2020, a financial institution issued an irrevocable standby letter of credit (“letter of credit”) on behalf of the Company for the benefit of one of the Company’s insurance carriers.

4 unchanged sentences

To date, no amounts have been drawn under the letter of credit.

As of March 31, 2021, the Company had $29,417,000 in cash and cash equivalents, and $93,646,000 in marketable securities, including $25,169,000 in corporate bonds, $20,423,000 in equities, $13,238,000 in mutual funds, $16,552,000 in exchange-traded funds, $16,000,000 in government securities, and $2,264,000 in cash and money funds.

As of June 30, 2021, the Company had $27,544,000 in cash and cash equivalents, and $95,345,000 in marketable securities, including $25,229,000 in corporate bonds, $14,679,000 in equities, $10,341,000 in mutual funds, $9,545,000 in exchange-traded funds, $30,998,000 in government securities, and $4,553,000 in cash and money funds.

The marketable securities are invested through a professional investment management firm.

These securities may be liquidated at any time into cash and cash equivalents.

The Company’s backlog was $42.6 million at March 31, 2021 compared to $24.5 million at March 31, 2020 due to an increase in equipment orders in the most recent quarter.

The Company’s working capital (defined as current assets less current liabilities) was $153.6 million at March 31, 2021 and $153.2 million at September 30, 2020.

Cash provided by operations during the six months ended March 31, 2021 was $9,283,000.

The significant purchases, sales and maturities of marketable securities shown on the condensed consolidated statements of cash flows typically reflect the recurring purchases and sales of United States treasury bills.

Costs and estimated earnings in excess of billings decreased by $6.5 million reflecting the completion and shipment of several large contract jobs during the six months ended March 31, 2021.

Customer deposits increased by $2.2 million from down payments on point-in-time

contract jobs booked but not shipped during the six months ended March 31, 2021.

Cash flows used in investing activities for the six months ended March 31, 2021 of $15,506,000 were related to the acquisition of Blaw-Know assets and subsequent capital expenditures, primarily for systems software and leasehold improvements for the paver line’s manufacturing facility.

Cash provided by financing activities of $56,000 for the six months ended March 31, 2021, related to proceeds from the exercise of stock options.

The Company’s primary business is the manufacture of asphalt plants and related components and asphalt pavers.

These products typically experience a seasonal slowdown during the third and fourth quarters of the calendar year.

The Company’s backlog was $28.5 million at June 30, 2021, compared to $11.7 million at June 30, 2020.

The Company’s working capital (defined as current assets less current liabilities) was $155.9 million at June 30, 2021 and $153.2 million at September 30, 2020.

Cash provided by operations during the nine months ended June 30, 2021 was $8,130,000.

The significant purchases, sales and maturities of marketable securities shown on the condensed consolidated statements of cash flows reflect the recurring purchases and sales of United States treasury bills.

Accounts receivable increased by $1,253,000 due to the additional receivables related to the Blaw-Knox business.

Costs and estimated earnings in excess of billings decreased by $7,090,000 reflecting the completion and shipment of several large contract jobs during the nine months ended June 30, 2021.

Excluding the impact of the Blaw-Knox acquisition, inventories increased by $3,357,000 primarily due to progress on two large contract orders where revenue is recognized at a point in time and some stock build to compensate for the long lead times from suppliers.

Accounts payable increased by $2,678,000 due to the additional payables related to the Blaw-Knox business along with the increase in inventory.

Cash flows used in investing activities for the nine months ended June 30, 2021 of $16,226,000 were related to the acquisition of Blaw-Know paver line and subsequent capital expenditures, primarily for systems software and leasehold improvements for the paver line’s manufacturing facility.

Cash provided by financing activities of $56,000 for the nine months ended June 30, 2021, related to proceeds from the exercise of stock options.

The Company’s primary business is the manufacture of asphalt pavers, asphalt plants and related components and typically experiences a seasonal slowdown during the third and fourth quarters of the calendar year.

This slowdown often results in lower reported sales and operating results during the first and fourth quarters of the fiscal year ended September 30.

2 unchanged sentences

Accounting policies, in addition to the critical accounting policies referenced below, are presented in Note 1 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K

for the year ended September 30, 2020, “Nature of Operations and Summary of Significant Accounting Policies.”

for the year ended September 30, 2020, “Accounting Policies.”

Estimates and Assumptions

13 unchanged sentences

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time.

There were no contract assets at March 31, 2021 and $6,405,000 in contract assets at September 30, 2020.

These contract assets are included in current assets as costs and estimated earnings in excess of billings on the Company’s condensed consolidated balance sheets.

These contract assets were zero at June 30, 2021 and $6,405,000 at September 30, 2020.

Contract assets at September 30, 2020 are included in current assets as costs and estimated earnings in excess of billings on the Company’s condensed consolidated balance sheet at September 30, 2020.

Revenues from all other contracts for the design and manufacture of equipment, for service and for parts sales, net of any discounts and return allowances, are recorded at a point in time when control of the goods or services has been transferred.

1 unchanged sentence

Payment for equipment under contract with customers is typically due prior to shipment.

Payment for services under contract with customers is due as services are completed.

Accounts receivable related to contracts with customers for equipment sales were $298,000 at March 31, 2021 and $223,000 at September 30, 2020.

Payment for services under contract with customers is due as certain milestones are completed.

Accounts receivable related to contracts with customers for equipment sales was $268,000 at June 30, 2021 and $223,000 at September 30, 2020.

Product warranty costs are estimated using historical experience and known issues and are charged to production costs as revenue is recognized.

Under certain contracts with customers, recognition of a portion of the consideration received may be deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance.

There were no contract liabilities other than customer deposits at March 31, 2021 and September 30, 2020.

Customer deposits related to contracts with customers were $6,026,000 at March 31, 2021 and $3,853,000 at September 30, 2020 and are included in current liabilities on the Company’s condensed consolidated balance sheets.

There were no contract liabilities other than customer deposits and billings in excess of costs and estimated earnings at June 30, 2021 and customer deposits at September 30, 2020.

Customer deposits related to contracts with customers were $3,761,000 at June 30, 2021 and $3,853,000 at September 30, 2020, and are included in current liabilities on the Company’s condensed consolidated balance sheets at June 30, 2021 and September 30, 2020, respectively.

Billings in excess of costs and estimated earnings were $685,000 at June 30, 2021 and represent billings in excess of revenue recognized on equipment sales recognized over time, and are included current liabilities on the Company’s condensed consolidated balance sheet at June 30, 2021.

The Company records revenues earned for shipping and handling as freight revenue at the time of shipment, regardless of whether or not it is identified as a separate performance obligation.

The cost of shipping and handling is classified as cost of goods sold concurrently with the revenue recognition.

The cost of shipping and handling is classified as cost of goods sold concurrently.

All product engineering and development costs, and selling, general and administrative expenses are charged to operations as incurred.

1 unchanged sentence

The allowance for doubtful accounts is determined by performing a specific review of all account balances greater than 90 days past due and other higher risk amounts to determine collectability and also adjusting for any known customer payment issues with account balances in the less-than-90-day

past due aging category.

Account balances are charged off against the allowance for doubtful accounts when they are determined to be uncollectible.

past due aging buckets.

Account balances are charged off against the allowance for doubtful accounts when they are determined to be uncollectable.

Any recoveries of account balances previously considered in the allowance for doubtful accounts reduce future additions to the allowance for doubtful accounts.

The allowance for doubtful accounts also includes an estimate for returns and allowances.

Provisions for estimated returns and allowances and other adjustments are provided for in the same period the related sales are recorded.

Returns and allowances, which reduce product revenue, are estimated using known issues and historical experience.

Returns and allowances, which reduce product revenue, are estimated using historical experience.

Inventories are valued at the lower of cost or net realizable value.

8 unchanged sentences

If significant known changes in trends, technology or other specific circumstances that warrant consideration occur during the year, then the impact on obsolescence is considered at that time.

Marketable Securities and Fair Value Measurements

Marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at fair value.

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis