FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal
year ended December 31, 19941996
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 0-14714
ASTEC INDUSTRIES, INC. .
(Exact name of registrant as specified in its charter)
Tennessee 62-0873631
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 72787, 4101 Jerome Avenue, Chattanooga, Tennessee 37407
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615)(423) 867-4210
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.20 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
Exhibit Index Appears at Page
(Form 10-K Cover Page - Continued)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
State theThe aggregate market value of the voting stock held by non-
affiliatesnon-affiliates
of the registrant. The aggregate market value shall be
computed by reference to the price at which the stockregistrant was sold,
or the average bid and asked prices of such stock, as of a specified
date within 60 days prior to the date of filing:
$93,105,764$72,401,400 based upon the closing sales price
inreported by the NASDAQ National Market System on March 10, 1995,1997, using
beneficial ownership of stock rules adopted pursuant to Section 13 of
the Securities Exchange Act of 1934 to exclude voting stock owned by
all directors and executive officers of the registrant, some of whom
may not be held to be affiliates upon judicial determination.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
As of March 10, 19951997
Common Stock, par value $.20 10,001,858-- 10,044,199 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated
by reference into the Parts of this Annual Report on Form 10-K
indicated:
Document Form 10-K
Proxy Statement relating to Part III
Annual Meeting of Shareholders
to be held on April 27, 199524, 1997
ASTEC INDUSTRIES, INC.
19941996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Executive Officers of the Registrant
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
Appendix A
SIGNATURES
PART I
Item 1. BUSINESS
General
Astec Industries, Inc. (the "Company") is a Tennessee
corporation which was incorporated in 1972. The Company designs,
engineers, manufactures and markets equipment and components
used primarily in road building and related construction activities. The
Company's products are used in each phase of road building, from
quarrying and crushing the aggregate to application of the road
surface. The Company also manufactures certain equipment and
components unrelated to road construction, including trenching and
excavating equipment, environmental remediation equipment, log
loading and industrial heat transfer equipment. The Company holds
over 10065 United States and 63 foreign patents, and has been responsible for
many technological and engineering innovations in the industry. The
Company currently manufactures over 125140 different products, which it
markets both domestically and internationally. In addition to plant and
equipment sales, the Company manufactures and sells replacement
parts for equipment in each of its product lines. The distribution and
sale of replacement parts is an integral part of the Company's
business.
The Company's seven operating divisions andmanufacturing subsidiaries each of which operates as an autonomous company, are: (i)
the Astec division (effective January 1, 1995 Astec, Inc.), which manufactures a line of hot mixhot-mix asphalt plants, soil
purification and environmental remediation equipment and related
components; (ii) Telsmith, Inc., which manufactures aggregate
processing equipment for the production and classification of sand,
gravel, and crushed stone for road and other construction
applications; (iii) Heatec, Inc., which manufactures thermal oil heaters,
asphalt heaters and other heat transfer equipment used in the
Company's asphalt mixing plants and in other industries;
(iv) Roadtec, Inc., which manufactures milling machines used to
recycle asphalt and concrete, asphalt paving equipment and material
transfer vehicles; (v) Trencor, Inc., which manufactures chain and
wheel trenching equipment, excavating equipment and log loaders;
(vi) Wibau-Astec
Maschinenfabrik GmbH,CEI Enterprises, Inc., which manufactures heat transfer
equipment and recycled rubber blending systems for the hot-mix
asphalt industry; and (vii) Production Engineered Products, Inc.
("PEP"), which designs, manufactures and markets high-frequency
vibrating screens for sand and gravel customers, as well as
customers engaged in asphalt production. In addition, PEP
incorporates the high-frequency screens in portable crushing and
screening plants serving the aggregate and industrial markets.
Astec Financial Services, Inc. ("AFS"), was formed in June
1996 as a wholly-owned subsidiary of the Company to provide a wide
range of financing products for leasing or acquiring the Company's
equipment. AFS, a captive finance company, is dedicated to working
exclusively with all the Company subsidiaries and their customers in
arranging financing for equipment. AFS provides loans, operating
leases, floor plans for dealers, fleet rental plans, and other financing
plans to meet the needs of the industry.
In 1996, we also began operations at Pavement Technology,
Inc. ("PTI"), located in Germany, which represents
Astec in international sales and manufactures and sells Wibau
parts in Europe, Africa and the Middle East and Astec continuous
mix plants in Europe and the Eastern bloc countries; (vii) Gibat
Ohl Ingenieurgesellschaft fur Anlagentechnik mbH, located in
Germany,Conyers, Georgia. The Company is a 50%
shareholder of PTI, which manufactures an asphalt pavement
analyzer, vibratory compactor and sells batch asphalt plants,
partspackages mix-design laboratory
products, that allows our customer to purchase a complete design
laboratory from one source. The pavement analyzer technology has
captured the interest of state departments of transportation and
controlsuniversities as a new standard for measuring rutting, fatigue, and
water susceptibility in Europehot-mix asphalt. The pavement technology
product line adds a completely new dimension to the services and
the Eastern bloc countries.equipment we are able to provide our customers.
The Company's strategy is to become the high quality, low
cost producer in each of its product lines while continuing to develop
innovative new products for its customers. Management believes that
this strategy will provide the Company with a
competitive advantage in the marketplace and position itis well positioned to capitalize on rebuilding the need to rebuild
and enhance roadway infrastructure, both in the United States and
abroad.
Disposition of Foreign Operating Subsidiaries
As previously disclosed, due to the disposition of Wibau-Astec
and the abandonment of Astec-Europa, the Company no longer
conducts foreign manufacturing operations and instead has decided to
concentrate all of its manufacturing activities, whether or not related to
international sales, with its more efficient domestic operations.
Products
The Company operates predominantly in a single businesssingle-business
segment. In 19941996 it manufactured and marketed products in five
principal categories: (i) hot mixhot-mix asphalt plants, soil purification and
environmental remediation equipment and related components; (ii)
mobile construction equipment, including asphalt pavers,
from Roadtec, milling
machines and material transfer vehicles and other auxiliary
equipment; (iii) hot oil heaters, asphalt heaters and other heat transfer
equipment; (iv) aggregates processing equipment; and (v) chain and
wheel trenching and excavating equipment. The following table following
shows the Company's sales for each product category which
accounted for 10% or more of consolidated revenue for the periods
indicated.
Years Ended December 31
1996 1995 1994
1993 1992
(in(In thousands)
Asphalt plants and components $93,786 $110,321 $100,514 $88,116 $81,438
Aggregate processing equipment 52,739 46,586 38,823
40,108 33,298Mobile construction equipment 37,845 29,706 30,291
Trenching and excavating equipment 23,543 21,110 25,867 16,535 14,803
Mobile construction equipment 30,291 22,120 14,660
Financial information in connection with the Company's international
sales is included in Note 114 to "Notes to Consolidated Financial
Statements - Segment Information",Information," appearing at Page A-11 of this
report.
Hot MixHot-mix Asphalt Plants
The Astec, divisionInc. designs, engineers, manufactures and markets a
complete line of portable, stationary and relocatable hot mixhot-mix asphalt
plants and related components under the "ASTEC" trademark. An
asphalt mixing plant typically consists of heating and storage
equipment for liquid asphalt (manufactured by Heatec), cold feed bins
for storing aggregates, a drum mixer for drying, heating and mixing, a
baghouse composed of air filters and other pollution control devices,
hot storage bins or silos for temporary storage of hot mixhot-mix asphalt and
a control house. The Company introduced the concept of plant
portability in 1979. Its current generation of portable asphalt plants is
marketed as the "Six Pack" and consists of six portable components
which can be disassembled and moved to the construction site to
reduce relocation expenses. Plant portability represents an industry
innovation developed and successfully marketed by the Company. In
1996, Astec, Inc. developed an improved version of the "Six Pack"
plant, making the new "Six Pack" considerably more portable and self-
erecting. This design will eliminate the use of cranes for disassembly
or erection. The enhanced version of the "Six Pack," known as the
Turbo 400, is capable of producing 400 tons-per-hour of hot-mix
asphalt. This highly portable plant is especially useful in less
populated areas where plants must be moved from job to job.
The components in the Company's asphalt mixing plants are
fully automated and use microprocessor basedmicroprocessor-based control systems for
efficient operation. The plants are manufactured to meet or exceed
federal and state clean air standards.
The Company has also developed specialized asphalt
recycling equipment for use with its hot mixhot-mix asphalt plants. Many of
the existing Astec products are suited for blending, vaporizing, drying
and incinerating contaminated products. As a result, the Astec, divisionInc. has
developed a line of thermal purification equipment for the remediation
of petroleum contaminated soil.
Mobile Construction Equipment
Roadtec, Inc., designs, engineers, manufactures and markets
asphalt pavers, material transfer vehicles, and milling machines.
Roadtec engineers emphasize simplicity, productivity, versatility and
accessibility in product design and use.
Asphalt Pavers. Asphalt pavers are used in the application of
hot mixhot-mix asphalt to the road surface. Roadtec pavers have been
designed to minimize maintenance costs while exceeding road
surface smoothness requirements. A new
effective and efficientRoadtec manufactures one paver
has been introducedmodel which must be used with thea material transfer vehicle. Other additional new
paver models have also been introduced in 1994.vehicle described
below.
Material Transfer Vehicles. The patented "Shuttle Buggy"TM is
a mobile, self-propelled material transfer vehicle which allows
continuous paving by separating truck unloading from the paving
process while remixing the asphalt surface material. A typical asphalt
paver must stop paving to permit truck unloading of asphalt mix. By
permitting continuous paving, the "Shuttle Buggy" TM allows the asphalt
paver to produce a smoother road surface. CertainAs a result of the
pavement smoothness achieved with this machine, certain states are
now requiring the use of the "Shuttle Buggy" TM on their jobs.
Milling Machines. Roadtec milling machines are designed to
remove old asphalt from the road surface before new asphalt mix is
applied. They are manufactured with a simplified control system, wide
conveyors, direct drives and a wide range of horsepower and cutting
capabilities to provide versatility in product application. Additional
modelsupgrades and options were introducedadded in 19941996 to meet contractor needs.enhance the products
and their capabilities.
Heat Transfer Equipment
Heatec, Inc., designs, engineers, manufactures and markets
a variety of heaters and heat transfer processing equipment under the
"HEATEC" trade name for use in various industries, including the
asphalt industry.
CEI Enterprises, Inc. (CEI), designs, engineers, manufactures
and markets heating equipment and storage tanks mainly for the
asphalt paving industry.
Asphalt Heating Equipment. Heatec manufactures a
complete line of heating and liquid storage equipment for the asphalt
paving industry. Heaters are offered in both direct-fired and helical coil
models while CEI's heating equipment is hot oil, direct fired or electric.
The equipment includes portable and stationary tank models with
capacities up to 35,000 gallons each. Heaters are offered in both direct-fired and helical coil
models.
Industrial Heating Equipment. Heatec builds a wide variety of
industrial heaters to fit a broad range of applications, including
equipment for emulsion plants, roofing material plants, refineries,
chemical processing, rubber plants and the agribusiness. Heatec has
the technical staff to custom design heating systems and has systems
operating as large as 40,000,000 BTU's per hour.
Aggregates Processing Equipment
Founded in 1906, Telsmith, has served the quarry business since 1906.
TelsmithInc. designs, engineers, manufactures, and
markets a wide
rangecomplete line of portableaggregate and stationarymineral processing
equipment and related machinery under the "TELSMITH" trademark
for the productionmining, quarrying, and classification of sand and gravel and quarried stone for road and
other construction applications.industries worldwide.
Telsmith's products include jaw, cone, and impact crushers; several
types of feeders which transport the aggregate from the storage sitemove virgin, recycled, or crushed material to
theprimary, secondary, or tertiary crushing equipment; vibrating screens
to separate the aggregate into various mixes;sizes; and washing and
conveying equipment. In metallic mining operations, Telsmith
marketsequipment is used in primary crushing stages after the material has
been blasted from the deposit. Secondary and tertiary crushing
equipment, as well as vibrating screens, are employed in systems to
reduce the material down to sizes for grinding mill feed or leech bed
processes.
Equipment furnished by Telsmith can be purchased as
individual components, as portable plants for flexibility, or as
completely engineered systems for both portable and stationary
applications.
In 1994, Telsmith received ISO 9001 certification, the
international standard of quality assurance in the design,
development, production, installation and servicing of Telsmith's
products. This designation recognizes the quality of its products individually and
services in the worldwide marketplace.
Production Engineered Products, Inc. ("PEP") designs,
manufactures, and markets high-frequency vibrating screens for sand
and gravel customers, as complete systems,
incorporating microprocessor based automated controls forwell as customers engaged in asphalt
production. In addition, PEP incorporates the efficient operation of its equipment.high-frequency screens
into portable crushing and screening plants serving the aggregate and
industrial markets.
Trenching and Excavating Equipment
Trencor, Inc. designs, engineers, manufactures and markets
chain and wheel trenching equipment, canal excavators, rock saws,
road miners and log loadinglog-loading equipment. In August
1994, Trencor acquired the product line and related
manufacturing rights, trademarks, patents, intellectual
property and engineering designs of Capitol Trencher
Corporation ("CTC"), also a manufacturer of trenching and
excavation equipment. This purchase excluded the manufacturing
plant and equipment operated by CTC. The acquisition of the CTC
product line strengthens and broadens Trencor's position in the
construction market. The fabrication of the CTC product line has
been relocated to Trencor's new facility in Grapevine, Texas.
Chain Trenchers. Trencor chain trenching machines utilize a
heavy duty chain (equipped with cutting teeth attached to steel plates)
wrapped around a long moveable boom. These machines, with
weights up to 400,000 pounds, are capable of cutting a trench up to
eight feet wide and thirty feet deep through rock. Trencor also makes
foundation trenchers used in areas where drilling and blasting are
prohibited.
Wheel Trenchers. Trencor wheel trenching machines are
used in pipeline excavation in soil and soft rock. The wheel trenchers
weigh up to 390,000 pounds and have a trench capacity of up to
seven feet in width and ten feet in depth.
Canal Excavator. Trencor canal excavators are used to make
finished and trimmed trapezoidal canal excavations within close
tolerances. The canals are primarily used for irrigation systems.
Rock Saws. Trencor manufactures a rock saw which is
utilized for laying water and gas lines, fiber optics cable, constructing
highway drainage systems and for other applications.
Road Miners.Roadminers. Trencor manufactures four "Road Miner"
models weighing up to 400,000 pounds with an attachment which
allows it to cut a path up to twelve and a half feet wide and five feet
deep on a single pass. The Road MinerRoadminer has applications in the road
construction industry and in mining and aggregates processing
operations.
Log Loaders. Trencor also manufactures several different
models of log loaders. Its products include mobile/truck mounted
models, as well as track mounted and stationary models, each of
which is used in harvesting and processing wood products. The
equipment is sold under the Log-Hog"Log Hog" name. In 1996, due to the
depressed nature of the timber industry as a whole and the resulting
price competition it created, the Company made a decision to de-
emphasize this product line and reallocate resources to strengthen
Trencor's core product lines.
Material Processor. During 1996, Trencor developed a
machine which includes a crusher that operates independently from
the trencher to process rock and related material (spoil) removed from
the trench to make it suitable for use as a filler around pipes, cables or
other lines being installed. Patents are pending on this product.
Manufacturing
The Company manufactures many of the component parts
and related equipment for its products. In many cases, the Company
designs, engineers and manufactures custom component parts and
equipment to meet the particular needs of individual customers.
Manufacturing operations during 19941996 took place at seveneight separate
locations. The Company's manufacturing operations consist primarily
of fabricating steel components and the assembly and testing of its
products to ensure quality control standards have been achieved.
Marketing
The Company markets its products both domestically and
internationally. The principal purchasers of the Company's products
include highway and heavy equipment contractors, utility contractors,
pipeline contractors, open mine operators, quarry operators and
foreign and domestic governmental agencies. The Astec division (now Astec, Inc.) sells directly
to its customers with domestic, soil remediation and international
sales departments. Astec, Inc. also has a branch in Chino,
California to service customers in the western United States. Telsmith products are sold through two leased
branch locations in San Francisco, California, and Sharon,Walpole,
Massachusetts, as well as through a combination of direct sales, both
domestic and international, and dealer sales. Roadtec and Trencor
share a warehouse facility in Aurora, Illinois, that supports both their
product lines. Heatec, CEI, Roadtec, and Trencor products are
marketed through a combination of direct sales and dealer sales.
Approximately 18 manufacturers' representatives sell Heatec products
for applications in industries other than the asphalt industry with such
sales comprising approximately 30%30 percent of Heatec's sales volume
during 1994.1996. Direct sales employees are paid salaries and are
generally entitled to commissions after obtaining certain sales quotas.
See "Business - Properties"Properties."
The Company's international sales efforts are decentralized,
with each division and subsidiary maintaining responsibility for its own international
marketing efforts.
German Subsidiaries
Effective July 1, 1993, the Company entered into an
agreement with Putzmeister-Werk Maschinenfabrik GmbH
("Putzmeister"), a company organized under the laws of the
Federal Republic of Germany, to form a new German limited
liability company, Wibau-Astec, to be jointly owned by the
Company and Putzmeister (the "Joint Venture"). Wibau-Astec
designs, engineers and manufactures asphalt plants, stabilization
plants, asphalt and thermal heaters, hot storage systems and soil
remediation equipment (including their respective parts and
components) which it markets in Europe, Africa and the Middle
East. Initially Putzmeister owned 50% of the Joint Venture and
Astec owned 50%. In consideration for their respective
interests in the Joint Venture, Putzmeister contributed the
operating assets, other than real estate, and related liabilities of
its asphalt plant manufacturing business located in Germany to
the Joint Venture; and Astec contributed, among other things, an
interest in the Company's technology related to asphalt plants,
asphalt heating equipment and soil remediation equipment. In
November 1994, Astec acquired the other 50% interest in
Wibau-Astec, making it a wholly owned subsidiary of the
Company.
In an unrelated transaction, Astec acquired Gibat Ohl
Ingenieurgesellschaft fur Anlagentechnik mbH located in
Hasselroth, Germany for cash and Astec stock in October 1994.
Gibat Ohl is a manufacturer of asphalt batch plants and related
equipment. The management of Gibat Ohl is composed of former
Wibau employees who are very knowledgeable about the asphalt
plant market. The completion of these acquisitions strengthens
Astec's position in the European market.
Seminars and Technical Bulletins
The Company periodically conducts technical and service
seminars which are primarily for contractors, employees and owners
of asphalt mixing plants. In 1994,1996, approximately 200238 representatives
of contractors and owners of hot mixhot-mix asphalt plants attended
seminars held by the Company in Chattanooga, Tennessee. These
seminars, which are taught by Company management and
employees, cover a range of subjects including technological
innovations in the hot mixhot-mix asphalt business and other industry
segments in which the Company manufactures products.
The Company also sponsors executive seminars for the
management of the customers of Astec, Inc. The seminars are taught
primarily by the management of the Company, but outside speakers
are also utilized. Five seminars with up to eighty participants each are
being held in 1997 in the newly constructed, state-of-the-art training
center at Astec, Inc.
In addition to the seminars, the Company publishedpublishes a number
of detailed technical bulletins covering various technological and
business issues relating to the asphalt industry.
Patents and Trademarks
The Company seeks to obtain patents to protect the novel
features of its products. The Company and its subsidiaries hold 6765
United States patents and 3963 foreign patents. There are 24eight United
States and 16four foreign patent applications pending.
The Company and its subsidiaries have approximately 40
trademarks registered in the United States, including logos for Astec,
Telsmith, Roadtec and Trencor, and the names ASTEC, TELSMITH,
HEATEC, LOG HOG, ROADTEC and TRENCOR. Many of these
trademarks are also registered in foreign countries, including Canada,
Great Britain, Mexico, Australia and Japan.Australia.
The Company and its subsidiaries also license their
technology to manufacturers.
Engineering and Product Development
The Company dedicates substantial resources to its
engineering and product development. At December 31, 1994,1996, the
Company and its subsidiaries had 143103 full-time individuals employed
domestically full-time in engineering and design capacities.
Raw Materials
Raw materials used by the Company in the manufacture of its
products include carbon steel and various types of alloy steel, which
are normally purchased from steel mills and other sources.
Seasonality and Backlog
The Company's business is somewhat seasonal. The
Company's sales tend to be stronger from January through June each
year which is attributable largely to orders placed in the fourth quarter
in anticipation of warmer summer months when most asphalt paving is
done.
As of December 31, 1994,1996, the Company had a backlog for
delivery of products at certain dates in the future of approximately
$50,500,000.$44,911,000. At December 31, 19931995, the total backlog was
approximately $33,100,000.$34,751,000. The Company's backlog is subject to
some seasonality, as noted above.
The Company's contracts reflected in the backlog are not, by
their terms, subject to termination. Management believes that the
Company is in substantial compliance with all manufacturing and
delivery timetables relating to its products.
Competition
The Company faces strong competition in price, service and
product performance in each product category. While the Company
does not compete with any one manufacturer in all of its product lines,
it competes as to certain products with both large publicly heldpublicly-held
companies with resources significantly greater than those of the
Company and various smaller manufacturers. Hot mixHot-mix asphalt plant
competitors include CMI Corporation; Cedarapids, Inc., a divisionsubsidiary of
Raytheon Company; and Gencor Industries, Inc. Paving equipment
competitors include Caterpillar Paving Products Inc. (including the Company's former Barber-Greene
product line), a subsidiary of
Caterpillar, Inc.; Blaw-Knox Construction Equipment Company, a
subsidiary of Clark Equipment Co.; Ingersoll-Rand Company; and
Cedarapids, Inc.
The market for the Company's heat transfer equipment is
diverse because of the multiple applications for such equipment. Its
principal competitor is Gencor/Hyway Heat Systems. The Company's
milling machine equipment competitors include Ingersoll-Rand
Company; CMI Corporation; Cedarapids, Inc.; Caterpillar; and Wirtgen
America, Inc. Aggregates processing equipment competitors include
the Pioneer Division of Portec, Inc.; Nordberg, Inc.; Eagle Iron Works;
Boliden Allis, a member of the Trelleborg Group; Cedarapids, Inc.;
and other smaller manufacturers, both domestic and foreign.
Competition for sales of trenching and excavating equipment includes
Ditch Witch; J.I. Case; Vermeer and other smaller manufacturers in
the small utility trencher market. Astec Financial Services competitors
are General Electric Credit Corporation, The CIT Group, and Safeco
Credit Company, Inc., as well as local financial institutions.
As a whole, imports do not constitute significant competition in
the United States; however, in international sales, the Company
generally competes with foreign manufacturers which may have a
local presence in the market the Company is attempting to penetrate.
Asphalt and concrete are generally considered competitive
products as a surface choice for new roads and highways. A portion
of the interstate highway system is paved in concrete, but a majority
of all surfaced roads in the United States are paved with asphalt.
Although concrete is used for some new road surfaces, asphalt is
used for virtually all resurfacing, even the resurfacing of most concrete
roads. Management does not believe that concrete, as a competitive
surface choice, materially impacts the Company's business prospects.
Regulation
The Company does not operate within a highly regulated
industry. However, air pollution equipment manufactured by the
Company principally for hot mixhot-mix asphalt plants must comply with
certain performance standards promulgated by the federal
Environmental Protection Agency under the Clean Air Act
applicable to "new sources" or new plants. Management believes
that the Company's products meet all material requirements of such
regulations and of applicable state pollution standards and
environmental protection laws.
In addition, due to the size and weight of certain equipment,
the Company and its customers sometimes confront conflicting state
regulations on maximum weights transportable on highways and
roads. This problem occurs most frequently in the movement of
portable asphalt mixing plants. Also, some states have regulations
governing the operation of asphalt mixing plants and most states have
regulations relating to the accuracy of weights and measures which
affect some of the control systems manufactured by the Company.
Employees
On August 3, 1995, a union representation election was held
at the Trencor plant and a unit of Trencor production and maintenance
employees voted to be represented by the United States Steelworkers
of American, AFL-CIO, CLC. Trencor has filed a Petition for Review
with the United States Court of Appeals for the Fifth Circuit and
requested that the National Labor Relation Board's certification of the
election be overturned due to alleged improper activity by the union.
Trencor has requested that a new representation election be held.
The proceeding currently is pending before the United States Court of
Appeals for the Fifth Circuit.
At December 31, 1994,1996, the Company and its subsidiaries
employed 1,5311,457 persons, of which 1,045916 were engaged in
manufacturing operations, 176138 in engineering, including support staff,
and design
functions and 310403 in selling, administrative and management functions.
Telsmith has a labor agreement expiring on October 14, 1995. None1998.
Except as set forth above, none of the Company's other employees
are covered by a collective bargaining agreement. TheNotwithstanding
the current preceding before the United States Court of Appeals for
the Fifth Circuit, the Company considers its employee relations to be
good.
Item 2. Properties
The location, approximate square footage, acreage occupied
and principal function of the properties owned or leased by the
Company are set forth below:
Approximate Approximate
Location Square Footage Acreage Principal Function
Chattanooga, Tennessee 265,000 26.0 Corporate and Division Offices,Approximate Approximate
Location Square Footage Acreage Principal Function
Chattanooga, Tennessee 361,000 59.1 Corporate and sub-
sidiary offices,
manufacturing - Astec
Chattanooga, Tennessee --- 63.0 Storage yard - Astec
Chattanooga, Tennessee 66,200 5.0 Offices, manufact-
uring - Heatec
Chattanooga, Tennessee 135,000 15.1 Offices, manufact-
uring - Roadtec
Chattanooga, Tennessee 1,820 --- Offices leased for
Astec Financial
Services, Inc.
North Aurora, Illinois 16,700 3.5 Roadtec and Trencor
(sales and service
office)
San Francisco,
California 550 1.0 Leased sales and
service office -
Telsmith
Mequon, Wisconsin 203,000 30.0 Offices and manufact-
uring - Telsmith
Walnut, Illinois 28,000 3.0 Leased offices and
manufacturing - PEP
Rossville, Georgia 40,500 2.6 Manufacturing - Astec division
Chattanooga, Tennessee 63.0 Storage yard - Astec division
Chattanooga, Tennessee 66,200 5.0 Offices, manufacturing - Heatec
Chattanooga, Tennessee 125,000 13.6 Offices, manufacturing -
Roadtec
Milwaukee, Wisconsin 120,000 6.1 Former Offices, manufacturing
- Telsmith (property for sale)
Mequon, Wisconsin 203,000 30.0 Offices, manufacturing -
Telsmith
North Aurora, Illinois 16,700 3.5 Roadtec (sales and service
office)
San Francisco, California 5,000 1.0 Leased sales and service office
and warehouse - Telsmith
St. Charles, Illinois 300 Leased international sales office
- Telsmith
Chino, California 4,762 1.0 Leased parts warehouse - Astec
Rossville, Georgia 40,500 2.6 Manufacturing and sales office
facility - Astec division
Grapevine, Texas 140,000 51.67 Offices, manufacturing -
Trencor
Grand Prairie, Texas 83,000 6.1 Former Offices, manufacturing
- Trencor, Inc.(property for sale)
Sharon, Massachusetts 4,000 1.0 Leased sales and service office -
Telsmith
Odessa, Texas 4,072 0.8 Sales office and parts warehouse
- Trencor, Inc.
Inman, South Carolina 13,600 8.0 Property for sale (office and
warehouse of former Soil
Purification of Carolina, Inc.)
Houston, Texas 120 Leased sales office - Heatec
Germany, Hasselroth 13,000 7.0 Leased offices, warehouse and limited
manufacturing - Gibat Ohl
Germany, Hasselroth 11,000 7.0 Leased offices and warehouse -
Wibau-Astec
In an effort to improve efficiency and consolidate
manufacturing space, the Company consolidated all of Telsmith's
manufacturing operations in an expanded Mequon facility. The
expansion began in late 1993 and was completed in 1994. On
February 18, 1994, Trencor, Inc. acquired facilities in
Grapevine, Texas 175,513 51.67 Offices, manufact-
uring - Trencor
Walpole,
Massachusetts 1,800 --- Leased sales and
has relocated its manufacturingservice office -
Telsmith
Odessa, Texas 4,072 0.8 Sales office and parts
warehouse - Trencor
Inman, South
Carolina 13,600 8.0 Leased with option
to buy (office
and warehouse of
former Soil
Purification of
Carolina, Inc.)
Houston, Texas 120 --- Leased sales office operations to this location. Except as set forth above,
management-
Heatec
Albuquerque,
New Mexico 110,700 14.0 Offices and manufact-
uring - CEI
Management believes that each of the Company's facilities
provideprovides office or manufacturing space suitable for its current needs
and considers the terms under which it leases facilities to be
reasonable.
Astec, Inc. is in the process of expanding its
offices and manufacturing facilities. In 1995 its manufacturing
space will increase by approximately 14,000 square feet.
Existing facilities will undergo some remodeling also.
Item 3. Legal Proceedings
During 1994, and in previous years, the Company and its
former Barber-Greene subsidiary (now Telsmith, Inc.) were
defendants in two patent infringement actions brought by Robert
L. Mendenhall and CMI Corporation ("CMI"), a competitor,
seeking monetary damages and an injunction to cease the alleged
infringement.
In 1990, CMI was awarded damages of $4,457,000 and
prejudgment interest of $2,838,000 or a total of $7,295,000
from Barber-Greene. During 1991, in a separate trial, CMI
was awarded damages of $8,463,000, prejudgment interest of
$5,309,000 and attorney's fees of $737,000 for a total of
$14,509,000 from Astec; and Astec was awarded damages of
$667,000 plus $391,000 of prejudgment interest or a total of
$1,058,000 from CMI. The total damages and expenses awarded
to CMI were $20,746,000, net of the $1,058,000 awarded to
Astec. Both Astec and CMI appealed the judgments. In
connection
with its appeals, the Company was directed by the courts to
pledge substantially all of its real property and to deposit funds
in an escrow account to secure the judgments against the
Company pending the outcome of appeals.
On June 9, 1994, the Company announced that the United
States Court of Appeals for the Federal Circuit had reversed the
lower court decision and did not remand to the lower court for
further proceedings the judgments previously entered against
Astec and its former Barber-Greene subsidiary in the Robert L.
Mendenhall and CMI patent litigation. Those judgments had
totaled approximately $22 million. The Federal Circuit Court
ruled in favor of Astec because the allegedly infringing patents
had been held invalid in a separate third party case. CMI asked
the Federal Circuit to reconsider its decision and to have all of
the Federal Circuit judges rehear the appeal. The Company
responded to this request. On September 20, 1994, the Company
announced that the United States Court of Appeals for the Federal
Circuit denied the request from Mendenhall and CMI to
reconsider its earlier reversal. With the issuance of this
ruling, The Federal Circuit's review of this ongoing patent
litigation ended.
On October 11, 1994, CMI Corporation and Robert L.
Mendenhall filed a Petition of Writ Certiorari asking the U.S.
Supreme Court to review the decision of the Federal Circuit
Court of Appeals. The Company filed a response opposing the
Petition and on November 28, 1994, the Supreme Court issued
an Order denying the Petition thus bringing the patent litigation
to an end.
As a result of the Supreme Court's refusal to grant
certiorari, the Company received approximately $12.9 million
which was being held in escrow pending the Company's appeal of
the two judgments. In addition, on December 16, 1994, the
Company received approximately $1.3 million from CMI in
satisfaction of the judgment entered in favor of the Company on
its counterclaim against CMI. The receipt of these funds
effectively concluded the litigation between the Company and CMI
and Robert L. Mendenhall which had been pending for a number
of
years. As a result, the Company has reversed its accrued
liability for patent damages. The reversal of $13,870,000 in
accrued patent damages and the receipt of $1,309,000 in patent
damages from CMI total $15,179,000 and are shown net of
accruals and related legal expenses in the Consolidated
Statements of Income as Patent Suit Damages and Expenses (Net
Recoveries and Accrual Adjustments).
In an unrelated case, the Company's Telsmith subsidiary
is a defendant in a patent infringement action brought by
Nordberg, Inc., a manufacturer of a competing line of rock
crushing equipment, seeking monetary damages and an injunction
to cease an alleged infringement of a patent on certain
components used in the production of its rock crushing
equipment. This case, being heard before the U.S. District Court
for the Eastern District of Wisconsin, has been bifurcated into
liability and damages phases. The liability phase was tried on
January 11, 1993; however, no decision had been rendered by
the Court. Because of the uncertainties inherent in the litigation
process, the Company is unable to predict the ultimate outcome
of this litigation.
On October 28, 1993, the Company was also named as a
defendant in a patent infringement action brought by Gencor,
Inc., a manufacturer of a competing line of asphalt plants,
seeking monetary damages and an injunction to cease an alleged
infringement of a patent on certain components used in the
production of its asphalt plant product line. This case was filed
in the U.S. District Court for the Middle District of Florida,
Orlando Division, and is currently in the discovery phase.
Management believes this case to be without merit and intends to
vigorously defend this suit; however, due to the uncertainties
inherent in the litigation process, the Company is unable to
predict the ultimate outcome of this litigation.
Management has reviewed all claims and lawsuits and, upon
the advice of counsel, has made provision for any estimable losses;
however, the Company is unable to predict the ultimate outcome of
the outstanding claims and lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Executive Officers of the Registrant
The name, title, ages and business experience of the
executive officers of the Company are listed below.
J. Don Brock, Ph.D., P.E., has been President and a director
of Astecthe Company since its incorporation in 1972 and assumed the
additional position of Chairman of the Board in 1975. He was the
Treasurer of the Company from 1972 until 1994. From 1969 to 1972,
Dr. Brock was President of the Asphalt Division of CMI Corporation.
Dr. Brock earned his Ph.D. degree in mechanical engineering from the
Georgia Institute of Technology. Dr. Brock and Thomas R. Campbell,
President of Roadtec, are first cousins. Dr. Brock is 56.58.
Richard W. Bethea, Jr., became Vice President, Corporate
Counsel, and Secretary on February 1, 1997.
Mr. Bethea has been a practicing lawyer since 1978. He has an
undergraduate degree in accounting from the University of Georgia.
Before joining the Company, Mr. Bethea was a member (stockholder)
and partner with the law firm Stophel & Stophel, P. C., in
Chattanooga, Tennessee. He has served as the Company's litigation
counsel since 1983. He is 44.
F. McKamy Hall, a Certified Public Accountant, has served as
Controller of the Company since May 1987. From 1985 to 1987, Mr.
Hall was Vice President-Finance of Quadel Management Corporation,
a company engaged in real estate management. Mr. Hall has an
undergraduate degree in accounting and a Master of Business
Administration degree from the University of Tennessee at
Chattanooga. He is 54.
W. Norman Smith has served as the President of Astec, Inc.
since December 1, 1994. He formerly served as President of Heatec,
Inc., from 1977 to 1994. From 1972 to 1977, Mr. Smith was a
Regional Sales Manager with the Company. From 1969 to 1972, Mr.
Smith was an engineer with the Asphalt Division of CMI Corporation.
Mr. Smith has also served as a director of the Company since 1972.
He is 57.
Robert G. Stafford has served as President of Telsmith, Inc.
since April 1991. Between January 1987 and January 1991, Mr.
Stafford served as President of Telsmith, Inc., a subsidiary of Barber-
Greene. From 1984 until the Company's acquisition of Barber-Greene
in December 1986, Mr. Stafford was Vice President - Operations of
Barber-Greene and General Manager of Telsmith. He became a
director of the Company in March 1988. He is 58
Thomas R. Campbell has served as President of Roadtec,
Inc. since 1988. From 1981 to 1988 he served as Operations
Manager of Roadtec. Mr. Campbell and J. Don Brock, President of
the Company, are first cousins. Mr. Campbell is 47.
Roger Sandberg has served as President of Trencor, Inc.,
since October 1, 1996. Prior to that he served as Vice President of
Sales and Marketing at Roadtec, Inc. and Director of Marketing with
Astec Inc. Before joining the Company, Mr. Sandberg held various
management positions with Cedarapids, Inc., and Standard Havens,
Inc., since 1971. He is 55.
James G. May has served as President of Heatec, Inc. since
December 1, 1994. From 1984 until 1994 he served as Vice
President of Engineering of Astec, Inc. He is 52.
Albert E. Guth has been President of Astec Financial
Services, Inc. since June 1996. He served as Chief Financial Officer
of the Company sincefrom 1987 through June 1996, as Senior Vice
President since 1984, Secretary of the Company since 1972, and
Treasurer since 1994. Mr. Guth, who has been a director since 1972,
was the Vice President of the Company from 1972 until 1984. From
1969 to 1972, Mr. Guth was the Controller of the Asphalt Division of
CMI Corporation. He is 55.
F. McKamy Hall, a Certified Public Accountant, has
served as Controller of the Company since May 1987. From
1985 to 1987, Mr. Hall was Vice President-Finance of Quadel
Management Corporation, a company engaged in real estate
management. He is 52.
Thomas R. Campbell has served as President of Roadtec,
Inc. since 1988. From 1981 to 1988 he served as Operations
Manager of Roadtec. Mr. Campbell and J. Don Brock, President
of the Company, are first cousins. Mr. Campbell is 45.
W. Norman Smith has served as the President of Astec,
Inc. since December 1, 1994. He formerly served as President
of Heatec, Inc. from 1977 to 1994. From 1972 to 1977, Mr.
Smith was a Regional Sales Manager with the Company. From
1969 to 1972, Mr. Smith was an engineer with the Asphalt
Division of CMI Corporation. Mr. Smith has also served as a
director of the Company since 1972. He is 55.
Jerry F. Gilbert has served as President of Trencor, Inc.
since 1981. From 1973 to 1980, Mr. Gilbert was self-
employed in the real estate investment and insurance field. Mr.
Gilbert has also served as a director of the Company since May,
1991. He is 49.
Robert G. Stafford has served as President of Telsmith,
Inc., formerly the Barber-Greene Company, since April 1991.
Between January 1987 and January 1991, Mr. Stafford served
as President of Telsmith, Inc., a subsidiary of Barber-Greene.
From 1984 until the Company's acquisition of Barber-Greene in
December 1986, Mr. Stafford was Vice President - Operations
of Barber-Greene and General Manager of Telsmith. From 1979
to 1984 he served as Director-Engineering and Operations for
Telsmith. He became a director of the Company in March 1988.
He is 56.
James G. May has served as President of Heatec, Inc.
since December 1, 1994. From 1983 until 1994 he served as Vice
President of Engineering of Astec, Inc. He is 50.57.
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters
The Company's Common Stock is traded in the National
Association of Securities Dealers Automated Quotation System
(NASDAQ) National Market System under the symbol "ASTE"."ASTE." The Company
has never paid any dividends on its Common Stock.
The high and low sales prices of the Company's Common
Stock as reported on the NASDAQ National Market System for each quarter
during the last two fiscal years, which have been
restated to retroactively reflect the two-for-one stock split
effected in the form of a dividend on August 12, 1993, wereare as follows:
Price Per Share
1994 High Low
1st Quarter 20Price Per Share
1996 High Low
1st Quarter 10 5/8 9 1/8
2nd Quarter 11 1/8 8 1/4
3rd Quarter 9 1/8 8 1/8
4th Quarter 9 3/4 8 3/8
Price Per Share
1995 High Low
1st Quarter 14 1/8 13 1/2
2nd Quarter 17 5/8 13
3rd Quarter 15 12 1/2
4th Quarter 15 7/8 11 5/8
Price Per Share
1993 High Low
1st Quarter 13 8 1/2
2nd Quarter 14 9 7/8
3rd Quarter 14 7/8 11 3/8
4th Quarter 15 3/4 11
2nd Quarter 13 1/8 10 7/8
3rd Quarter 11 3/4 9 7/8
4th Quarter 12 1/4 9 3/4
The number of holders of record of the Company's Common Stock as
of March 10,1995,10, 1997 was 821.696.
Item 6. Selected Financial Data
Selected financial data appear on page A-1 of this Report.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Management's discussion and analysis of financial condition
and results of operations appears on pages A-2 to A-4A-5 of this Report.
Item 8. Financial Statements and Supplementary Data
Financial statements and supplementary financial information
appear on pages A-5A-6 to A-22A-23 of this Report.
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
None required to be reported in this item.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding the Company's directors included under
the caption "Election of Directors - Certain Information Concerning
Nominees and Directors" in the Company's definitive Proxy Statement
to be delivered to the shareholders of the Company in connection with
the Annual Meeting of Shareholders to be held on April 27, 199524, 1997, is
incorporated herein by reference. Required information regarding the
Company's executive officers is contained in Part I of this Report
under the heading "Executive Officers of the Registrant".Registrant." Information
regarding compliance with Section 16(a) of the Exchange Act is
included under "Election of Directors - Section 16(a) Filing
Requirements" in the Company's definitive Proxy Statement, which is
incorporated herein by reference.
Item 11. Executive Compensation
Information included under the caption, "Election of Directors -
Executive Compensation" in the Company's definitive Proxy
Statement to be delivered to the shareholders of the Company in
connection with the Annual Meeting of Shareholders to be held on
April 27, 199524, 1997 is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information included under the captions "Election of Directors
- - Certain Information Concerning Nominees and Directors",Directors," "Election
of Directors - Common Stock Ownership of Management" and
"Election of Directors - Common Stock Ownership of Certain
Beneficial Owners" in the Company's definitive Proxy Statement to be
delivered to the shareholders of the Company in connection with the
Annual Meeting of Shareholders to be held on April 27, 199524, 1997 is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
In September 1991,On March 18, 1996, Dr. J. Don Brock, Chairman of the Board
and President of the Company loaned $1,178,000 to the Company to
supplement its working capital revolving credit facility. The Company
executed a demand note payable to Dr. Brock in connection with this
loan bearing interest at a rate equal to that paid to First Chicago NBD
under the Company's Chairman,unsecured revolving line of credit. At the time
Dr. Brock loaned these funds to the Company, the Company's
outstanding balance under its Senior
Vice President, and$22,000,000 revolving credit facility was
$9,605,000. The Company was able to use the President of its Telsmith, Inc. subsidiary
formed a general partnership which acquired 25%proceeds of the common stockloan
from Dr. Brock to reduce the amount outstanding under the credit
facility. As of American Rock Products, Inc., an Ohio
corporation engaged in the businessDecember 31, 1996, interest of supplying crushed rock$73,135 has been
accrued with respect to concrete and asphalt producers in the southeastern Oklahoma
area ("Amrock"). These individuals own interests in the
partnership of 50%, 25% and 25%, respectively. In December
1992, the rock crushing business of Amrock was sold to a
competitor, exclusive of two used rock crushing machines and
certain other miscellaneous inventory and equipment.
In March 1994, Amrock sold two of these used rock
crushing machines to Telsmith for $50,000 and $70,000,
respectively. The purchase price for each of these machines was
determined by the President of Telsmith based on his opinion of
their fair market value at the time of purchase. Telsmith
intends to market both rock crushing machines to its customers
for sale in the ordinary course of business.this loan.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a)(1) The following financial statements and other
information appear in Appendix "A" to this Report and are filed as a
part hereof:
. Selected Consolidated Financial Data.
. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
. Report of Independent Auditors.
. Consolidated Balance Sheets at December 31, 19941996
and 1993.1995.
. Consolidated Statements of Income for the Years
Ended December 31, 1994, 19931996, 1995 and 1992.1994.
. Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1994, 19931996, 1995 and 1992.1994.
. Consolidated Statements of Cash Flows for the Years
Ended December 31, 1994, 19931996, 1995 and 1992.1994.
. Notes to Consolidated Financial Statements.
(a)(2) Other than as described below, Financial Statement
Schedules are not filed with this Report because the Schedules are
either inapplicable or the required information is presented in the
Financial Statements or Notes thereto. The following Schedules
appear in Appendix "A" to this Report and are filed as a part hereof:
. Report of Independent Auditors.
. Schedule VIII - Valuation and Qualifying Accounts.
(a)(3) The following Exhibits* are incorporated by reference
into or are filed with this Report:
2.1 Share Purchase and Transfer Agreement, dated October 13,
1994, between the Company and Wibau-Astec Maschinenfabrik
GmbH (incorporated by reference to the Form 8-K effective
November 7, 1994, File No. 0-14714).
2.2 Share Purchase and Transfer Agreement by and between the
Company and Gibat Ohl Ingenieurgesellschaft fur Anlagentechnik mbH,
dated as of October 5, 1994.
3.1 Restated Charter of the Company
(incorporated by reference to the
Company's Registration Statement
on Form S-1, effective June 18,
1986, File No. 33-5348).
3.2 Articles of Amendment to the
Restated Charter of the Company,
effective September 12, 1988
(incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1988, File No.
0-14714).
[FN]
The Exhibits are numbered in accordance with Item 601 of
Regulation S-K. Inapplicable Exhibits are not included in the
list.
3.3 Articles of Amendment to the
Restated Charter of the Company,
effective June 8, 1989 (incorporated
by reference to the Company's
Annual Report on Form 10-K for the
year ended December 31, 1989, File
No. 0-14714).
3.4 Amended and Restated Bylaws of
the Company, adopted March 14,
1990 (incorporated by reference to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1989, File No. 0-14714).
4.1 Trust Indenture between City of
Mequon and Firstar Trust Company,
as Trustee, dated as of February 1,
1994 (incorporated by reference to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1993, File No. 0-14714).
4.2 Indenture of Trust, dated April 1,
1994, by and between Grapevine
Industrial Development Corporation
and Bank One, Texas, NA, as
Trustee.
10.1 Agreement, dated December 24, 1976, between the Company and
Jemco International, Inc. (incorporated by reference to the
Company's Registration Statement on Form S-1, effective June 18,
1986, File No. 33-5348).
10.2 Supplemental Agreement, dated December 30, 1982, between the
Company and Jemco International, Inc. (incorporated by reference to
Company's Registration Statement on Form S-1, effective June 18,
1986, File No. 33-5348).
10.3 Restated License and Trademark Agreement, dated March 25, 1988,
between the Company and Barber-Greene Europa B.V.Trustee (incorporated by reference to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1988,1993, File No. 0-14714).
10.4 License and Trademark4.3 Shareholder Protection Rights
Agreement, dated May 5, 1988, between the
Company and BM Group PLC incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1989, File No. 0-14714).
10.5 1986 Stock Option Plan of the Company22,
1995 (incorporated by reference to
the Company's Registration Statement on Form S-
1, effective June 18, 1986, File No. 33-5348).
10.6 Loan Agreement, dated July 1, 1980, between the Company and
the Industrial Development Board of the City of Chattanooga
(incorporated by reference to the Company's Registration Statement
on Form S-1, effective June 18, 1986, File No. 33-5348).
10.7 Trust Indenture, dated July 1, 1980, between the Industrial
Development Board of the City of Chattanooga and Pioneer Bank
(incorporated by reference to Company's Registration Statement
on Form S-1, effective June 18, 1986, File No. 33-5348).
10.8 Warrant Agreement, dated as of December 29, 1986, between the
Company and The Citizens and Southern National Bank, as
Warrant Agent (incorporated by reference to the Company's
Registration Statement on Form S-4, effective November 26, 1986,
File No. 33-10403).
10.9 Credit Agreement, dated as of September 17, 1987, between the
Company and The First National Bank of Chicago (incorporated by
reference to the Company's AnnualCurrent Report on
Form 10-K for the year
ended8-K dated December 31, 1987, File No. 0-14714).
10.10 Amendment No. One, dated January 4, 1988, to Credit Agreement,
dated as of September 17, 1987, between the Company and The First
National Bank of Chicago (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1987, File No. 0-14714).
10.11 Amendment No. Two, dated March 17, 1988, to Credit Agreement,
dated as of September 17, 1987, between the Company and The First
National Bank of Chicago (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1987, File No. 0-14714).
10.12 Amendment, dated August 17, 1988, to Credit Agreement, dated
as of September 17, 1987, between the Company and The First
National Bank of Chicago (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1988, File No. 0-14714).
10.13 Second Amendment, dated October 21, 1988, to Credit Agreement,
dated as of September 17, 1987, between the Company and The First
National Bank of Chicago (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1988, File No. 0-14714).
10.14 Amendment, dated as of January 19, 1989, to Credit Agreement,
dated as of September 17, 1987, between the Company and The First
National Bank of Chicago (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December
31, 1988, File No. 0-14714).
10.15 Consent, Waiver and Release, dated as of January 31, 1989, to Credit
Agreement, dated as of September 17, 1987, between the Company
and The First National Bank of Chicago (incorporated by reference
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1988, File No. 0-14714).
10.16 Waiver, dated March 8, 1989, to Credit Agreement, dated as of
September 17, 1987, between the Company and The First National
Bank of Chicago (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1988, File No.
0-14714).
10.17 Senior Note Agreement, dated as of January 31, 1989, between the
Company and Principal Mutual Life Insurance Company (incorporated
by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1988, File No. 0-14714).
10.18 Subordinated Note Agreement, dated
as of January 31, 1989, between
the Company and Principal Mutual
Life Insurance Company
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1988, File No. 0-14714).
10.19 Amended and Restated Credit
Agreement, dated as of April 27,
1989, between the Company and
The First National Bank of Chicago
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1989, File No. 0-14714).
10.20 Amendment, dated as of March 26,
1990, to the Amended and Restated
Credit Agreement, dated as of April
27, 1989, between the Company
and The First National Bank of
Chicago (incorporated by reference
to the Company's Annual Report on
Form 10-K for the year ended
December 31, 1989, File No. 0-14714).
10.21 Consent, Waiver and Release, dated
as of November 1, 1989, to
Amended and Restated Credit
Agreement, dated as of April 27,
1989, between the Company and
The First National Bank of Chicago
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1989, File No. 0-14714).
10.22 Consent, Waiver and Release, dated
as of November 10, 1989, to
Senior and Subordinated Note
Agreements dated as of January 31,
1989, between the Company and
Principal Mutual Life Insurance
Company (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1989, File No. 0-14714).
10.23 Consent, Waiver and Release, dated
as of March 14, 1990, to Credit
Agreement, dated as of September
17, 1987, between the Company
and The First National Bank of
Chicago (incorporated by reference
to the Company's Annual Report on
Form 10-K for the year ended
December 31, 1989, File No. 0-14714).
10.24 Lease Agreement, dated as of July
1, 1974, between Barber-Greene
Company and the City of Mequon,
Wisconsin (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1988, File No. 0-14714).
10.25 Lease Agreement, dated November
10, 1986, between Barber-Greene
Company and Stephen P. and Sandra
S. Davenport (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1988, File No. 0-14714).
10.26 Lease Agreement, dated as of March 31, 1988, between Telsmith, Inc.
and AEW #79 Trust (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1988, File No. 0-14714).
10.27 Lease Agreement, dated June 20,
1988, between Barber-Greene
Company and 8000 Cypress
Parkway Corporation
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1988, File No. 0-14714).
10.28 Lease Agreement, dated February 1, 1989, between Barber-Greene
Company and Lee Steinberg
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December 31, 1988,22, 1995,
File No. 0-14714).
10.29 Lease Agreement, dated as of
August 28, 1989, between Telsmith,
Inc., and Pine Hill Developers
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1989, File No. 0-14714).
10.30 Lease Agreement, dated as of March
24, 1989, between the Company
and Robert D. Ingersoll
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1989, File No. 0-14714).
10.31 Assignment, dated as of February
5, 1990, of lease dated November
10, 1986, between Barber-Greene
Company and Castro and Davenport
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1989, File No. 0-14714).
10.32 Sublease, dated as of December 29,
1989, of lease dated February 1,
1989, between Barber-Greene
Company and Lee Steinberg
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1989, File No. 0-14714).
10.33 Waiver and Agreement, dated
March 30, 1990, with respect to
Senior and Subordinated Note
Agreements, dated as of January
31, 1989, between the Company
and Principal Mutual Life
Insurance Company (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31, 1990, File No. 0-14714).
10.34 Waiver, dated August 24, 1990,
with respect to Senior Note
Agreement, dated as of January 31,
1989, between the Company and
Principal Mutual Life Insurance
Company (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1990,
File No. 0-14714).
10.35 Waiver, dated December 18,
1990, with respect to Senior and
Subordinated Note Agreements,
dated as of January 31, 1989,
between the Company and Principal
Mutual Life Insurance Company
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1990, File No. 0-14714).
10.36 Waivers, dated October 18, 1990,
with respect to Amended and
Restated Credit Agreement, dated as
of April 27, 1989, between the
Company and the First National
Bank of Chicago (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1990,
File No. 0-14714).
10.37 Waivers, dated December 20,
1990, with respect to Credit
Agreement, dated as of April 27,
1989, between the Company and
the First National Bank of Chicago
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1990, File No. 0-14714).
10.38 Lease Agreement, dated as of March
1, 1991 between Astec Industries,
Inc. and Carl M. Krueger (dba
Krueger Instruments),
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1990, File No. 0-14714).
10.39 Asset Purchase Agreement by and
between Caterpillar Paving
Products Inc., Barber-Greene
Company, and Astec Industries,
Inc., dated December 17, 1990
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1990, File No. 0-14714).
10.40 Waiver, dated April 11, 1991,
with respect to Amended and
Restated Credit Agreement, dated
as of April 27, 1989, between the
Company and the First National
Bank of Chicago (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1990,
File No. 0-14714).
10.41 Waiver, dated April 11, 1991,
with respect to Senior and
Subordinated Note Agreements,
dated as of January 31, 1989,
between the Company and Principal
Mutual Life Insurance Company
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1990, File No. 0-14714).
10.42 Consent and Waiver, dated April
17, 1991, with respect to the
Amended and Restated Credit
Agreement, dated as of April 27,
1989, between the Company and
The First National Bank of Chicago
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1991, File No. 0-14714).
10.43 Consent and Waiver, dated April
17, 1991, with respect to the
Senior and Subordinated Note
Agreements, dated as of January
31, 1989, between the Company
and Principal Mutual Life
Insurance Company (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31, 1991, File No. 0-14714).
10.44 Consent of Barber-Greene Company
(now Telsmith, Inc.), Heatec, Inc.,
Roadtec, Inc., and Trencor Jetco,
Inc., dated April 17, 1991, with
respect to the (i) Amended and
Restated Credit Agreement, dated as
of April 27, 1989, between the
Company and The First National
Bank of Chicago, and (ii) Senior
and Subordinated Note Agreements,
dated as of January 31, 1989,
between the Company and Principal
Mutual Life Insurance Company
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1991, File No. 0-14714).
10.45 Collateral Trust Indenture, dated as
of March 1, 1991, between the
Company, The First National Bank
of Chicago, Principal Mutual Life
Insurance Company and Citizens
and Southern Trust Company
(Georgia), N.A. (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1991, File No.
0-14714).
10.46 Consent, Waiver and Release of
Security Interest by The First
National Bank of Chicago ("First
Chicago"), Principal Mutual Life
Insurance Company ("PMLIC") and
Citizens and Southern Trust
Company (Georgia), N.A. ("C&S"),
dated April 17, 1991, with respect
to the (i) Amended and Restated
Credit Agreement, dated as of April
27, 1989, between the Company
and First Chicago, (ii) Senior and
Subordinated Note Agreements,
dated as of January 31, 1989,
between the Company and PMLIC,
(iii) Collateral Trust Indenture,
dated as of March 1, 1991,
between the Company, First
Chicago, PLMIC, and C&S, and (iv)
certain collateral documents
related thereto (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1991, File No.
0-14714).
10.47 Release of Security Interest by the
Citizens and Southern Trust
Company (Georgia), N.A., The First
National Bank of Chicago ("First
Chicago") and Principal Mutual
Life Insurance Company
("PMLIC"), dated April 17, 1991,
with respect to certain
trademarks, trademark
registrations, trademark
applications and trademark
licenses pledged as collateral under
the Pledge and Security Agreement,
dated as of March 26, 1990
between the Barber-Greene
Company, Ameacon, Inc., Heatec,
Inc., Roadtec, Inc., Trencor Jetco,
Inc., Barber-Greene Overseas, Inc.
and Telsmith, Inc., and First
Chicago acting in its capacity as
collateral agent for itself and
PMLIC (incorporated by reference
to the Company's Annual Report on
Form 10-K for the year ended
December 31, 1991, File No. 0-14714).
10.48 Release of Security Interest by the
Citizens and Southern Trust
Company (Georgia), N.A., The First
National Bank of Chicago ("First
Chicago") and Principal Mutual
Life Insurance Company
("PMLIC"), dated April 17, 1991,
with respect to certain patents,
patent applications and patent
licenses pledged as collateral under
the Pledge and Security Agreement,
dated as of March 26, 1990
between the Barber-Greene
Company, Ameacon, Inc., Heatec,
Inc., Roadtec, Inc., Trencor Jetco,
Inc., Barber-Greene Overseas, Inc.
and Telsmith, Inc., and First
Chicago acting in its capacity as
collateral agent for itself and
PMLIC (incorporated by reference
to the Company's Annual Report on
Form 10-K for the year ended
December 31, 1991, File No. 0-14714).
10.49 Bank response to requests for
waivers for quarter ended
6/30/91 (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1991, File No. 0-14714).
10.50 Waiver, dated March 23, 1992,
with respect to the Amended and
Restated Credit Agreement, dated as
of April 27, 1989, between the
Company and The First National
Bank of Chicago (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1991,
File No. 0-14714).
10.51 Fourth Amendment, dated March
23, 1992 between the Company
and The First National Bank of
Chicago, with respect to the
Amended and Restated Credit
Agreement, dated April 27, 1989
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1991, File No. 0-14714).
10.52 Waiver, dated March 23, 1992,
with respect to the Senior and
Subordinated Note Agreements,
dated as of January 31, 1989,
between the Company and Principal
Mutual Life Insurance Company
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1991, File No. 0-14714).
10.53 Third Amendment, dated March 23,
1992 between the Company and
Principal Mutual Life Insurance
Company, with respect to the
Senior Note Agreement dated
January 31, 1989 (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31, 1991, File No. 0-14714).
10.54 Third Amendment, dated March 23,
1992 between the Company and
Principal Mutual Life Insurance
Company, with respect to the
Subordinated Note Agreement dated
January 31, 1989 (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1991, File No. 0-14714).
10.55 Consent and Waiver, dated April
29, 1992, with respect to the
Amended and Restated Credit
Agreement, dated as of April 27,
1989, between the Company and
The First National Bank of Chicago
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1992, File No. 0-14714).
10.56 Waiver, dated April 29, 1992,
with respect to the Senior and
Subordinated Note Agreements,
dated as of January 31, 1989,
between the Company and Principal
Mutual Life Insurance Company
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1992, File No. 0-14714).
10.57 License Agreement, dated July 2,
1992, between Telsmith, Inc. and
Gerlach Industries (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1992, File No. 0-14714).
10.58 Deed of Trust from the Company to
Milligan-Reynolds Guaranty Title
Agency, Inc., Trustee, pledging
certain property located in
Hamilton County, Tennessee,
recorded August 24, 1992 in Book
4029, Page 417 in the Office of the
Register of Deeds of Hamilton
County, Tennessee (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1992, File No. 0-14714).
10.59 Deed of Trust from Heatec, Inc. to
Milligan-Reynolds Guaranty Title
Agency, Inc., Trustee, pledging
certain property located in
Hamilton County, Tennessee,
recorded August 24, 1992 in Book
4029, Page 423 in the Office of the
Register of Deeds of Hamilton
County, Tennessee (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1992, File No. 0-14714).
10.60 Deed of Trust from Roadtec, Inc. to
Milligan-Reynolds Guaranty Title
Agency, Inc., Trustee, pledging
certain property located in
Hamilton County, Tennessee,
recorded August 24, 1992 in Book
4029, Page 428 in the Office of the
Register of Deeds of Hamilton
County, Tennessee (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1992, File No. 0-14714).
10.61 Deed to Secure Debt from the
Company to CMI Corporation
pledging certain property located
in Walker County, Georgia,
recorded August 25, 1992 in deed
Book 683, Page 506 in the Office
of the Superior Court Clerk of
Walker County, Georgia
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1992, File No. 0-14714).
10.62 Deed of Trust from Trencor Jetco,
Inc. to Craig Bishop, Trustee,
pledging certain property located
in Dallas County, Texas, recorded
August 25, 1992 in Book 92166,
Page 891 in the Office of the
County Clerk of Dallas County,
Texas (incorporated by reference
to the Company's Annual Report on
Form 10-K for the year ended
December 31, 1992, File No. 0-14714).
10.63 Mortgage from Telsmith, Inc. to
CMI Corporation pledging certain
property located in Ozaukee
County, Wisconsin, recorded
August 25, 1992 in Volume 768,
Page 74 in the Office of the
Register of Deeds of Ozaukee
County, Wisconsin (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1992, File No. 0-14714).
10.64 Mortgage from Telsmith, Inc. to
CMI Corporation pledging certain
property located in Milwaukee
County, Wisconsin, recorded
August 25, 1992 in Reel 2850,
image 427 in the Office of the
Register of Deeds of Milwaukee
County, Wisconsin (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1992, File No. 0-14714).
10.65 Fifth Amendment, dated December
31, 1992 between the Company
and The First National Bank of
Chicago, with respect to the
Amended and Restated Credit
Agreement, dated April 27, 1989
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1992, File No. 0-14714).
10.66 Letter of Intent between the
Company and Putzmeister-Werk,
Maschinenfabrik GmbH dated
December 12, 1992 in connection
with the formation of
WIBAU/ASTEC GmbH (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1992, File No. 0-14714).
10.67 First Amendment to Note Agreement
(for Senior Notes) dated April 1,
1991 between the Company and
Principal Mutual Life Insurance
Company (incorporated by
reference to the Company's
Registration Statement on Form S-
2, effective June 8, 1993, as
Exhibit 10.54, File No. 33-61952).
10.68 First Amendment to Note Agreement
(for Subordinated Notes) dated
April 11, 1991 between the
Company and Principal Mutual Life
Insurance Company (incorporated
by reference to the Company's
Registration Statement on
Form S-2, effective June 8, 1993,
as Exhibit 10.55, File No. 33-61952).
10.69 Fourth Amendment, dated March
31, 1993 between the Company
and Principal Mutual Life
Insurance Company, with respect
to the Amended and Restated Credit
Agreement dated January 31, 1989
(incorporated by reference to the
Company's Registration Statement
on Form S-2, effective June 8,
1993, as Exhibit 10.56, File No. 33-61952).
10.70 Sixth Amendment, dated March 31,
1993 between the Company and the
First National Bank of Chicago,
with respect to the Amended and
Restated Credit Agreement, dated
April 27, 1989 (incorporated by
reference to the Company's
Registration Statement on Form S-2, effective June 8, 1993, as
Exhibit 10.57, File No. 33-61952).
10.71 Consent of Telsmith, Inc.; Heatec,
Inc.; Roadtec, Inc.; and Trencor
Jetco, Inc.; dated March 31, 1993,
with respect to (i) the Fourth
Amendment to Note Agreement; (ii)
the Senior Guaranty; and (iii) the
Security Documents (incorporated
by reference to the Company's
Registration Statement on
Form S-2, effective June 8, 1993,
as Exhibit 10.58, File No. 33-61952).
10.72 Joint Venture Agreement, dated
June 6, 1993, between the
Company and Putzmeister-Werk
Maschinenfabrik GmbH
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1993, File No. 0-14714).
10.73 Technology Contribution
Agreement, dated July 12, 1993,
between the Company and Wibau-
Astec Maschinenfabrik GmbH
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1993, File No. 0-14714).
10.74 Seventh Amendment, dated January
21, 1994 between the Company
and The First National Bank of
Chicago, with respect to the
Amended and Restated Credit
Agreement, dated April 27, 1989
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1993, File No.
0-14714).
10.75 Loan Agreement between City of
Mequon, Wisconsin and Telsmith,
Inc. dated as of February 1, 1994
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1993, File No. 0-14714).
10.76 Credit Agreement by and between
Telsmith, Inc. and M&I Marshall &
Ilsley Bank, dated as of February 1,
1994 (incorporated by reference to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1993, File No. 0-14714).
10.77 Security Agreement by and between
Telsmith, Inc. and M&I Marshall &
Ilsley Bank, dated as of February 1,
1994 (incorporated by reference to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1993, File No. 0-14714).
10.78 Mortgage and Security Agreement
and Fixture Financing Statement by
and between Telsmith, Inc. and M&I
Marshall & Ilsley Bank, dated as of
February 1, 1994 (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1993, File No.
0-14714).
10.79 Guarantee of Astec Industries, Inc. in
favor of M&I Ilsley Bank, dated as of
February 1, 1994 (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1993, File No. 0-14714).
10.80 Guarantee of Wibau-Astec Maschinenfabrik GmbH in favor of
Dresdner Bank Aktiengensellschaft,dated as of December 22, 1993.
10.81 Letter of Guarantee of Wibau-Astec Maschinenfabrik GmbH in favor of
Berliner Hondels - und Frankfurter Bank, dated as of
December 22, 1993.
10.82 Guarantee of Wibau-Astec Maschinenfabrik GmbH in favor of
Bayerische Vereinsbank, dated as of December 22, 1993.
10.83 Loan Agreement dated as of April 1,1994,1,
1994, between Grapevine Industrial
Development Corporation and
Trencor, Inc. (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1994, File No.
0-14714).
10.84 Letter of Credit Agreement, dated
April 1, 1994, between The First National Bank of Chicago
NBD and Trencor, Inc. (incorporated
by reference to the Company's
Annual Report on Form 10-K for the
year ended December 31, 1994, File
No. 0-14714).
10.85 Guaranty Agreement, dated April 1,
1994, between Astec Industries, Inc.
and Bank One, Texas, NA, as
Trustee.Trustee (incorporated by reference to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1994, File No. 0-14714).
10.86 Astec Guaranty, dated April 29,
1994, of debitdebt of Trencor, Inc. in favor
of The First National Bank of Chicago.Chicago NBD (incorporated
by reference to the Company's
Annual Report on Form 10-K for the
year ended December 31, 1994, File
No. 0-14714).
10.87 Credit Agreement, dated as of July
20, 1994, between the Company and
The First National Bank of Chicago.
10.88 Guarantee of Wibau-Astec Maschinenfabrik GmbH in favor of
Bayerische Vereinsbank, dated as of January 16, 1995.Chicago NBD (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1994, File No.
0-14714).
10.89 Waiver for December 31, 1994,
dated February 24, 1995 with respect
to the First National Bank of Chicago NBD Credit
Agreement dated July 20, 1994.
11.1994
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1994, File No. 0-14714).
10.90 First Amendment to Guaranty of
Payment, dated March 21, 1995 by
and between Heatec, Inc.; Roadtec,
Inc.; Trencor, Inc.; Telsmith, Inc.;
Astec Transportation, Inc.; ACI, Inc.;
Astec, Inc.; CEI Enterprises, Inc.; and
First Chicago NBD (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1995, File No. 0-14714).
10.91 First Amendment to Credit
Agreement, dated May 22, 1995
between the Company and First
Chicago NBD (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1995, File No. 0-14714).
10.92 Second Amendment to Guaranty of
Payment, dated May 22, 1995 by and
between Heatec, Inc.; Roadtec, Inc.;
Trencor, Inc.; Telsmith, Inc.; Astec
Transportation, Inc.; ACI, Inc.; Astec,
Inc.; CEI Enterprises, Inc.; and First
Chicago NBD (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1995, File No. 0-14714).
10.93 Guaranty of all obligations of Astec-
Europa Strassenbaumaschinen
GmbH executed by the Company in
favor of Bayerische Vereinsbank
Aktiengesellschaft, dated December
6, 1995 (incorporated by reference to
the Company's Annual Report on
Form 10-K for the year ended
December 31, 1995, File No. 0-14714).
10.94 Guaranty of a DM3,000,000 credit
facility to Gibat Ohl
Ingenieurgesellschaft fur
Anlagentechnik mbH executed by the
Company in favor of Deutsche Bank
AG, dated December 13, 1995
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1995, File No. 0-14714).
10.95 Waiver for December 31, 1995,
dated November 10, 1995 with
respect to First Chicago NBD Credit
Agreement dated July 20, 1994, as
amended (incorporated by reference
to the Company's Annual Report on
Form 10-K for the year ended
December 31, 1995, File No. 0-14714).
10.97 Limited Consent of First Chicago
NBD dated as of March 21, 1995
related to the acquisition of Trace
Industries, Inc. and the assignment of
certain assets to Astec, Inc.
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1995, File No. 0-14714).
10.98 Supplemental Executive Retirement
Plan, dated February 1, 1996 to be
effective as of January 1, 1995
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1995, File No. 0-14714).
10.99 Trust under Astec Industries, Inc.
Supplemental Retirement Plan, dated
January 1, 1996 (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1995, File No. 0-14714).
10.100 Demand note dated March 18, 1996
between the Company and the
Company's Chief Executive Officer,
Dr. J. Don Brock.
10.101 Loan Agreement dated December 5,
1996 between Astec Financial
Services, Inc. and The CIT
Group/Equipment Financing, Inc. ("CIT").
10.102 Astec Industries, Inc. Guaranty dated
December 5, 1996 of Line of Credit
Agreement between Astec Financial
Services, Inc. and The CIT
Group/Equipment Finance.
11 Statement Regarding Computation of
Per Share Earnings.
22.22 Subsidiaries of the Registrant.
23.23 Consent of Independent Auditors
(b) A reportNo reports on Form 8-K waswere filed duringin the fourth quarter of 1994 in connection with the Wibau-Astec
Maschinenfabrik GmbH acquisition.quarter.
(c) The Exhibits to this Report are listed under Item 14(a)(3) above.
(d) The Financial Statement Schedules to this Report are
listed under Item 14(a)(2) above.
* The Exhibits are numbered in accordance with Item 601 of
Regulation S-K. Inapplicable Exhibits are not included in the list.
APPENDIX "A" to ANNUAL REPORT ON FORM 10-K
ITEMS 8 and 14(a)(1) and (2), (c) and (d)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
ASTEC INDUSTRIES, INC.
Contents Page
Selected Consolidated Financial Data A-1
Management's Discussion and Analysis of Financial Condition and
Results of Operations Report of Independent AuditorsA-2
Consolidated Balance Sheets at December 31, 19941996 and 19931995 A-6
Consolidated Statements of Income for the Years Ended December
31, 1996, 1995 and 1994 1993 and1992A-7
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1996, 1995 and 1994 1993 and 1992A-8
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 1993 and 1992A-9
Notes to Consolidated Financial Statements A-11
Report of Independent Auditors A-24
Schedule VIII - Valuation and Qualifying Accounts A-25
ASTEC INDUSTRIES, INC.
1996 ANNUAL REPORT
Astec Industries, Inc., through its seven manufacturing
subsidiaries, designs, engineers, manufactures and markets
equipment and components used in road building and various
other construction activities. The Company's products are used
in each phase of road building, from quarrying and crushing the
aggregate to application of the road surface. The Company also
manufactures certain equipment and components unrelated to
road construction, including trenching equipment,
environmental remediation equipment, log handling equipment
and industrial heat transfer equipment.
The Company has been responsible for many technological and
engineering innovations in the road building industry and
presently holds 65 United States and 63 foreign patents and has
eight domestic and four foreign patents pending. The Company
currently manufactures over 140 different products which it
markets both domestically and internationally. In addition to
plant and equipment sales, the Company manufactures and sells
replacement parts for equipment in each of its product lines,
which is an integral part of the Company's business.
The Company's eight subsidiaries are: (i) Astec, Inc., which
manufactures a line of hot mix asphalt plants, soil purification
and environmental remediation equipment and related
components; (ii) Telsmith, Inc., which manufactures aggregate
processing equipment for the production and classification of
sand, gravel and crushed stone for road and other construction
applications; (iii) Heatec, Inc., which manufactures thermal oil
heaters, asphalt heaters and other heat transfer equipment used
in the Company's asphalt mixing plants and in other industries;
(iv) CEI Enterprises, Inc., which manufactures heating
equipment, mixing equipment, agitating tanks and storage tanks
used primarily in the asphalt paving industry; (v) Roadtec, Inc.,
which manufactures reclaiming equipment used to recycle
asphalt and concrete, asphalt paving equipment and material
transfer vehicles; (vi) Trencor, Inc., which manufactures chain
and wheel trenching equipment, excavating equipment, and
logging equipment; (vii) Production Engineered Products, Inc.,
which designs, manufactures, and markets high-frequency
vibrating screens for sand and gravel and asphalt operations;
and (viii) Astec Financial Services, Inc., which provides a wide
range of financial services for financing the purchase of Astec
products for Astec's customers.
The principal purchasers of the Company's products for road
building and related construction activities include highway and
heavy equipment contractors, utility contractors, pipeline
contractors, open mine operators, quarry operators and foreign
and domestic governmental agencies. International sales
represented approximately 17.3% of net sales for 1996 and
included sales in Canada, Mexico, Europe, the Middle East,
Asia, Africa, Australia, South America and the West Indies.
TABLE OF CONTENTS
TO OUR SHAREHOLDERS
FINANCIAL HIGHLIGHTS
CORPORATE OVERVIEW
FINANCIAL STATEMENTS
Selected Consolidated Financial Data
Quarterly Financial Highlights
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
Corporate Information
Total sales for 1996 were $221,413,000 compared to
$242,601,000 during 1995. Income before income taxes for the
year ended December 31, 1996 was $7,018,000 compared to
$6,141,000 in 1995. Net income for the year ended December
31, 1996 was $4,345,000, or $0.43 per share, compared to
$4,560,000, or $0.45 per share for 1995.
We are not satisfied with the level of our profits during 1996,
which were adversely affected by unusual events at our Trencor,
Inc. subsidiary and a significant downturn in international sales
of hot-mix asphalt plants and components at our Astec, Inc.
subsidiary.
In an effort to diversify Trencor's product line, we acquired the
Log Hog log loader line in early 1994 and produced a
significant amount of inventory in anticipation of continued
high demand in the timber industry. Unfortunately, a
significant and unexpected downturn in the paper industry,
which produced a similar decline in the timber market,
substantially reduced the demand for the log loaders. This
market downturn increased price competition to the point that in
order to sell units we were experiencing unacceptable losses.
Consequently, in December we decided it was in the best
interest of the Company to de-emphasize this product line,
reduce the investment in inventory, and reallocate these
resources for further expansion of Trencor's core trencher
business. As a result, the appropriate writedowns on inventory
were taken.
We also decided to terminate Trencor's research and
development of a large mining machine for use in rock quarries
and surface mines. After two years of experimentation with a
prototype, we had doubts about the long-range cost
effectiveness of the machine, so we felt that the project should
be discontinued. This decision allowed us to redirect our
engineering resources to the trencher line to which three new
models of trenchers were added in 1996.
In 1996, Astec, Inc. experienced an 11.3% increase in domestic
sales compared to 1995, but these gains were not sufficient to
offset a decrease of approximately $25 million in the cyclical
and often unpredictable international market. Also during 1996,
Astec continued to be the industry's innovator in plant
technology as it completed the development of a new Turbo 400
ton per hour "Six Pack" plant, which we believe is the most
portable high-production asphalt plant ever built.
While 1996 was a disappointing year in terms of earnings, it
was, nevertheless, a year of successes and great progress. For
example, the Telsmith operation realized many of the
efficiencies we had hoped to achieve with our capital
investments in state-of-the-art machine tools and expanded
facilities. In December, we completed the acquisition of
Production Engineered Products, Inc. ("PEP") in Walnut,
Illinois. PEP manufactures and markets patented high-
frequency screening units for sand and gravel and asphalt
operations. PEP will be operated in conjunction with Telsmith.
We believe the high-production capacity of the PEP screens will
enhance sales of Telsmith's portable crushing plants and that
Telsmith's experienced sales force will significantly increase
sales in the PEP product lines.
Roadtec, Inc. continued to be an innovator in the paver and
milling machine markets and introduced a new model of paver
and a new model of our patented "Shuttle Buggy"TM which is
a market leader in the material transfer vehicle market.
Heatec, Inc. also had a good year. Even though sales of Astec,
Inc., Heatec's largest customer, declined in 1996, Heatec's sales
increased and it is currently adding to its manufacturing facility.
We also acquired a new facility for CEI, Inc. These additions
should position Heatec and CEI for continuing growth,
particularly in the western United States.
In a further effort to enhance the strength of our core businesses,
during 1996 we formed a new subsidiary, Astec Financial
Services, Inc., which will offer our customers access to capital
financing through a lender that better understands the equipment
being purchased and the road construction industry in general.
Albert E. Guth, former Senior Vice President and Chief
Financial Officer of Astec Industries, Inc., is President of this
new subsidiary.
In 1996, we also began operations at Pavement Technology,
Inc. located in Conyers, Georgia. Astec Industries, Inc. is a
50% shareholder of this company, which manufactures an
asphalt pavement analyzer and a vibratory compactor and
packages mix-design laboratory products. These products allow
our customers to purchase a complete design laboratory from
one source. The pavement analyzer technology has captured the
interest of state departments of transportation and universities as
a new standard for measuring rutting, fatigue, and water
susceptibility in hot-mix asphalt. The pavement technology
product line adds a completely new dimension to the services
and equipment we are able to provide our customers.
We never take our shareholders for granted, and we deeply
appreciate your patience with us over the last two years. Quite
candidly, we are not happy with the profits we have earned over
the past two years, and we have taken a hard look at our
operations in order to make the changes necessary to maximize
our profit potential in the future. We believe we have done that
and that we are strategically positioned to reap the benefits. Our
Company has the largest share of the hot-mix asphalt plant,
asphalt heater, and large custom trencher markets. We are
among the leaders in rock crushers, milling machines, and
asphalt pavers, and we believe that our technology, much of
which is patented, is the most innovative and reliable in the
world today.
Astec Industries, Inc. went public approximately ten years ago
in June 1986. While the amount and consistency of our profits
has not been satisfactory to us, we are proud of the overall
performance of the Company which we intend to enhance. For
example, on September 30, 1986, our net worth was
$17,803,000. By December 31, 1996 our net worth had risen to
$99,393,000. On a per-share basis, the net worth of the
Company was $3.04 on September 30, 1986, and had increased
to $9.84 per share by December 31, 1996, representing a
compounded growth rate of net worth of approximately 12.1%
per year.
Our mission in 1997 is the expansion and enhancement of our
core businesses and improvement of the return on our
shareholders' investments. We believe we will fulfill that
mission and will set a new standard of performance that will
continue into the future. We deeply appreciate the trust,
confidence, and support of our customers, employees, and
especially our stockholders.
Sincerely,
/s/ J. Don Brock
J. Don Brock, Ph.D., P.E.
Chairman of the Board and Chief Executive Officer
FINANCIAL HIGHLIGHTS
(in thousands, except as noted *)
Percent
Increase
1996 1995 (Decrease)
Operating Results
Net sales $221,413 $242,601 (8.7)%
Patent suit damages and
expenses 264 699 (62.2)%
Loss on abandonment
of foreign subsidiary 7,037
Pre-tax income 7,018 6,141 14.3%
Net income 4,345 4,560 (4.7)%
Financial Position
Working capital $69,884 $58,015 20.5%
Shareholders' equity 99,393 95,901 3.6%
Per Common Share
Net income* $0.43 $0.45 (4.4)%
Book value per
common share at
year-end* 9.84 9.50 3.6%
Other Data
Weighted average
number of common
and common equivalent
shares outstanding 10,047 10,072
Common shareholders -
approximate* 700 750
Employees* 1,457 1,402
CORPORATE OVERVIEW
Astec Industries, Inc. and its operating subsidiaries share a
commitment of providing quality equipment for rebuilding
infrastructure, both domestically and internationally. From rock
to road, each company provides a critical function in the road
building process. Using the latest design and manufacturing
technology, these companies provide the most modern and
innovative equipment available today.
Hot Mix Asphalt Plants
Astec, Inc. designs, engineers, manufactures and markets a
complete line of portable, stationary, and relocatable hot mix
asphalt plants and related components under the "ASTEC"
trademark. An asphalt mixing plant consists of heating and
storage equipment (manufactured by Heatec or CEI) for liquid
asphalt, cold feed bins for storing aggregates, a drum mixer, a
baghouse composed of air filters and other pollution control
devices, hot storage bins or silos for temporary storage of hot
mix asphalt and a control house. The Company introduced the
concept of plant portability in 1979. Its current generation of
portable asphalt plants is marketed as the "Six Pack" and
consists of six portable components which can be disassembled
and moved to the construction site to reduce relocation
expenses. Plant portability represents an industry innovation
developed and successfully marketed by the Company.
In 1996, Astec, Inc. developed an improved version of the "Six
Pack" plant, making the new "Six Pack" considerably more
portable and self-erecting. This design will eliminate the use of
cranes for disassembly or re-erection. The enhanced version of
the "Six Pack," known as the Turbo 400, is capable of
producing 400 tons per hour of hot mix asphalt. This highly
portable plant is especially useful in less populated areas where
plants must be moved from job to job.
The components in the company's asphalt mixing plants are
fully automated and use microprocessor-based control systems
for efficient operation. The plants are manufactured to meet or
exceed federal and state clean air standards.
Many of the existing Astec products are suited for blending,
vaporizing, drying and incinerating contaminated products. As a
result, Astec, Inc. has developed a line of thermal purification
equipment for the remediation of petroleum contaminated soil.
Mobile Construction Equipment
Roadtec designs, engineers, manufactures and markets asphalt
pavers, material transfer vehicles and milling machines.
Roadtec engineers emphasize simplicity, productivity,
versatility and accessibility in product design and use.
Asphalt Pavers. Asphalt pavers are used in the application of
hot mix asphalt to the road surface. Roadtec pavers have been
designed to minimize maintenance costs while exceeding road
surface smoothness requirements.
Material Transfer Vehicles. The "Shuttle Buggy" is a mobile,
self-propelled material transfer vehicle which allows continuous
paving by separating truck unloading from the paving process
while remixing the asphalt surface material. A typical asphalt
paver must stop paving to permit truck unloading of the asphalt
mix. By permitting continuous paving, the "Shuttle Buggy"
allows the asphalt paver to produce a smoother road surface.
Milling Machines. Roadtec milling machines are designed to
remove old asphalt from the road surface before new hot mix
asphalt is applied. They are manufactured with a simplified
control system, wide conveyors, direct drives and a wide range
of horsepower and cutting capabilities to provide versatility in
product application.
Heat Transfer Equipment
Heatec designs, engineers, manufactures and markets a variety
of heaters and heat transfer processing equipment under the
"HEATEC" trade name for use in various industries including
the asphalt industry. CEI Enterprises ("CEI") designs,
manufactures and markets heating equipment and storage tanks
primarily for the asphalt paving industry, and markets
equipment under the CEI name.
Asphalt Heating Equipment. Heatec manufactures direct-fired
and helical coil heaters for the asphalt industry, while CEI's
heating equipment is hot oil, direct fired or electric. CEI and
Heatec make a wide range of models that are both portable and
stationary in capacities up to 35,000 gallons. Heatec and CEI
both manufacture rubber blending and mixing systems.
Industrial Heating Equipment. Heatec also builds a wide variety
of industrial heaters to fit a broad range of applications,
including equipment for emulsion plants, roofing material
plants, refineries, chemical processing, rubber plants and the
agribusiness. Heatec has the technical staff to custom design
heating systems and has systems operating as large as
40,000,000 BTUs per hour.
Aggregates Processing Equipment
Founded in 1906, Telsmith, Inc. designs, manufactures, and
markets a complete line of aggregate and mineral processing
equipment and related machinery under the "TELSMITH"
trademark for the mining, quarrying, and sand and gravel
industries worldwide. Telsmith's products include jaw, cone,
and impact crushers; several types of feeders which move
virgin, recycled, or crushed material to primary, secondary, or
tertiary crushing equipment; vibrating screens to separate the
aggregate into various sizes; and washing and conveying
equipment. In metallic mining operations, Telsmith equipment
is used in primary crushing stages after the material has been
blasted from the deposit. Secondary and tertiary crushing
equipment, as well as vibrating equipment, are employed in
Telsmith systems to reduce the material down to sizes for
grinding mill feed or leech bed processes.
Equipment furnished by Telsmith can be purchased as
individual components, as portable plants for flexibility, or as
completely engineered systems for both portable and stationary
applications.
In 1994, Telsmith received ISO 9001 certification, the
international standard of quality assurance in the design,
development, production, installation, and servicing of our
products. This designation is a recognition of the quality of our
products and services in the worldwide marketplace.
Production Engineered Products, Inc. ("PEP") designs,
manufactures, and markets high-frequency vibrating screens for
sand and gravel and asphalt operations. In addition, PEP
incorporates the high-frequency screens into portable crushing
and screening plants serving the aggregate and industrial
markets.
Trenching and Excavating Equipment
Trencor designs, manufactures and markets chain and wheel
trenching equipment, canal excavators, rock saws, roadminers
and log handling equipment.
Chain Trenchers. Trencor chain trenching machines utilize a
heavy duty chain (equipped with cutting teeth attached to steel
plates) wrapped around a long movable boom. These machines,
with weights up to 400,000 pounds, are capable of cutting a
trench up to eight feet wide and thirty feet deep. Trencor also
makes foundation trenchers used in areas where drilling and
blasting are prohibited.
Wheel Trenchers. Trencor wheel trenching machines are used in
pipeline excavation in soil and soft rock. The wheel trenchers
weigh up to 390,000 pounds and have a trench capacity of up to
seven feet in width and ten feet in depth.
Canal Excavators. Trencor canal excavators are used to make
finished and trimmed trapezoidal canal excavations within close
tolerances. The canals are primarily used for irrigation systems.
Material Processors. During 1996, Trencor developed a
machine which includes a crusher that operates independent of
the trencher to process rock and related material (spoil) removed
from the trench to make it suitable for use as a filler around
pipes, cables or other lines being installed. Patents are pending
on this product.
Rock Saws. Trencor manufactures a rock saw which is utilized
for laying water and gas lines, fiber optics cable, constructing
highway drainage systems and for other applications.
Roadminers. The "Roadminer" is a 400,000 pound unit
manufactured by Trencor with an attachment which allows it to
cut a path up to twelve and a half feet wide and five feet deep on
a single pass. The Roadminer has applications in the road
construction industry and in mining and aggregates processing
operations.
Log Loaders. Trencor also manufactures several different
models of log loaders. Its products include mobile/truck
mounted models, as well as track mounted and stationary
models, each of which is used in harvesting and processing
wood products. The equipment is sold under the Log Hog name.
Asphalt, Mix Design, and Quality Control Testing Equipment
In 1996, Pavement Technology, Inc. was formed and is located
in Conyers, Georgia. Astec Industries, Inc. is a 50%
shareholder of this company, which manufactures an asphalt
pavement analyzer, vibratory compactor and packages mix-
design laboratory products, that allow our customers to
purchase a complete design laboratory from one source. The
pavement analyzer technology has captured the interest of state
departments of transportation and universities as a new standard
for measuring rutting, fatigue, and water susceptibility in hot-
mix asphalt. The pavement technology product line adds a
completely new dimension to the services and equipment we are
able to provide our customers.
Captive Finance Business
Astec Financial Services, Inc. was formed in June 1996 as a
wholly-owned subsidiary of Astec Industries, Inc. to provide a
wide range of financing products for the Company's equipment.
AFS, a captive finance company, is dedicated to working
exclusively with all of the Company's subsidiaries and their
customers in arranging financing for the Company's equipment.
AFS has provided loans, operating leases, floor plans for
dealers, fleet rental plans and has developed financing plans to
meet the needs of the industry.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT AS NOTED*)(in thousands, except as noted *)
1996 1995 1994 1993 1992
Consolidated Income
Statement Data (1)
1994 1993 1992 1991 1990
Net sales $221,413 $242,601 $213,806 $172,801 $149,133 $134,512 $134,982
Selling, general and
administrative expenses 35,082 34,326 31,142 28,624 23,969
20,456 21,946Research and development 5,868 5,128 3,166 2,923 2,580
Patent suit damages
and expenses net(net
recoveries and accrual
adjustmentsadjustments) 264 699 (14,947) 375 567
3,868 8,329
Research and development 3,166 2,923 2,580 2,503 1,918Loss on abandonment of
foreign subsidiary 7,037
Income from operations 8,051 2,566 27,236 9,974 7,058
Interest expense 1,656 2,125 713 1,788 3,241
4,597 6,310
Income loss from
continuing operationsNet income 4,345 4,560 23,436 9,338 6,014
524 (13,463)
Discontinued operations 3,530 (2,771)
Net income loss 23,436 9,338 6,014 4,054 (16,234)
Income loss per common share from continuing
operations* (2)share*(1) .43 .45 2.38 1.07 .82 .07 (1.87)
Consolidated Balance
Sheet Data
Working capital $ 69,884 $ 58,015 $ 53,000 $ 40,767 $ 33,641 $ 31,167 $ 49,776$40,767 $33,641
Total assets 167,853 154,356 155,964 102,967 87,885
90,989 112,414
Total short-term debt 2,051 774 8,573 10 3,103 4,862 8,836
Long-term debt, less
current maturities 30,497 17,150 16,155 22,660
29,387 50,305
Shareholders' equity 99,393 95,901 90,373 64,105 27,631 21,279 17,208
Book value per common
share at year-end* (2) 9.04 6.54 3.78 2.95 2.39
Quarterly Financial Highlights (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994
Net sales $ 46,226 $ 62,694 $ 49,021 $ 55,865
Gross profit 11,029 14,013 11,216 11,839
Net income 2,876 5,212 3,131 12,217
Net income per
common share* (2) .29 .53 .32 1.23
1993
Net sales $ 43,401 $ 52,436 $ 38,838 $ 38,126
Gross profit 10,380 11,878 9,268 10,369
Net income 1,578 3,481 2,116 2,163
Net income per
common share* (2) .22 .45 .22 .22
Common Stock Price* (2)
1994 High 20-1/8 17-5/8 15 15-7/8
1994(1) 9.84 9.50 9.04 6.54 3.78
Quarterly Financial Highlights (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1996
Net sales $ 59,570 $ 63,212 $ 47,182 $ 51,449
Gross profit 13,822 15,305 11,284 8,854
Net income 2,826 2,245 1,021 (1,747)
Net income per
common share* .28 .22 .10 (.17)
1995
Net sales $ 57,544 $ 70,368 $ 65,015 $ 49,674
Gross profit 13,637 14,011 13,298 8,811
Net income 2,516 4,730 2,768 (5,454)
Net income per
common share* .25 .47 .27 (.54)
Common Stock Price*
1996 High 10-5/8 11-1/8 9-1/8 9-3/4
1996 Low 9-1/8 8-1/4 8-1/8 8-3/8
1995 High 14-1/4 13-1/8 11-3/4 12-1/4
1995 Low 13-1/2 13 12-1/2 11-5/8
1993 High 13 14 14-7/8 15-3/4
1993 Low 8-1/2 9-7/8 11-3/8 11 10-7/8 9-7/8 9-3/4
The Company's common stock is traded on the National
Association of Securities Dealers Automated Quotation
System (NASDAQ) National Market
System under the symbol ASTE. Prices
shown are the high and low bid prices as announced by
NASDAQ. The Company has never paid any dividends on its
common stock.
The number of shareholders of record is approximately 900.
[FN]
1 Restated to reflect paving equipment business of Barber-Greene as a
discontinued operation.
2700.
(1) Restated to retroactively reflect the two-for-one stock split
effected in the form of a dividend on August 12, 1993
1993.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
19941996 vs. 19931995
Net income for 1996 was $4,345,000, or $.43 per share,
compared to net income of $4,560,000, or $.45 per share, in
1995. Net income for 1995 included losses of approximately
$4,279,000 relative to the Company's former German
subsidiaries, Astec-Europa and Wibau-Astec, while pre-tax
income for 1996 was reduced by approximately $3,000,000 due
to various fourth quarter charges. Net income from domestic
operations was $4,345,000 in 1996 compared to $8,840,000 in
1995. This decrease was principally attributed to the fourth
quarter charges taken in connection with the discontinuance and
writedown of a newly-developed mining machine product line,
increases in inventory reserves related to the Company's log
loader business, and additional litigation expenses incurred by
the Company. The Company also experienced a $25,447,000
decline in international asphalt plant sales from domestic
operations from 1995 to 1996. This decline had a significant
adverse impact on net income for 1996. In addition, the
Company experienced an increase in income tax expense of
approximately $870,000 in 1996 due to an increase in the
effective income tax rate applicable to the Company. This also
contributed to the decrease in net income from domestic
operations for 1996.
Net sales for 1994 increased $41,005,0001996 were $221,413,000, a decrease of
$21,188,000, or approximately 23.7%8.7% compared to 1993.1995.
Excluding sales of $24,748,000 related to German operations
which were disposed of in 1995, 1996 sales increased by
$3,560,000, or 1.6% and domestic sales increased by
$24,216,000 in 1996 compared to 1995. This increase in
domestic sales is principally attributed to strong sales in mobile
equipment, rock crushing equipment, a slight improvement in
sales of trencher equipment, and increased domestic sales of
asphalt plants. However, this increase in domestic sales was
offset by a $20,656,000 decrease in international sales,
primarily as a result of a $25,447,000 decline in international
sales of asphalt plants. International sales by domestic
subsidiaries were 17.3% of total sales in 1996 compared to
24.3% of total sales in 1995.
The gross profit margin for 1996 was 22.3% compared to 20.5%
for 1995. This increase reflects the improvement attributable to
the disposition of German operations in 1995 where gross profit
margin was low. Domestic operations' gross profit margin for
1996 was 22.3% compared to 22.5% for 1995.
In 1996, selling, general, and administrative expenses increased
to 15.8% of net sales from 14.1% in 1995. In 1995, selling,
general, and administrative expenses were 14.0%, excluding the
German operations. ConExpo, an equipment show which
occurs once every three years, accounted for .4% of the
increase. As a percentage, the additional increase is attributed
to the reduction in net sales for 1996, increased sales
accommodations on the log loader product line, increased
selling expenses primarily related to salaries, travel, and
entertainment expenses at all subsidiaries, and product
demonstration expenses at the Roadtec subsidiary.
Research and development expenses increased from 2.1% of net
sales in 1995 to 2.6% in 1996. Excluding the German
operations, research and development expenses were 1.3% in
1995. This increase in 1996 was principally attributed to the
product development expenses related to a prototype mining
machine which will be discontinued in 1997.
Interest expense for 1996 decreased to .8% of sales from .9% of
sales in 1995. The decrease resulted from reduced average
borrowings and lower average interest rates during 1996.
Other income decreased by $5,076,000 from 1995 to 1996.
Excluding German operations, the decrease was only $525,000.
The 1995 other income, excluding Germany, included gains on
the sale of fixed assets, primarily related to the sale of the
former manufacturing facility operated by Telsmith, Inc., but no
such comparable gains occurred in 1996.
Income tax expense for 1996 was $2,673,000, or approximately
38.1% of pre-tax income, compared to $1,580,000, or
approximately 25.7%, of pre-tax income in 1995. The variance
from the normal corporate tax rate in 1995 was primarily
attributed to a lower effective tax rate related to the Company's
foreign operations. The Company has previously utilized the
majority of its tax credit carryforwards, therefore, the
Company's tax rate for 1996 and subsequent years will
approximate the normal corporate rate.
The backlog at December 31, 1996 was $44,911,000 compared
to $34,751,000 at December 31, 1995, representing a 29.2%
increase which was principally attributed to increased domestic
asphalt plant orders. The Company is unable to determine
whether this increase in backlog was experienced by the
industry as a whole or whether it reflects an increase of market
share. While this backlog reflects a positive development,
management does not believe this increase represents a trend,
but is attributed to periodic fluctuations in sales volume given
the nature of the Company's products and customers. In
contrast to the strong domestic market, international asphalt
plant orders continue to be slow and unpredictable. In an effort
to improve international asphalt plant sales, the Company is
reviewing its international sales efforts and developing a plan to
add agents in Singapore, Malaysia, and Indonesia, as well as
increase its participation in international trade shows in 1997.
The Company will also hold a service school for Spanish-
speaking customers in 1997.
Results of Operations
1995 vs. 1994
Net income for 1995 was $4,560,000 or $.45 per share
compared to net income of $23,436,000 or $2.38 per share in
1994. Net income for 1994 included $14,947,000 in non-
recurring gains as a result of final judgments entered in
connection with the CMI litigation. The decline in 1995 also
reflects a $7,037,000 loss resulting from the abandonment of
Astec-Europa, as well as continuing losses from foreign
operations during 1995. Income before income taxes was
$6,141,000 in 1995 compared to $25,737,000 in 1994.
This is shown in the following table:
Year Ended December 31,
1995 1994
Income before income taxes $ 6,141,000 $ 25,737,000
Patent suit recoveries - CMI litigation (14,947,000)
Gain on sale of Wibau-Astec (2,449,000)
Loss on abandonment of Astec-Europa 7,037,000
Loss from foreign subsidiaries 3,598,000 5,366,000
Adjusted pre-tax income from domestic
operations 14,327,000 16,156,000
Income taxes for domestic operations (5,487,000) (916,000)
Net income from domestic operations $ 8,840,000 $ 15,240,000
The decrease in adjusted pre-tax income for domestic operations
of $1,829,000 in 1995 as compared to 1994 was the result of
increased gross profit margin due to increased sales of domestic
subsidiaries which were more than offset by increased interest
and research and development expenses, and a decrease in other
income from domestic subsidiaries.
Net sales for 1995 were $242,601,000, an increase of
$28,795,000 or approximately 13.5% compared to 1994. Of
this increase, $10,133,000$14,615,000 is attributable to the acquisition of
Gibat Ohl and the acquisition of the remaining 50% ofinterest in
Wibau-Astec. CEI, which was acquired in 1995, accounted for
$3,543,000 in sales. Excluding these
acquisitions,the increase from the German
operations and the CEI acquisition, sales increased $30,872,000$10,637,000
or 17.9%5.2%. International sales by domestic subsidiaries were
24.3% of total sales in 1994both 1995 and 17.2% in 1993.1994. The net increase in
sales reflects the strength of our economy, the attitude of our customers
toward the economy, expectations for infrastructure contractsreflected a strong sales increase in asphalt plants, heaters
and the quality,
performancerock crushing equipment, but reduced sales in mobile
equipment and competitiveness of our products as a result of many years of
investment in research and development.trenchers.
The gross profit margin for 19941995 was 22.5%20.5% compared to 24.2%22.5%
for 1993.1994. This decrease was primarily due to lower gross profit
margins from our foreign operations which had gross profit
margins of 3.4% in 1995 compared to 11.4% in 1994.
Domestic operations gross profit margin for 19941995 was 23.0%22.5%
compared to 24.2%23.0% for 1993. Foreign operations gross profit margin was 11.4%. The
domestic gross profit margin was negatively effected in 1994 for several
reasons:
1) Telsmith's consolidation of plant operations with many inefficiencies
involved.
2) Trencor's relocation to facilities in Grapevine, Texas from Grand
Prairie, Texas.
3) Inefficiencies related to the training of a significant number of new
manufacturing employees at Trencor and training of replacements for
retirees at Telsmith.
4) Trencor's introduction of the Log Hog product line.
Offsetting these negative factors were improved margins at Heatec and
increased manufacturing efficiencies at Roadtec, both of which positively
affected the gross profit margin.1994.
In 1994,1995, selling, general, and administrative expenses decreased
to 14.6%14.1% of net sales from 16.6%14.6% in 1993.1994.
The increaseGencor patent litigation accounted for $699,000 of legal
fees which were included in sales is the primary reason for
the percentage reduction.1995 patent damages and expenses.
Research and development expenses declinedincreased from 1.7%1.5% of net
sales in 19931994 to 1.5%2.1% in 1994, again,1995, primarily due to the increase in sales.
In October 1994, the decisionforeign
operations.
As noted above, income from operations was significantly
impacted by the United States Supreme Courtlosses of Astec-Europa in 1995. The total pre-
tax loss, including the cost of abandonment, was approximately
$9,945,000. Astec-Europa incurred pre-tax operating losses in
1995 of approximately $2,908,000. Due to deny
certiorariAstec-Europa's
poor operating results and its negative net worth at December
31, 1995, the Company declined to contribute additional capital
to Astec-Europa, and elected instead to abandon the subsidiary
in connectionaccordance with German law. Astec-Europa management
filed a request for bankruptcy in Germany on February 9, 1996.
Consequently, the appeal filedCompany was not required to fund Astec-
Europa's liabilities except for certain liabilities previously
guaranteed by CMI Corporation "CMI"
brought to a successful end the Company's long-standing patent litigation
with CMI.Company. The Supreme Court's actions effectively denied CMI's request to
appeal a lower court ruling that found that Astec did not have any liability
for infringementloss on abandonment of
CMI patents and left intact damages payable by CMI to
Astec. As a result, previously establishedapproximately $7,037,000 included the liabilities of $13,870,000,
payableAstec-
Europa that were guaranteed by the Company were reversed and patent damagesthe remainder
of $1,309,000 were
receivedthe original investment recorded on the books of the
Company.
Interest expense for 1995 increased to .9% of net sales from CMI. These amounts are shown.3%
in Consolidated Statements1994. The increase resulted from increased inventories in
anticipation of Income as net recoveriessales which did not materialize and accrual adjustmentsinvestment in
capital expenditures of patent damages. See
Contingencies and Note 9$15,160,000.
Other income increased by approximately $722,000 or 36.7% in
1995, resulting primarily from Astec-Europa (formerly Gibat
Ohl) receiving $1,430,000 to settle various claims related to
Astec-Europa's business operations. The gain on sale of foreign
subsidiary of $2,449,000 in 1995 was due to the Consolidated Financial Statements.
Because our joint venture, Wibau-Astec, continued to be unprofitable, it
became apparent that major changes were necessary and we began a plansale of restructuring. Restructuring costs of $1,500,000 related to Wibau-Astec are
discussedWibau-
Astec as described in Note 122 to Consolidated Financial
Statements.
The anticipated
effect of the restructuring plan is reflected in the pro forma summary
included in Note 2.
Interest expense for 1994 decreased to 0.3% of net sales from 1.0% in 1993.
This is due to a decrease in overall interest expense combined with the
increase in sales. Plant expansion and improvements were financed by
industrial revenue bonds at favorable interest rates.
Other income decreased by approximately $371,000 or 15.9% in 1994. As
noted in the 1993 Management Discussion and Analysis, one international
licensee that was not renewed for 1994 produced $665,000 in license fees in
1993.
The equity in loss of joint venture of $3,177,000 reflects 50% of the losses
from the joint venture for the ten months prior to the purchase of the
remaining 50% interest in Wibau-Astec.
Income tax expense for 19941995 was $1,580,000, or approximately
25.7% of pre-tax income compared to $2,300,000, or
approximately 8.9% of pre-
tax income.pre-tax income in 1994. The primary reasonsreason for
the variance from the normal corporate tax rate arein 1994 was the
utilization of net operating loss carryforwards and establishment
of a deferred tax benefit relative to net deductible temporary
differences which could be recovered against future taxes or
taxes previously paid. The variance in 1995 was primarily
attributed to foreign operations. See Note 89 to Consolidated
Financial Statements.
In the first quarter of 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". At December 31, 1994, there were net
deferred tax assets of approximately $14,799,000, which are comprised of
temporary differences, the tax benefit of net operating loss and credit
carryforwards and foreign net operating loss carryforwards. Temporary
differences relate primarily to inventory reserves, warranty reserves and bad
debt reserves. At December 31, 1994, a valuation allowance of approximately
$10,070,000 was recorded. This valuation allowance offsets the deferred tax
assets relative to net operating loss and credit carryforwards as well as
foreign net operating loss carryforwards. Both the net operating loss and
credit carryforwards are SRLY carryforwards and can be used to offset only the
income of a certain subsidiary of the Company. As a result, the Company
determined that a valuation allowance was necessary for these items as well
as the foreign net operating loss carryforward, the utilization of which is
uncertain. Due to the utilization of the majority of
its credit carryforwards, the Company expects itsCompany's tax rate for 1995 to1996 and
subsequent years will approximate the normal corporate rate.
The backlog at December 31, 19941995 was $50,465,000$34,751,000 compared
to $33,100,000$50,465,000 at December 31, 1993,1994 which representsrepresented a
52.4% increase.31.1% decrease. The increase isCompany's backlog for 1994 was
unusually large primarily due to the optimism of many of our
major customers about the strength of the economy and
the performance and competitiveness of our products.
Results of Operations, 1993 vs. 1992
Net sales from continuing operations for 1993 increased $23,668,000, or
approximately 15.9% compared to 1992. International sales declined from
21.9% of total company net sales in 1992 to 17.2% in 1993. Domestic sales
increased by 22.9% in 1993 and 18% in 1992. The improved sales reflect the
optimism of our customers with respect to both the continued improvement of
the economy and the federal role in providing funding for the nation's
surface transportation systems through 1997 with the passage of the
Intermodal Surface Transportation Efficiency Act at the end of 1991.
The gross profit margin for 1993 was 24.2% compared to 22.9% for 1992.
Pricing improved slightly in 1993, but the greatest impact on gross profit
margins was the manufacturing efficiency achieved with improved volume.
In 1993, selling, general, and administrative expenses increased to 16.6% of
net sales from 16.1% in 1992. Large increases were incurred for exhibition
expense for the Conexpo show, legal expenses, international dealer
commissions and profit sharing bonuses.
Research and development expenses as a percentage of sales remained
constant at 1.7% of sales for both 1993 and 1992.
Patent suit damages and expenses decreased by $192,000 compared to 1992
and were 0.2% of 1993 net sales compared to .4% in 1992. The patent suit
damages and expenses relate to the patent suits by CMI against Astec and its
former Barber-Greene subsidiary and the countersuit by Astec against CMI.
See "Contingencies" and Note 9 to the Consolidated Financial Statements.
Interest expense for 1993 decreased to 1.0% of net sales from 2.2% of net
sales in 1992. This decrease was primarily the result of the Company's
reduction of its debt by approximately $25,753,000demand resulting primarily from
funds generated by a secondary public stock offering of 1,195,000 shares of
common stock, which raised approximately $27,000,000 for the Company. In
connection with the prepayment of substantially all of its debt, the Company
incurred approximately $545,000 in prepayment penalties and expenses.
Other income in 1993 increased by approximately $370,000 or 16.6% over
1992. The increase is primarily due to increased license fee income which
more than offset a nonrecurring refund of unemployment taxes in 1992.
Increases in service income and the forfeiture of two customer deposits also
contributed to the increase. One international licensee was not renewed for
1994 that produced approximately $665,000 of license fee income in 1993.
The equity in loss of joint venture of $720,000 reflects 50% of the loss from the Wibau-Astec joint venture in 1993. This loss reflects the continued
European recession in 1993.
Duerenewed emphasis to
the existence of net operating loss carryforwards, income tax expense
for 1993 consisted primarily of state income taxes, foreign income taxes and
federal alternative minimum tax.rebuild infrastructure.
Liquidity and Capital Resources
Working capital increased to $53,000,000$69,884,000 at December
31, 19941996 from $40,767,000$58,015,000 at December 31, 1993.1995. The Company's
debt to equitydebt-to-equity ratio was .27.33 to 11.00 at December 31, 19941996 and .0001.19 to 11.00 at
December 31, 1993.1995. The increaseCompany's principal source of liquidity in 1994 reflects the utilization of industrial revenue bonds to
expand1996
was its borrowings under current and modernize plant facilities as well as debt assumed in connection
with acquisitions.newly-obtained credit
facilities.
Total short-term borrowings, including current maturities of
long-term debt, were $8,573,000$2,051,000 at December 31, 19941996 and
$10,000$774,000 at December 31, 1993.1995. Included in short-term
borrowings at December 31, 1996 was a loan from the
Company's Chief Executive Officer, Dr. J. Don Brock, dated
March 18, 1996, in the amount of $1,078,000. The principal
and all accrued interest on the loan calculated at the Company's
current borrowing rate under its revolving credit facility with
First Chicago NBD, was repaid to Dr. Brock on January 6,
1997. Long-term debt, less current maturities was $16,155,000$30,497,000
at December 31, 19941996 and zero$17,150,000 at December 31, 1993.1995.
The majority of the increase in long-term debt related to
increased usage of the Company's revolving line of credit.
Contributing to the significant increase was payment of
$3,049,000 for liabilities guaranteed by the Company related to
the 1995 abandonment of Astec-Europa operations, capital
expenditures of $8,708,000, and an increase in finance
receivables of $5,226,000 related to the operations of Astec
Financial Services, Inc., which began in June 1996.
Capital expenditures of $21,886,000$8,708,000 were made in 19941996 as
compared to capital expenditures in 19931995 of $8,767,000. The Company utilized industrial
revenue bonds in the amount of $8,000,000 to finance the Grapevine, Texas
(Trencor) project which included improvements to the existing facility as well
as additions of new equipment. Industrial bonds were issued in February
1994 in the amount of $6,000,000 to assist in financing the Telsmith
expansion at Mequon, Wisconsin.$15,160,000.
The Company has aan unsecured revolving credit loan agreement
with The First National
Bank of Chicago.Chicago NBD. The line of credit is $15,000,000.$22,000,000.
This credit facility expires June 30, 1997.1999. At December 31,
1994, $2,655,0001996, $13,322,000 of the line of credit was utilized. Principal
covenants under the First Chicago credit agreement include (i)
the maintenance of certain levels of net worth and compliance
with certain current, leverage, interest expense, and fixed charge
ratios, (ii) a limitation on capital expenditures, (iii) a prohibition
against dividends, and (iv) a prohibition on large acquisitions
except upon the consent of the lenders. The Company was in
compliance with all financial covenants related to the above
loan agreement at December 31, 1996.
In addition to the Company's $22,000,000 revolving credit
facility, Astec Financial Services, Inc. established a
$15,000,000 line is unsecured.of credit with The CIT Group/Equipment
Financing. At December 31, 1994,1996, Astec Financial Services, Inc. had utilized
$2,508,000 of this line. Advances under this line are limited to
"Eligible Receivables" of Astec Financial Services, Inc. as
defined in the Company was in violationcredit agreement. Principal covenants under the
CIT Group credit agreement are substantially the same as those
of the covenant relativeFirst Chicago credit facility with the exception of a
minimum net worth requirement for Astec Financial Services,
Inc. The Company and Astec Financial Services, Inc. were in
compliance with all financial covenants related to capital expenditures and
has received a waiver for such violation.
Wibau-Astec has German bank linesthe CIT line
of credit available totaling $11,253,669
(17,500,000 DM) of which $8,069,577 was outstanding at December 31, 1994. Gibat Ohl has a German bank line of credit available of $2,122,000
(3,300,000 DM), $2,925 of which was utilized1996.
In 1996, year-end trade receivables rose to $30,040,000 from
$27,075,000 at December 31, 1994.
On January 31, 1989,1995 with slower receivable
turnaround being the Company placed $10,000,000primary reason for the increase. Inventory
levels increased $881,000 during 1996 with the increase in
Senior Notesending inventory of asphalt plants and $10,000,000 in Senior Subordinated Notes with Principal Mutual Life
Insurance Company. These notes were repaid during the second and third
quartersaggregate processing
products offset by decreased ending inventory of 1993 using cash received from the secondary public stock offering.asphalt paving
equipment.
For additional information on current and long-term debt, see
Note 67 to the Consolidated Financial Statements.
Contingencies
See Note 910 to Consolidated Financial Statements for
information on certain pending litigation and contingent
liabilities arising from recourse financing arrangements.
Environmental Matters
Based on information available from environmental
consultants, the Company has no material reserve requirements
for potential environmental liabilities.
Forward Looking Statments
The Company may from time to time make forward-looking statements, including
statements contained in the Company's filings with the Securities and Exchange
Commission (the "Commission") and its reports to shareholders. Statements
made in this annual report on Form 10-K, other than those concerning historical
information, should be considered forward-looking and subject to various
risks and uncertainties. Such foward-looking statements are made based on
management's belief as of the date thereof as well as assumptions made
by, and information currently available to, management pursuant to "safe
habor" provisions of the Private Securities Litigation Reform Act of 1995.
The Company's actual results may differ materially from the results anticipated
in these forward-looking statements due to a variety of factors, including,
without limitation: the effects of future economic conditions; the amount of
federal, state and local governmental revenues to support road building
and related activities, and the effects of competition in the design,
engineering, and manufacturing of equipment and components used in road
building and various other consturction activities. The Company does not
undertake to update any forward-looking statement that may be made from
time to time by, or on behalf of, the Company.
CONSOLIDATED BALANCE SHEETS
December 31,
1996 1995
Assets Current assets:
Cash and cash equivalents Note 1 $ 3,382,484 $ 3,133,070
Trade receivables less allowance
for doubtful accounts of $1,267,000
in 1996 and $1,279,000 in 1995 30,039,813 27,075,401
Finance receivables Note15 3,371,513
Notes and other receivables 1,191,223 596,134
Inventories Note 1 56,764,085 55,882,679
Prepaid expenses 1,967,999 894,593
Refundable income taxes 2,071,063 2,341,849
Deferred tax asset Note 9 5,534,950 6,667,052
Other current assets 4,169 5,214
Total current assets 104,327,299 96,595,992
Property and equipment, net Note 5 54,317,352 51,709,033
Other assets:
Goodwill 5,285,051 4,066,152
Finance receivables Note 15 1,854,443
Notes receivable 320,000 572,829
Deferred tax asset Note 9 442,458
Other 1,306,113 1,412,326
Total other assets 9,208,065 6,051,307
Total $ 167,852,716 $ 154,356,332
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of long-term
debt Note 7 $ 2,051,003 $ 774,274
Accounts payable 14,613,782 15,877,964
Customer deposits 2,150,852 4,989,557
Accrued product warranty 2,364,705 2,470,775
Deferred tax liability Note 9 173,388
Accrued insurance 2,672,274 2,783,246
Amounts payable in business combination 2,405,145
Liabilities related to abandoned
subsidiary Note 3 593,886 3,643,077
Other accrued liabilities 7,418,242 8,041,719
Total current liabilities 34,443,277 38,580,612
Long-term debt, less current
maturities Note 7 30,496,734 17,150,000
Deferred tax liability Note 9 2,838,024 2,351,283
Deferred retirement costs Note 8 544,911 373,310
Other 136,842
Total liabilities 68,459,788 58,455,205
Shareholders' equity: Note 1,11
Preferred stock - authorized 2,000,000
shares of $1.00 par value; none issued
Common stock - authorized 20,000,000
shares of $.20 par value; issued and
outstanding - 10,101,199 in 1996 and
10,092,199 in 1995 2,020,240 2,018,440
Additional paid-in-capital 51,980,855 51,940,580
Retained earnings 46,286,983 41,942,107
Minimum pension liability adjustment (127,150)
100,160,928 95,901,127
Less common stock in treasury at
cost - 64,000 shares in 1996 (768,000)
Total shareholders' equity 99,392,928 95,901,127
Total $ 167,852,716 $ 154,356,332
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1996 1995 1994
Net sales $ 221,412,796 $ 242,601,351 $ 213,806,411
Cost of sales 172,147,913 192,844,160 165,709,245
Gross profit 49,264,883 49,757,191 48,097,166
Selling, general, and
administrative expenses 35,081,800 34,325,974 31,142,335
Research and
development expenses 5,867,909 5,128,495 3,165,795
Patent suit damages and
expenses (net recoveries
and accrual adjustments) Note 10 263,978 699,222 (14,947,498)
Restructuring costs Note 12 1,500,469
Loss on abandonment
of foreign subsidiary Note 3 7,037,105
Income from operations 8,051,196 2,566,395 27,236,065
Other income (expense):
Interest expense (1,656,466) (2,125,261) (712,853)
Interest income 386,646 565,724 426,489
Other income - net 247,434 2,685,161 1,963,633
Gain on sale of foreign
subsidiary Note 2 2,448,551
Equity in loss of joint
venture Note 2 (10,652) (3,176,834)
Income before income taxes 7,018,158 6,140,570 25,736,500
Income taxes Note 9 2,673,282 1,580,210 2,300,126
Net income $ 4,344,876 $ 4,560,360 $ 23,436,374
Earnings per Common and
Common Equivalent Share:
Net income $ .43 $ .45 $ 2.38
Weighted average number of
common and common
equivalent shares
outstanding Note 1 10,047,442 10,071,930 9,843,980
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1996, 1995, and 1994
Foreign
Common Stock Additional Currency Pension Common
Note 1 Paid-in Translation Retained Liability Stock in
Shares Amount Capital Adjustment Earnings Adjustment Treasury
Balance
December 31, 1993 9,795,402 $1,959,080 $48,200,446 $13,945,373
Issuance of common
stock 206,429 41,286 2,700,462
Change during year $ 89,975
Net income 23,436,374
Balance
December 31, 1994 10,001,831 2,000,366 50,900,908 89,975 37,381,747
Issuance of common
stock 90,368 18,074 1,039,672
Change during year (89,975)
Net income 4,560,360
Balance
December 31, 1995 10,092,199 2,018,440 51,940,580 41,942,107
Issuance of common
stock 9,000 1,800 40,275
Common stock acquired
for treasury - 64,000
shares $(768,000)
Minimum pension liability
adjustment $(127,150)
Net income 4,344,876
Balance
December 31, 1996 10,101,199 $2,020,240 $51,980,855 $0 $46,286,983 $(127,150) $(768,000)
[FN] See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1996 1995 1994
Cash Flows From
Operating Activities
Net income $ 4,344,876 $ 4,560,360 $ 23,436,374
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 5,812,723 5,697,862 3,941,871
Provision for doubtful accounts 157,183 533,136 362,089
Provision for inventory reserves 1,231,828 1,196,876 3,621,218
Provision for warranty 3,018,990 3,194,240 2,616,565
Provision for patent damages
(net recoveries and
accrual adjustments) (13,250,048)
Foreign currency translation
adjustment (74,519) 89,975
(Gain) loss on sale of fixed assets 59,118 (263,195) 322,587
(Gain) on sale of finance
receivables (67,492)
Equity in loss of joint venture 10,652 3,176,834
Gain on sale of foreign subsidiary (2,448,551)
Loss on abandonment of foreign
subsidiary 7,037,105
(Increase) decrease in:
Receivables (3,855,177) (2,551,526) (7,660,990)
Inventories (1,353,245) (5,921,052) (3,537,955)
Prepaid expenses (991,145) (2,071,266) (803,177)
Patent damage escrow funds 12,309,420
Deferred tax asset 1,349,773 413,524 (4,156,695)
Other assets 196,607 (993,322) (1,916,921)
Increase (decrease) in:
Accounts payable (1,383,256) 6,062,733 2,138,449
Customer deposits (2,838,705) (1,211,925) (1,738,643)
Accrued product warranty (3,127,860) (3,433,374) (2,256,128)
Income taxes payable 270,786 (1,117,518) 400,355
Other accrued liabilities (3,723,984) (2,373,657) (947,201)
Total adjustments (5,233,204) 1,675,571 (7,288,395)
Net cash (used) provided by
operating activities (888,328) 6,235,931 16,147,979
Cash Flows From Investing Activities
Proceeds from sale of property
and equipment - net 1,202,335 953,766 307,099
Expenditures for property
and equipment (8,707,987) (15,159,921) (21,886,011)
Additions to finance receivables (8,333,293)
Collections of finance receivables 536,089
Proceeds from sale of finance
receivables 2,638,739
Cash received in connection
with sale of subsidiary (36,687)
Cash balance abandoned
with subsidiary (203,643)
Additions to notes receivable (60,000)
Repayments on notes receivable 901,233 95,256 600,499
Investment in joint venture (100,000) (635,700)
Cash payments in connection
with business combination, net
of cash acquired 164,794 (834,591) 1,447,965
Net cash (used by) investing
activities (11,758,090) (15,185,820) (20,166,148)
Cash Flows From Financing Activities
Proceeds from industrial bonds $ 14,000,000
Purchase of treasury shares $ (768,000)
Proceeds from issuance of
common stock 42,075 $ 9,750 34,750
Net borrowings under
revolving credit loan 11,680,000 1,495,000 2,655,000
Principal repayments of industrial
bonds, loans and notes payable (1,027,023) (1,523,213) (5,658,355)
Proceeds from debt and notes payable 2,968,780 1,629,978
Net cash provided by
financing activities 12,895,832 1,611,515 11,031,395
Increase (decrease) in cash and
cash equivalents 249,414 (7,338,374) 7,013,226
Cash and cash equivalents,
beginning of period 3,133,070 10,471,444 3,458,218
Cash and cash equivalents
end of period $ 3,382,484 $ 3,133,070 $ 10,471,444
Supplemental Cash Flow Information
Cash paid during the year for:
Interest $ 1,572,642 $ 1,800,598 $ 595,767
Income taxes $ 3,466,100 $ 5,088,465 $ 282,709
Excluded from the Consolidated
Statements of Cash Flows were
the following effects of non-cash
investing and financing activities:
Non-cash business combination:
Investment in subsidiary $ 2,405,145
Accrued liability (2,405,145)
Non-cash transfer of assets:
Trade receivables $ 1,200,000
Notes receivables (1,200 000)
Capital stock issued for purchase
of subsidiary:
Investment in subsidiary $ 1,047,996 $ 2,706,996
Capital stock (17,467) (39,871)
Additional paid-in-capital (1,030,529) (2,667,125)
Non-cash purchase of assets:
Property, plant and equipment, $ 547,587
Accrued liability (547,587)
Non-cash assets assumed in
connection with recourse
customer financing:
Notes receivables, $ 369,229
Inventory (369,229)
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1996, 1995, and 1994
1. Summary of Significant Accounting Policies
Basis of Presentation - The consolidated financial statements
include the accounts of Astec Industries, Inc. and its
subsidiaries. The Company's wholly-owned subsidiaries at
December 31, 1996, are as follows:
Astec, Inc. Production Engineered Products, Inc.
Astec Financial Services, Inc. Roadtec, Inc.
CEI Enterprises, Inc. Telsmith, Inc.
Heatec, Inc. Trencor, Inc.
All significant intercompany transactions have been eliminated
in consolidation.
The Company's investment in a 50% owned joint venture,
Pavement Technology, Inc., is accounted for on an equity basis.
As discussed in Notes 2 and 3, in 1995 the Company sold
Wibau-Astec Maschinenfabrik GmbH ("Wibau-Astec") and
abandoned Gibat Ohl Ingenieurgesellschaft fur Anlagentechnik
("Gibat Ohl").
Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents - The Company considers all highly liquid
instruments purchased with a maturity of less than three months
to be cash equivalents.
Inventories - Inventories (excluding used equipment) are stated
at the lower of first-in, first-out cost or market. Used equipment
inventories are stated on the specific unit cost method, which in
the aggregate is less than market.
Property and Equipment - Property and equipment is stated at
cost. Depreciation is calculated for financial reporting purposes
using the straight-line method based on the estimated useful
lives of the assets as follows: buildings - 40 years and
equipment - 3 to 10 years. Both accelerated and straight-line
methods are used for tax reporting purposes.
Goodwill - Goodwill represents the excess of cost over the fair
value of net assets acquired. Goodwill amounts are being
amortized using the straight-line method over twenty years.
Additions to goodwill in 1996 reflect the purchase of
Production Engineered Products, Inc.
Product Warranty - The Company provides product warranties
against defects in materials and workmanship for periods
ranging from ninety days to one year following the date of sale.
Estimated costs of product warranties are charged to cost of
sales in the period of the sale.
Income Taxes - Income taxes have been provided using the
liability method in accordance with SFAS No. 109 "Accounting
for Income Taxes".
Revenue Recognition - A portion of the Company's equipment
sales represents equipment produced in the Company's plants
under short-term contracts for a specific customer project or
equipment designed to meet a customer's specific requirements.
Equipment revenues are recognized in compliance with the
terms and conditions of each contract, which is ordinarily at the
time the equipment is shipped. Certain contracts include terms
and conditions through which the Company recognized
revenues upon completion of equipment production which is
subsequently stored at the Company's plant at the customer's
request. Revenue is recorded on such contracts upon the
customer's assumption of title and all risks of ownership.
Advertising Expense - The cost of advertising is expensed as
incurred. The Company incurred $2,661,000, $2,199,000, and
$1,504,000 in advertising costs during 1996, 1995, and 1994,
respectively.
Foreign Currency Translation - The financial statements of
foreign subsidiaries have been translated into U.S. Dollars in
accordance with SFAS No. 52, "Foreign Currency Translation."
All balance sheet accounts have been translated using the
exchange rate in effect at the balance sheet date. Income
statement amounts have been translated using the average
exchange rate for the year. The gains and losses resulting from
the changes in exchange rates from year to year have been
reported separately as a component of shareholders' equity.
Stock Based Compensation - The Company grants stock options
for a fixed number of shares to employees with an exercise price
equal to the fair value of the shares at the date of grant. The
Company accounts for stock options granted in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and, accordingly, recognizes no compensation
expense for the stock option grants. The Company adopted
SFAS No. 123, "Accounting for Stock-based Compensation," in
1996 and is utilizing the disclosure only option permitted by the
statement. See Note 11.
Earnings Per Share - Primary and fully diluted earnings per
share are based on the weighted average number of common
and common equivalent shares outstanding and include the
potentially dilutive effects of the exercise of stock options in
years where there are earnings. Fully diluted earnings per share
are not presented for 1996, 1995, or 1994 since the dilution is
not material.
Impairment of Assets - In 1995, the Company adopted SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed of." SFAS No. 121
requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying amount. SFAS
No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed of. During 1995, events and
circumstances indicated that approximately $4,400,000 of assets
of the Company's subsidiary, Astec-Europa might be impaired.
As further discussed in Note 3, these assets were written off in
connection with the abandonment of Astec-Europa.
Reclassifications - Certain amounts for 1995 and 1994 have
been reclassified to conform with the 1996 presentation.
2. Business Combinations
Effective December 1, 1996, the Company acquired the
operating assets and liabilities of Production Engineered
Products, Inc. ("PEP") in exchange for $2,405,145 in cash. The
operations of PEP are included in the consolidated statements of
income from the effective date of acquisition. The transaction
was accounted for as a purchase and the purchase price of
$2,405,145 was allocated to the net tangible assets acquired
based on the estimated fair market value of the assets acquired.
The excess of the purchase price over the fair market value of
PEP's net tangible assets was recorded as goodwill and is being
amortized using the straight-line method over 20 years.
On February 28, 1995, the Company acquired
the operating assets and liabilities of Trace Industries, Inc., a
New Mexico corporation doing business as CEI Enterprises
("CEI"), in exchange for 87,333 shares of the Company's
common stock and approximately $852,000 in cash. The
operations of CEI are included in the consolidated statements of
income from the effective date of acquisition. The transaction
was accounted for as a purchase and the purchase price of
approximately $1,900,000 was allocated to the net tangible
assets acquired based on the estimated fair market value of the
assets acquired. That portion of the purchase price in excess of
the fair market value of CEI's net tangible assets was recorded
as goodwill and is being amortized using the straight-line
method over 20 years.
Effective July 1, 1993, the Company entered into
a joint venture with Putzmeister-Werk Maschinenfabrik GmbH
(""Putzmeister") to form a new German limited-liability
company, Wibau-Astec Maschinenfabrik GmbH ("Wibau-
Astec"). Wibau-Astec designed, engineered, manufactured and
marketed asphalt plants, stabilization plants, asphalt and thermal
heaters, hot storage systems and soil remediation equipment.
Putzmeister and the Company each owned
50% of Wibau-Astec. On November 7, 1994, the Company
acquired the remaining shares of Wibau-Astec from Putzmeister
for $67,400. The acquisition was accounted for as a purchase
effective November 7, 1994 and accordingly, the results of
operations and accounts of
Wibau-Astec subsequent to November 7, 1994 are included in
the Company's consolidated financial statements. The purchase
price was allocated to the net tangible assets of Wibau-Astec
based on the estimated fair market value of the assets acquired.
As required by the purchase method of accounting, the excess
amount of the purchase price over the fair value of Wibau-
Astec's net tangible assets was recorded as goodwill and was
being amortized using the straight-line method over 20 years.
Subsequent to the acquisition of Wibau-Astec, the Company
undertook a plan to restructure Wibau-Astec's operations (see
Note 12 - Restructuring Costs). Effective June 30, 1995, the
Company sold Wibau-Astec to Wirtgen Gesellschaft mit
beschrankter Haftung for approximately $1,109,000. For the
six months ended June 30, 1995, Wibau-Astec had a net loss of
approximately $688,000. The Company realized a gain of
approximately $2,449,000 on the sale of Wibau-Astec.
Effective October 17, 1994, the Company acquired the
operating assets and liabilities of Gibat Ohl
Ingenieurgesellschaft fur Anlagentechnik ("Gibat Ohl") in
exchange for 193,357 shares of the Company's common stock
and approximately $2,760,000 in cash. The acquisition was
accounted for as a purchase effective October 17, 1994, and
accordingly, the results of operations and accounts of Gibat Ohl
subsequent to October 17, 1994 are included in the Company's
consolidated financial statements. The purchase price of
approximately $5,460,000 was allocated to the net tangible
assets of Gibat Ohl based on the estimated fair market value of
the assets acquired. The excess of the purchase price over the
fair market value of Gibat Ohl's net tangible assets was
recorded as goodwill and was being amortized using the
straight-line method over 20 years. During 1995, Gibat Ohl's
name was changed to Astec-Europa and in February 1996, the
Company abandoned Astec-Europa. See Note 3.
A summary of the net assets acquired is as follows:
PEP CEI Wibau-Astec Gibat Ohl
Current assets $1,292,161 $1,035,148 $4,938,766 $ 11,007,164
Property, plant and
equipment 551,289 243,877 412,193 300,657
Current liabilities (243,511) (768,647) (8,678,984) (10,029,223)
Other liabilities (1,094,453) (39,683) (2,038,165)
Goodwill 1,734,865 1,411,892 1,193,259 4,153,364
Net assets acquired
excluding cash 2,240,351 1,882,587 (4,172,931) 5,431,962
Cash 164,794 17,413 4,240,331 32,984
Net assets acquired $ 2,405,145 $1,900,000 $ 67,400 $ 5,464,946
The following unaudited pro forma summary presents the
consolidated results of operations as if the acquisitions
discussed above had occurred at the beginning of each of the
periods presented. Pro forma adjustments have been made to
1994 to reflect the restructuring of Wibau-Astec as described in
Note 12. The pro forma results have been prepared for
comparative purposes only and do not purport to be indicative
of the results that would have incurred had the acquisitions
occurred at the beginning of the periods presented or of results
which may occur in the future.
Year Ended December 31,
1996 1995 1994
Net sales $ 224,927,000 $ 247,256,000 $ 227,891,000
Income from operations 8,219,000 6,303,000 28,814,000
Net income 4,400,000 4,630,000 24,863,000
Per common and common
equivalent share:
Net income $ .44 $ .46 $ 2.53
Prior to its acquisition of the remaining 50% interest in Wibau-
Astec, the Company's investment in Wibau-Astec was
accounted for by the equity method. Accordingly, net income
as presented in the Consolidated Statement of Income for 1994
includes the Company's share of Wibau-Astec's losses for the
period prior to the acquisition of $3,177,000.
3. Abandonment of Foreign Subsidiary
During 1995, the Company's subsidiary, Astec-Europa,
incurred a net loss of approximately Subsidiary $2,354,000 and
had a negative net worth at December 31, 1995. The Company
determined that it would no longer support Astec-Europa and on
February 9, 1996, Astec-Europa management filed a request for
bankruptcy in Germany. Due to its decision to abandon Astec-
Europa, the Company will not recover any amounts related to
Astec-Europa's assets nor will it be required to liquidate Astec-
Europa's liabilities except to the extent such liabilities were
guaranteed by the Company. Accordingly, Astec-Europa's
assets and liabilities at December 31, 1995 were adjusted to
liquidation basis values. This, along with the write-off of the
Company's investment in Astec-Europa and the remaining
goodwill associated with Astec-Europa of approximately
$3,911,000 resulted in a total write-off related to the
abandonment of approximately $7,037,000 before tax and
$3,683,000 after tax. Total losses recognized in 1995, including
net loss from operations and the loss on abandonment, related to
Astec-Europa were approximately $9,945,000 before tax or
$6,037,000 after tax.
4. Inventories
Inventories consisted of the following:
December 31,
1996 1995
Raw materials and parts $ 23,541,508 $23,709,839
Work-in-process 9,038,158 10,384,847
Finished goods 16,994,736 14,583,127
Used equipment 7,189,683 7,204,866
Total $ 56,764,085 $55,882,679
5. Property and Equipment
Property and equipment consisted of the following:
December 31,
1996 1995
Land, land improvements, and
buildings $ 38,161,554 $ 35,220,996
Equipment 41,217,853 39,322,961
Less accumulated depreciation (26,829,232) (22,864,623)
Land, buildings, and equipment - net 52,550,175 51,679,334
Rental property:
Equipment 2,004,118 122,347
Less accumulated depreciation (236,941) (92,648)
Rental property - net 1,767,177 29,699
Total $ 54,317,352 $ 51,709,033
6. Leases
The Company leases certain land, buildings and
equipment which are used in its operations. Total rental
expense charged to operations under operating leases was
approximately $1,272,000, $1,213,000, and $615,000 for the
years ended December 31, 1996, 1995 and 1994 respectively.
Minimum rental commitments for all noncancelable
operating leases at December 31, 1996 are as follows:
1997 $ 766,000
1998 542,000
1999 359,000
2000 238,000
2001 and beyond 80,000
The Company also leases equipment to customers under short-
term contracts generally ranging from two months to twenty-
four months. Rental income under such leases was $2,073,000,
$1,630,000, and $1,394,000 for the years ended December 31,
1996, 1995 and 1994, respectively. Scheduled minimum rental
payments to be received for equipment leased to others during
the years 1997 through 1998 and in total thereafter are
$263,000, $114,000 and $0, respectively.
7. Long-term Debt
Long-term debt consisted of the following:
December 31,
1996 1995
Revolving credit loan of
$22,000,000 at December 31, 1996
and 1995, available through June 30, 1999 at
interest rates from 6.69% to 8.0% at
December 31, 1996 and 8.25% at December 31,
1995 $ 13,322,000 $ 4,150,000
Revolving credit loan of $15,000,000 at
December 31, 1996 available through
June 30, 1999 at an interest rate of prime,
which was 8.25% at December 31, 1996 2,508,000
Loans payable maturing at various dates through
2000 at interest rates from 8.0% to 9.25% 2,639,307 274,274
Industrial Development Revenue Bonds
payable in annual installments through
2006 at weekly negotiated interest rates 5,000,000 5,500,000
Industrial Development Revenue Bonds due in
2019 at weekly negotiated interest rates 8,000,000 8,000,000
Loan payable to related party at an
interest rate of prime less a quarter, which was
8.0% at December 31, 1996 1,078,430
Total long-term debt 32,547,737 17,924,274
Less current maturities 2,051,003 774,274
Long-term debt less
current maturities $ 30,496,734 $ 17,150,000
The Company has a $22,000,000 revolving credit agreement
with First Chicago NBD. Amounts outstanding under the
agreement bear interest, at the Company's option, at a rate of
prime less one quarter or the London Interbank Offering Rate
plus one. The credit agreement contains certain restrictive
covenants relative to operating ratios and capital expenditures
and also restricts the payment of dividends. The Company also
has a $15,000,000 revolving credit agreement with The CIT
Group/Equipment Financing, Inc., which is available to Astec
Financial Services, Inc. Amounts outstanding under the
agreement bear interest at a rate of prime and are limited to
"Eligible Receivables" as defined in the agreement. The credit
agreement contains certain restrictive covenants relative to
operating ratios and maintenance of net worth and also restricts
the payment of dividends.
Loan payable to related party at December 31, 1996 was a note
payable to the Company's Chief Executive Officer. Interest
expense related to this note for 1996 was calculated at the
Company's current borrowing rate and was approximately $73,000.
The aggregate of all maturities of long-term debt
in each of the next five years is as follows:
1997 $ 2,051,000
1998 1,974,000
1999 16,803,000
2000 720,000
2001 and beyond 11,000,000
For 1996, the weighted average interest rate on short term
borrowings, which includes current maturities of Industrial
Revenue Bonds, was 7.12%.
8. Retirement Benefits
The Company provides a deferred savings plan
("Savings Plan") under Section 401(k) of the Internal Revenue
Code, under which substantially all employees of the Company
and its subsidiaries are eligible to participate. The Savings Plan
provides that the Company match an amount equal to 50% of
employee savings subject to certain limitations. The total
expense for such matching was approximately $799,000,
$777,000 and $696,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
A former subsidiary of the Company, the Barber-Greene
Company, had defined benefit pension plans ("Barber-Greene
Plans") covering substantially all of its employees. Non-union
benefits were frozen as of September 1, 1986, and certain union
benefits were frozen as of October 31, 1986. The Company retained
responsibility for the Barber-Greene Plans when it sold the Barber-Greene
Company in 1991. Telsmith, Inc. also sponsors a defined benefit pension
plan covering certain employees hired prior to October 14, 1987
who have chosen not to participate in the Company's 401(k)
savings plan. The benefit is based on years of benefit service
multiplied by a monthly benefit as specified in the plan. The
Company's funding policy for its pension plans is to make the
minimum annual contributions required by applicable
regulations.
During 1994, the Company made the decision to terminate the
Barber-Greene Plans and purchased annuities to fund the
benefits provided for in the plans. In 1995, the Company
received approval from the Internal Revenue Service to
terminate the plans. As a result, the settlement loss of
approximately $46,000 is included in Other income-net in 1995.
A reconciliation of the funded status of the Plans, which
is based on a valuation date of September 30, with amounts
reported in the Company's consolidated balance sheets, is as
follows:
Year Ended December 31,
1996 1995
Actuarial present value of
benefit obligations:
Vested $ 3,039,628 $ 2,991,159
Nonvested 88,965 90,781
Accumulated benefit obligation $ 3,128,593 $ 3,081,940
Projected benefit obligation $ 3,128,593 $ 3,081,940
Plan assets at fair value 2,583,682 2,539,151
Projected benefit obligation in excess
of plan assets 544,911 542,789
Unrecognized net gain (loss) (127,150) 6,046
Prior service cost not yet recognized
in net periodic pension cost (129,205) (148,819)
Additional liability 256,355
Pension liability in the consolidated
balance sheets $ 544,911 $ 400,016
Net periodic pension cost for 1996, 1995 and 1994 included the
following components:
Year Ended December 31,
1996 1995 1994
Service cost - benefits earned
during the period $ 20,986 $ 24,585 $ 31,503
Interest cost on projected
benefit obligation 227,815 219,465 2,565,355
Actual return on plan assets (122,607) (238,493) 2,148,873
Net amortization and deferral (84,816) (6,682) (5,405,871)
Net expense (income) $ 41,378 $(1,125) $ (660,140)
The weighted average discount rate used in determining the
actuarial present value of the projected benefit obligation was
7.5% at September 30, 1996 and 1995. The expected long-term
rate of return on assets was 9.0% for the years ending
September 30, 1996 and 1995. Plan assets are primarily
comprised of corporate equity and corporate and U.S. Treasury
debt securities.
In addition to the retirement plans discussed above, the
Company has an unfunded post-retirement medical and life
insurance plan covering employees of its Telsmith, Inc.
subsidiary and retirees of its former Barber-Greene subsidiary.
The plan is accounted for under the provision of SFAS No. 106,
"Employees Accounting for Post-retirement Benefits Other
Than Pensions." The accumulated post-retirement benefit
obligation ("APBO") at adoption was approximately $674,000
and is being amortized over 20 years.
The accumulated post-retirement benefit obligation and
the amount recognized in the Company's consolidated balance
sheets, is as follows:
December 31,
1996 1995
Accumulated post-retirement
benefit obligation:
Retirees $ 241,700 $ 246,300
Active employees 471,000 393,500
712,700 639,800
Unamortized transition obligation (538,200) (571,900)
Unrecognized net gain 64,100 118,800
Accrued post-retirement benefit cost $ 238,600 $ 186,700
Net periodic post-retirement benefit cost included the following
components:
December 31,
1996 1995
Service cost $ 64,700 $ 53,300
Interest cost 48,300 50,200
Amortization of transition obligation 33,700 33,700
Amortization of net gain (1,900)
Net expense $ 146,700 $ 135,300
A discount rate of 7.5% was used in calculating the APBO. The
APBO assumes a 13.0% increase in per capita health care costs
decreasing gradually to 5.8% for years 2012 and later. A 1%
increase in the medical inflation rate would increase the APBO
by approximately $36,000 and the expense by approximately $8,900.
9. Income Taxes
For financial reporting purposes, income before income taxes
includes the following components:
Year Ended December 31,
1996 1995 1994
United States $ 6,655,652 $ 16,497,616 $ 30,726,395
Foreign:
License income 362,506 277,855 404,000
Equity in loss of
joint venture (3,176,834)
Loss from foreign subsidiaries (3,597,796) (2,217,061)
Loss on abandonment (7,037,105)
Income before income taxes $ 7,018,158 $ 6,140,570 $ 25,736,500
The provision for income taxes consisted of the following:
Year Ended December 31,
1996 1995 1994
Current $ 1,416,242 $ 1,166,956 $ 7,029,419
Deferred (benefit) 1,257,040 413,254 (4,729,293)
Total provision for
income taxes $ 2,673,282 $ 1,580,210 $ 2,300,126
A reconciliation of the provision for income taxes at the
statutory rate to those provided is as follows:
Year Ended December 31,
1996 1995 1994
Tax at statutory rates $ 2,386,174 $ 2,087,794 $ 9,007,775
Effect of utilization
of net operating loss
carryforwards net of
alternative minimum tax
(1,344,000) (3,008,000)
Effect of utilization
of alternative minimum
tax credits
(382,000)
Benefit from foreign
sales corporation (125,000) (327,000) (265,000)
State taxes, net of federal
income tax benefit 424,000 522,000 212,000
Income taxes of
other countries 20,000 (553,000) 27,000
Loss from foreign
operations (413,000) 2,636,000
Recognition of deferred
tax asset 1,827,000 (4,729,000)
Reversal of prior temporary
differences (1,937,000)
Other items (31,892) (219,584) 738,351
Income taxes $ 2,673,282 $ 1,580,210 $ 2,300,126
At December 31, 1996, the Company had long-term capital loss
carryforwards of approximately $709,000 expiring in 2000.
As a result of utilizing the net operating loss carryforwards, net
income from continuing operations increased by approximately
$.13 and $.31 for the years ended December 31, 1995 and 1994,
respectively.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial statement purposes and the amounts used
for income tax purposes.
At December 31, 1996, the Company had deferred tax assets of
approximately $6,218,000, and deferred tax liabilities of
approximately $3,011,000, related to temporary differences and
tax loss carryforwards. At December 31, 1996, a valuation
allowance of approximately $241,000 was recorded. This
valuation allowance offsets the deferred tax asset relative to
capital loss carryforwards. Due to the uncertainty of the
utilization of these carryforwards, the Company determined that
a valuation allowance was necessary for this item. The change
in valuation allowance in 1996 is due to the expiration of ITC
credit carryforwards ($98,000) and the establishment of a
valuation allowance relative to the capital loss carryforwards ($241,000).
Significant components of the Company's deferred tax liabilities and assets are
as follows:
Year Ended December 31,
1996 1995
Deferred tax assets:
Inventory reserves $ 1,556,000 $ 1,812,000
Warranty reserves 898,000 939,939,000
Accrued insurance 864,000 725,000
Bad debt reserves 479,000 505,000
Other accrued expenses 1,428,000 1,455,000
Alternative minimum tax credit 560,000
Foreign net operating
loss carryforwards 1,384,000
Other credit carryforwards 433,000 98,000
Total deferred tax assets 6,218,000 6,918,000
Deferred tax liabilities:
Property and equipment 2,793,000 2,475,000
Other 218,000 29,000
Total deferred tax liabilities 3,011,000 2,504,000
Net deferred tax assets 3,207,000 4,414,000
Valuation allowance (241,000) (98,000)
Deferred tax asset $ 2,966,000 $ 4,316,000
10. Contingencies
The Company's subsidiary, Telsmith, was a defendant in a
patent infringement action brought by Nordberg, Inc., a
manufacturer of a competing line of rock crushing equipment,
seeking monetary damages and an injunction to cease an alleged
infringement of a patent on certain components used in the
production of its rock crushing equipment. On March 30, 1995,
the United States District Court for the Eastern District of
Wisconsin issued a ruling in favor of the Company and entered
a declaratory judgment in favor of Telsmith, and against
Plaintiff Nordberg, Inc. The Court also entered judgment in
favor of Telsmith, Inc. and against Nordberg, Inc., dismissing
Nordberg's claim of infringement against Telsmith.
During 1993, the Company was also named as a
defendant in a patent infringement action brought by Gencor,
Inc., a manufacturer of a competing line of asphalt plants. On
February 3, 1996, the jury returned a verdict in the Company's
favor. In early July 1996, the Company and Gencor entered
into a settlement of the case on appeal and two other lawsuits
pending between the parties. Under the terms of the settlement,
each of the pending cases was dismissed, with prejudice, with
each party bearing its own costs. No payments were made by
either party to the other in connection with the settlement as a
result of which all litigation between the Company and Gencor
is now ended.
During 1994, the United States Supreme Court refused
to hear CMI Corporation's petition to overturn the United States
Court of Appeals for the Federal Circuit's reversal of patent
damages awarded to CMI Corporation and Robert L.
Mendenhall by a lower court. As a result of the Supreme
Court's refusal to grant certiorari, the Company received
$12,917,000 which was being held in escrow pending the
Company's appeal of the two judgments. In addition, on
December 31, 1994, the Company received $1,309,000 from
CMI in satisfaction of the judgment entered in favor of the
Company on its counterclaim against CMI. The receipt of these
funds effectively concluded the litigation between the Company
and CMI and Robert L. Mendenhall which had been pending for
a number of years. As a result, in 1994 the Company reversed
its accrued liability for patent damages. The reversal of
$13,870,000 in accrued patent damages and the receipt of
$1,309,000 in patent damages from CMI total $15,179,000 and
are included in the Consolidated Statements of Income as Patent
suit damages and expenses (net recoveries and accrual
adjustments).
Management has reviewed all claims and lawsuits and,
upon the advice of counsel, has made provision for any
estimable losses; however, the Company is unable to predict the
ultimate outcome of the outstanding claims and lawsuits.
Recourse Customer Financing - Certain customers have
financed purchases of the Company's products through
arrangements in which the Company is contingently liable for
customer debt aggregating approximately $4,618,000 and
$7,362,000 at December 31, 1996 and 1995, respectively.
These obligations average five years in duration and have
minimal risk.
Other - The Company is contingently liable for letters of
credit of approximately $2,491,000 issued for bid bonds and
performance bonds.
11. Shareholders' Equity
The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25) and related Interpretations in
accounting for its employee stock options because, as discussed
below, the alternative fair value accounting provided for under
SFAS No. 123, "Accounting for Stock-based Compensation,"
requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25,
because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
The Company has reserved 300,000 shares of
common stock under the 1986 Stock Option Plan and 500,000
shares of common stock under the 1992 Stock Option Plan for
issuance upon exercise of non-qualified options, incentive
options and stock appreciation rights to officers and employees
of the Company and its subsidiaries at prices determined by the
Board of Directors. All options granted have ten-year terms and
vest and become fully exercisable immediately or within one
year of the grant date.
Pro forma information regarding net income and earnings per
share is required by SFAS No. 123, and has been determined as
if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following
weighted-average assumptions for 1994, 1995, and 1996,
respectively; risk-free interest rates of 5.93%, 6.06%, and
6.04%; volatility factors of the expected market price of the
Company's common stock of .275; and a weighted-average
expected life of the option of five years.
The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility.
Because the Company's employee stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its
employee stock options.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting
period. The Company's pro forma information follows.
1996 1995 1994
Pro forma net income $ 3,734,000 $ 4,362,000 $ 23,177,000
Pro forma earnings per share:
Primary $ .37 $ .43 $ 2.35
A summary of the Company's stock option activity and related
information for the years ended December 31, 1996, 1995, and
1994 follows:
Year Ended December 31
1996 1995 1994
Weighted Avg. Weighted Avg. Weighted Avg.
Options Exercise Price Options Exercise Price Options Exercise Price
Options outstanding,
beginning of year 308,000 $ 8.33 244,000 $ 6.92 170,000 $ 2.35
Options granted 250,000 $ 10.17 67,000 $ 13.26 87,000 $ 15.22
Options exercised 9,000 $ 4.68 3,000 $ 3.25 13,000 $ 2.67
Options outstanding
and exercisable,
end of year 549,000 $ 9.23 308,000 $ 8.33 244,000 $ 6.92
The weighted average fair value of options granted whose
exercise price was equal to the market price of the stock on the
grant date was $3.97, $4.65, and $4.66 for the years ended
December 31, 1996, 1995, and 1994. The weighted average fair
value of options granted whose exercise price exceeded the
market price of the stock on the grant date was $3.14, $4.13,
and $4.05 for the years ended December 31, 1996, 1995, and
1994. Exercise prices for options outstanding as of December
31, 1996, range from $1.38 to $16.36.
The Company has adopted a Shareholder Protection
Rights Agreement and declared a distribution of one right
(the "Right") for each outstanding share of Company common
stock, par value $0.20 per share (the "Common Stock"). Each
Right entitles the registered holder to purchase from the
Company one one-hundredth of a share (a "Unit") of Series A
Participating Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), at a purchase price of $36.00 per Unit,
subject to adjustment. The rights currently attach to the
certificates representing shares of outstanding Company
Common Stock, and no separate Rights certificates will be
distributed. The Rights will separate from the Common Stock
upon the earlier of ten business days (unless otherwise delayed
by the Board) following the (i) public announcement that a
person or group of affiliated or associated persons (the
"Acquiring Person") has acquired, obtained the right to acquire,
or otherwise obtained beneficial ownership of 15% or more of
the then outstanding shares of Common Stock, or (ii)
commencement of a tender offer or exchange offer that would
result in an Acquiring Person beneficially owning 15% or more
of the then outstanding shares of Common Stock. The Board of
Directors may terminate the Rights without any payment to the
holders thereof at any time prior to the close of business ten
business days following announcement by the Company that a
person has become an Acquiring Person. The Rights, which do
not have voting power and are not entitled to dividends, expire
on December 21, 2005. In the event of a merger, consolidation,
statutory share exchange or other transaction in which shares of
Common Stock are exchanged, each Unit of Preferred Stock
will be entitled to receive the per share amount paid in respect
of each share of Common Stock.
12. Restructuring Costs
In the fourth quarter of 1994, the Company developed and
implemented a plan to restructure the operations of Wibau-
Astec. In connection with the restructuring, the Company
accrued costs of $1,500,000 ($1,250,000, net of tax, or $0.12
per share). The plan included, among other things, the cessation
of manufacturing operations at Wibau-Astec along with related
personnel reductions as well as personnel reductions in
engineering and administration. Total personnel reductions
were approximately 150. The plan was communicated to
employees and severance notices given during the fourth quarter
of 1994.
As of the end of 1994, the restructuring was
substantially complete. Total costs incurred were for the write-
down of certain assets to estimated fair market value, severance
payments and lease termination expenses. Severance costs and
exit costs incurred were approximately $1,137,000 and
$363,000, respectively. Costs incurred during 1995 were
substantially the same as the amounts accrued as of December
31, 1994.
Wibau-Astec sold Astec asphalt plants either manufactured in
the United States or subcontracted in Europe. Wibau-Astec also
sold Wibau-Astec parts and serviced a large customer base and
utilized subcontractors as needed for parts and/or manufacturing
components in Europe. As described in Note 2, Wibau-Astec
was sold in 1995.
13. Financial Instruments
Credit Risk - The Company sells products to a wide
variety of customers. The Company performs ongoing credit
evaluations of its customers and generally does not require
collateral. The Company maintains an allowance for doubtful
accounts at a level which management believes is sufficient to
cover potential credit losses. As of December 31, 1996,
concentrations of credit risk with respect to receivables are
limited due to the wide variety of customers.
Fair Value of Financial Instruments - The book value of the
Company's financial instruments approximates their fair values.
Financial instruments include cash, accounts receivable, finance
receivables, accounts payable, and long- and short-term debt.
Substantially all of the company's short- and long-term debt is
floating rate debt and, accordingly, book value approximates its
fair value.
14. Operations by Industry Segment and Geographic Area
The Company operates predominately in one industry segment.
Its products are used for road construction and for the
manufacture and processing of construction aggregates. Net
sales and net losses of foreign operations were $24,748,000 and
$3,044,000 for the year ended December 31, 1995 and
$10,133,000 and $5,394,000 for the year ended December 31,
1994. See Notes 2 and 3. International sales by domestic
subsidiaries by major geographic region were as follows:
Year Ended December 31,
1996 1995 1994
Asia $12,340,130 $22,294,203 $14,680,301
Europe 8,792,885 11,257,809 3,651,822
South America 6,889,869 3,811,091 4,662,530
Canada 3,852,792 8,105,164 4,007,019
Australia 1,760,828 1,613,920 413,368
Africa 1,131,318 3,220,047 9,594,267
Central America 1,381,030 5,955,227 13,285,042
Other 2,159,746 2,707,225 1,736,698
TOTAL $38,308,598 $58,964,686 $52,031,047
15. Finance Receivables
Finance receivables are receivables of Astec Financial Services,
Inc. Contractual maturities of outstanding receivables at
December 31, 1996 were:
Financing
Amounts Due In Leases Notes Total
1997 $ 1,330,422 $ 1,829,819 $ 3,160,241
1998 524,585 980,668 1,505,253
1999 481,585 301,514 783,099
2000 229,745 153,000 382,745
Thereafter 115,117 115,117
2,681,454 3,265,001 5,946,455
Less Unearned Income 356,685 363,814 720,499
Total $ 2,324,769 $ 2,901,187 $ 5,225,956
Receivables may be paid prior to contractual maturity generally
by payment of a prepayment penalty. At December 31, 1996,
there were no impaired loans or leases. Recognition of income
on finance receivables is suspended when management
determines that collection of future income is not probable.
Accrual is resumed if the receivable becomes contractually
current and collection doubts are removed--previously
suspended income is recognized at that time.
Astec Financial Services, Inc.'s net investment in
financing leases at December 31, 1996 consisted of the
following components:
Total minimum lease payment receivables $ 2,681,454
Less: unearned income 356,685
Net investment in financing leases $ 2,324,769
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Astec Industries, Inc.
We have audited the accompanying consolidated balance sheets
of Astec Industries, Inc. and subsidiaries as of December 31,
19941996 and 1993,1995, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1994.1996. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Astec Industries, Inc. and subsidiaries at
December 31, 19941996 and 1993,1995, and the consolidated results of its
operations and its cash flows for each of the three years in the
period ended December 31, 1994,1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young, LLP
Chattanooga, Tennessee
February 21, 1997
CORPORATE INFORMATION
Corporate and Subsidiary
Executive Officers
J. Don Brock Chairman of the Board and President
Richard W. Bethea, Jr. Vice President, Corporate Counsel, and Secretary
F. McKamy Hall Vice President, Corporate Controller, and Treasurer
W. Norman Smith President, Astec, Inc.
Robert G. Stafford President, Telsmith, Inc.
Thomas R. Campbell President, Roadtec, Inc.
Roger Sandberg President, Trencor, Inc.
James G. May President, Heatec, Inc.
Albert E. Guth President, Astec Financial Services, Inc.
Board of Directors
J. Don Brock +#Chairman of the Board and President
George C. Dillon *Former Chairman, Manville Corporation
Ronald W. Dunmire *+#Former President of Cedarapids, Inc.
Daniel K. Frierson *Chairman and CEO, Dixie Yarns Inc.
Albert E. Guth President, Astec Financial Services, Inc.
G. W. Jones *Former President of APAC, Inc.
William B. Sansom *Chairman and CEO , The H.T. Hackney Co.
E.D. Sloan, Jr. *Chairman of the Board, Nolas Trading Co, Inc.
W. Norman Smith +#President, Astec, Inc.
Robert G. Stafford #President, Telsmith, Inc.
*Member of the Audit and Compensation Committees
+Member of the Executive Committee
#Member of the Technical Committee
Subsidiaries
Astec Financial Services, Inc. Chattanooga, Tennessee
Astec, Inc. Chattanooga, Tennessee
CEI Enterprises, Inc. Albuquerque, New Mexico
Heatec, Inc. Chattanooga, Tennessee
Production Engineered Products, Inc. Walnut, Illinois
Roadtec, Inc. Chattanooga, Tennessee
Telsmith, Inc. Mequon, Wisconsin
Trencor, Inc. Grapevine, Texas
Transfer Agent Registrar
Chase Mellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
Stock Exchange
NASDAQ National Market - ASTE
Auditors
Ernst & Young LLP Chattanooga, Tennessee
General Counsel and Litigation
Chambliss, Bahner & Stophel, P.C. Chattanooga, Tennessee
Securities Counsel
Alston & Bird Atlanta, Georgia
Corporate Office
Astec Industries, Inc.
4101 Jerome Avenue
P.O. Box 72787
Chattanooga, Tennessee 37407
Telephone 423-867-4210
The Form 10-K, as filed with the Securities and Exchange
Commission, may be obtained at no cost by any shareholder
upon written request to Astec Industries, Inc., attention
Shareholder Relations.
The Annual Meeting will be held at 10:00 a.m. on Thursday,
April 24, 1997, in the Training Center at the Corporate office
located at 4101 Jerome Avenue, Chattanooga, Tennessee.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Astec Industries, Inc.
We have audited the accompanying consolidated balance sheets of
Astec Industries, Inc. and subsidiaries and the related consolidated
statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. Our audits
also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based
on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Astec Industries, Inc. and subsidiaries at December 31,
1996 and 1995, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young, LLP
ERNST & YOUNG LLP
Chattanooga, Tennessee
February 18,21, 1997
A-24
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE (VIII)
VALUATION AND QUALIFYING ACCOUNTS FOR CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONSOLIDATED BALANCE SHEET
December 31,
1994 1993
Assets Current assets:
Cash and cash equivalents note 1 $ 10,471,444 $ 3,458,218
Trade receivables less allowance for doubtful
accounts of $1,684,000 in 1994 and
$1,191,000 in 1993 29,852,180 18,116,773
Notes and other receivables 215,390 973,507
Inventories note 1, 3 56,309,735 40,005,281
Prepaid expenses 2,149,795 1,272,524
Deferred tax asset note 8 2,901,799
Other current assets 236,229 349,886
Patent damage escrow funds note 9 12,309,420
Total current assets 102,136,572 76,485,609
Property and equipment, net note 4 42,348,792 23,659,015
Other assets:
Goodwill 8,370,662 1,966,233
Notes receivable 9,541
Deferred tax asset note 8 1,827,494 572,498
Other 1,280,069 274,038
Total other assets 11,478,225 2,822,310
Total $ 155,963,589 $ 102,966,934
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 8,072,502
Current maturities of long-term debt note 6 500,000 $ 9,520
Accounts payable 14,262,518 10,169,871
Customer deposits 6,301,481 1,430,449
Accrued product warranty 3,470,703 1,781,733
Income taxes payable note 8 1,987,511 1,111,928
Reserve for patent damages note 9 13,250,048
Other accrued liabilities 14,541,920 7,965,112
Total current liabilities 49,136,635 35,718,661
Long-term debt, less
current maturities note 6 16,155,000
Deferred retirement costs note 7 192,242 3,033,536
Other 106,716 109,838
Total liabilities 65,590,593 38,862,035
Shareholders' equity: note 1,10
Preferred stock, authorized 2,000,000 shares of
$1.00 par value; none issued
Common stock, authorized 20,000,000 shares of
$.20 par value; issued and outstanding,
10,001,831 in 1994 and 9,795,402 in 1993 2,000,366 1,959,080
Additional paid-in capital 50,900,908 48,200,446
Foreign currency translation adjustment 89,975
Retained earnings 37,381,747 13,945,373
Total shareholders' equity 90,372,996 64,104,899
Total $ 155,963,589 $ 102,966,934
[FN]
See notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1994 1993 1992
Net sales $ 213,806,411 $ 172,801,465 $ 149,132,958
Cost of sales 165,709,245 130,906,009 114,960,249
Gross profit 48,097,166 41,895,456 34,172,709
Selling, general, and
administrative expenses 31,142,335 28,624,179 23,968,553
Research and
development expenses 3,165,795 2,922,921 2,580,146
Patent suit damages
and expenses (net recoveries
and accrual
adjustments) note 9 (14,947,498) 374,740 566,502
Restructuring costs note 12 1,500,469
Income from operations 27,236,065 9,973,616 7,057,508
Other income (expense):
Interest expense (712,853) (1,787,742) (3,241,066)
Loan prepayment penalty
and expenses note 6 (544,783)
Interest income 426,489 516,957 392,798
Other income - net 1,963,633 2,334,407 2,226,820
Equity in loss of joint
venture note 2 (3,176,834) (720,000)
Income before income taxes 25,736,500 9,772,455 6,436,060
Income taxes note 8 2,300,126 434,246 421,807
Net income $ 23,436,374 $ 9,338,209 $ 6,014,253
Earnings per Common and Common Equivalent Share:
Net income: note 1
Primary $ 2.38 $ 1.07 $ .82
Fully diluted .81
Weighted average number of
common and common
equivalent shares outstanding: note 1
Primary 9,843,980 8,694,478 7,349,612
Fully diluted 7,459,304
[FN]
See notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993 and 1992
Common Stock note 1 Additional Foreign Currency Retained
Shares Amount Paid-In Capital Translation Adjustment Earnings
Balance,
December 31,
1991 3,604,063 $ 720,813 $ 21,965,755 $ (1,407,089)
Issuance of
common
stock 54,571 10,900 325,950
Net income 6,014,253
Balance,
December 31,
1992 3,658,634 731,713 22,291,705 4,607,164
Issuance of
common
stock 1,243,067 248,627 26,887,481
Stock
dividend 4,893,701 978,740 (978,740)
Net income 9,338,209
Balance,
December 31,
1993 9,795,402 1,959,080 48,200,446 13,945,373
Issuance of
common
stock 206,429 41,286 2,700,462
Change during year $89,975
Net income 23,436,374
Balance,
December 31,
1994 10,001,831 $2,000,366 $50,900,908 $89,975 $37,381,747
[FN]
See notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1994 1993 1992
Cash Flows from Operating Activities
Net income $ 23,436,374 $ 9,338,209 $ 6,014,253
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 3,941,871 3,105,694 3,448,398
Provision for doubtful
accounts 362,089 742,752 719,117
Provision for inventory
reserves 3,621,218 2,952,918 2,937,459
Provision for warranty 2,616,565 2,689,441 2,699,657
Provision for patent damages
(net recoveries and
accrual adjustments) (13,250,048) 13,697
Foreign currency translation
adjustment 89,975
(Gain) loss on sale of
fixed assets 322,587 (19,976) (224,367)
Equity in loss of joint venture 3,176,834 720,000
(Increase) decrease in:
Receivables (7,660,990) (7,105,758) (2,646,546)
Inventories (3,537,955) (2,988,734) (563,442)
Prepaid expenses (803,177) (337,248) (38,676)
Patent damage escrow funds 12,309,420 (705,431) (3,667,305)
Deferred tax asset (4,156,695) (572,598)
Other assets (1,916,921) (400,318) 198,238
Increase (decrease) in:
Accounts payable 2,138,449 1,054,970 (138,856)
Customer deposits (1,738,643) 113,091 (555,655)
Accrued product warranty (2,256,128) (2,459,558) (2,421,631)
Income taxes payable 400,355 877,225 169,777
Reserve for patent damages 681,711 642,237
Other accrued liabilities (947,201) 1,376,519 (1,363,786)
Total adjustments (7,288,395) (261,603) (805,381)
Net cash provided by
operating activities 16,147,979 9,076,606 5,208,872
Cash Flows From Investing Activities
Proceeds from sale of property
and equipment - net 307,099 74,284 1,827,358
Expenditures for property
and equipment (21,886,011) (8,767,135) (2,492,249)
Repayments on notes receivable 600,499 47,672 89,071
Investment in joint venture (635,700) (589,900)
Cash payments in connection
with business combination,
net of cash acquired 1,447,965
Net cash (used by)
investing activities (20,166,148) (9,235,079) (575,820)
[FN]
See notes to Consolidated Financial Statements.
Year Ended December 31,
1994 1993 1992
Cash Flows From Financing Activities
Proceeds from industrial
bonds 14,000,000
Proceeds from issuance of
common stock 34,750 27,136,109 336,850
Net (repayments) borrowings
under revolving credit loan 2,655,000 (4,675,000) (1,655,000)
Principal repayments of
loans and notes payable (5,658,355) (21,078,374) (6,831,560)
Net cash provided by (used by)
financing activities 11,031,395 1,382,735 (8,149,710)
Increase (decrease) in cash
and cash equivalents 7,013,226 1,224,262 (3,516,658)
Cash and cash equivalents,
beginning of period 3,458,218 2,233,956 5,750,614
Cash and cash equivalents,
end of period $ 10,471,444 $ 3,458,218 $ 2,233,956
Supplemental Cash Flow Information
Cash paid during the year for:
Interest $ 595,767 $ 2,600,688 $ 3,213,499
Income taxes $ 6,282,709 $ 176,021 $ 462,210
Excluded from the Consolidated
Statements of Cash Flows
were the following effects
of non-cash investing and
financing activities:
Non-cash assets assumed in
connection with repossessions:
Trade receivables $ (1,421,239)
Notes receivable (183,855)
Inventories 1,421,239
Other current assets 183,855
Capital stock issued for purchase
of foreign subsidiary:
Investment in foreign subsidiary $2,706,996
Capital stock (39,871)
Additional paid-in-capital (2,667,125)
Non-cash sale of assets
by assumption of receivable:
Property and equipment $ (8,244)
Receivable - other 8,244
Non-cash transfer of assets:
Trade receivables $90,435
Notes receivable (90,435)
[FN]
See notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Astec
Industries, Inc. and its subsidiaries. The Company's wholly-owned
subsidiaries at December 31, 1994 are as follows:
Astec, Inc.
Heatec, Inc.
Telsmith, Inc.
Roadtec, Inc.
Trencor, Inc.
Wibau-Astec Maschinenfabrik GmbH (Wibau-Astec)
Gibat Ohl Ingenieurgesellschaft fur Anlagentechnik (Gibat Ohl)
All significant intercompany transactions have been eliminated in
consolidation.
Segment Information - The Company operates in one industry
segment. Its products are used predominately for road construction and for
the manufacture and processing of construction aggregates. International
sales by domestic subsidiaries were $52,031,000, $29,693,000, and $32,659,000,
for the years ended December 31, 1994, 1993 and 1992, respectively. Net sales
and net loss (including equity in loss of joint venture) of foreign
operations for the year ended December 31, 1994, were $10,133,000 and
$5,394,000, respectively. At December 31, assets of foreign subsidiaries were
$23,953,000.
Cash Equivalents - The Company considers all highly liquid instruments
purchased with a maturity of less than three months to be cash equivalents.
Inventories - Inventories excluding used equipment are stated at the
lower of first-in, first-out cost or market. Used equipment inventories are
stated on the specific unit cost method, which in the aggregate is
less than market.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is computed generally on the straight-line method for financial
reporting purposes at rates considered sufficient to amortize costs
over estimated useful lives. Depreciation is computed generally on both
accelerated and straight-line methods for tax reporting purposes.
Maintenance and repairs are expensed as incurred.
Goodwill - Goodwill represents the excess of cost over the fair value of net
assets acquired. Goodwill amounts are being amortized using
the straight-line method over twenty years. Additions to goodwill in
1994 reflect the purchase of the Capital Trencher product line, the Log Hog
product line, the additional 50% of Wibau-Astec, and Gibat Ohl.
Product Warranty - The Company provides product warranties against defects in
materials and workmanship for periods ranging from ninety days to one
year following the date of sale. Estimated costs
of product warranties are charged to cost of sales in the period of the sale.
Revenue Recognition - A portion of the Company's equipment sales represents
equipment produced in the Company's plants under short-term contracts for a
specific customer project or equipment designed to
meet a customer's specific requirements. Equipment revenues are recognized in
compliance with the terms and conditions of each contract, which is ordinarily
at the time the equipment is shipped. Certain
contracts include terms and conditions through which the Company recognizes
revenues upon completion of equipment production which is subsequently stored
at the Company's plant at the customer's request. Revenue is recorded on
such contracts upon the customer's assumption of title and all risks of
ownership.
Credit Risk - The Company sells products to a wide variety of customers. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains an allowance for
doubtful accounts at a level which management believes is sufficient to cover
potential credit losses. As of December 31, 1994 concentrations of credit
risk with respect to trade receivables are limited due to the wide variety of
customers.
Earnings Per Share - Primary and fully diluted earnings per share are based on
the weighted average number of common and common equivalent shares outstanding
and include the potentially dilutive effects of the exercise of stock options
in years where there are earnings. Fully diluted earnings per share are not
presented for 1994 and 1993 since the dilution is not material. Earnings
per share information has been restated to retroactively reflect
the two-for-one stock split effected in the form of a dividend on August 12,
1993.
2. Business Combinaions
Effective July 1, 1993, the Company entered into a joint venture with
Putzmeister-Werk Maschinenfabrik GmbH (Putzmeister) to form
a new German limited liability company,Wibau-Astec Maschinenfabrik
GmbH (Wibau-Astec). Wibau-Astec designed, engineered, manufactured and
marketed asphalt plants, stabilization plants, asphalt and thermal
heaters, hot storage systems and soil remediation equipment. Putzmeister
and the Company each owned 50% of Wibau-Astec. On November 7, 1994, the
Company acquired the remaining shares of Wibau-Astec from Putzmeister for
$67,400. The acquisition was accounted for as a purchase effective
November 7, 1994, and accordingly, the results of operations
and accounts of Wibau-Astec subsequent to November 7, 1994 are included in the
Company's consolidated financial statements. The purchase price was allocated
to the net tangible assets of Wibau-Astec based on the estimated fair market
values of the assets acquired. As required by the purchase
method of accounting, the excess amount of the purchase price over the fair
value of Wibau-Astec's net tangible assets was recorded as goodwill
and is being amortized using the straight-line method over 20
years. Subsequent to the acquisition of Wibau-Astec, the Company undertook a
plan to restructure Wibau-Astec's operations. See Note 12 - Restructuring
Costs.
Effective October 17, 1994, the Company acquired the operating assets and
liabilities of Gibat Ohl Ingenieurgesellschaft fur Anlagentechnic (Gibat Ohl)
in exchange for 193,357 shares of the Company's common stock and approximately
$2,760,000 in cash. The acquisition was accounted for as a purchase
effective October 17, 1994, and accordingly, the results of operations and
accounts of Gibat Ohl subsequent to October 17, 1994 are included
in the Company's consolidated financial statements. The purchase price of
approximately $5,460,000 was allocated to the net tangible assets of Gibat Ohl
based on the estimated fair market values of the assets acquired. The
excess of the purchase price over the fair market value of Gibat
Ohl's net tangible assets was recorded as goodwill and is being amortized
using the straight-line method over 20 years.
A summary of the net assets acquired is as follows:
Wibau-Astec Gibat Ohl
Current assets $ 4,938,766 $ 11,007,164
Property, plant and equipment 412,193 300,657
Current liabilities (8,678,984) (10,029,223)
Other liabilities (2,038,165)
Goodwill 1,193,259 4,153,364
Net assets acquired excluding cash (4,172,931) 5,431,962
Cash 4,240,331 32,984
Net assets acquired $ 67,400 $ 5,464,946
The following unaudited pro forma summary presents the consolidated results of
operations as if the acquisition of Wibau-Astec and Gibat Ohl had occurred at
the beginning of each period presented. Pro forma adjustments have been made
to reflect the restructuring of Wibau-Astec as described in Note 12. The pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results that would have occurred had the
acquisition occurred at the beginning of the periods presented or of results
which may occur in the future.
Year Ended December 31,
1994 1993
Net sales $ 223,887,000 $ 188,823,000
Income from operations 28,380,000 10,576,000
Net income 24,619,000 9,638,000
Per common and common
equivalent share:
Net income $ 2.50 $ 1.11
Prior to its acquisition of the remaining 50% interest in Wibau-Astec, the
Company's investment in Wibau-Astec was accounted for by the equity method.
Accordingly, net income as presented in the Consolidated Statements of
Income for 1994 and 1993 includes the Company's share of Wibau-Astec's
losses for periods prior to the acquisition of $3,177,000 and $720,000,
respectively.
3. Inventories
Inventories consisted of the following:
December 31,
1994 1993
Raw materials and parts $ 26,705,110 $ 18,418,839
Work-in-process 14,380,192 6,017,940
Finished goods 7,745,709 7,802,956
Used equipment 7,478,724 7,765,546
Total $ 56,309,735 $ 40,005,281
4. Property and Equipment
Property and equipment consisted of the following:
December 31,
1994 1993
Land, land improvements, and buildings $ 26,676,486 $ 14,062,161
Equipment 37,497,348 27,955,598
Less accumulated depreciation (21,880,823) (18,437,672)
Land, buildings, and equipment - net 42,293,011 23,580,087
Rental property:
Equipment 1,703,608 1,703,608
Less accumulated depreciation (1,647,827) (1,624,680)
Rental property - net 55,781 78,928
Total $ 42,348,792 $ 23,659,015
5. Leases
The Company leases certain land, buildings and equipment which are used in its
operations. Total rental expense charged to operations under operating
leases was approximately $615,000, $427,000 and $384,000 for the years ended
December 31, 1994, 1993 and 1992 respectively.
Minimum rental commitments for all noncancelable
operating leases at December 31, 1994, are as follows:
1995 $ 718,000
1996 492,000
1997 246,000
1998 97,000
1999 and beyond 189,000
The Company also leases equipment to customers under short-term contracts
generally ranging from 2 months to 6 months. Rental income under
such leases was $1,394,000, $1,719,000 and $2,470,000, for
the years ended December 31, 1994, 1993 and 1992, respectively.
6. Long-term Debt
Long term debt consisted of the following:
December 31,
1994 1993
Revolving credit loan of
$15,000,000 at December 31, 1994
and 1993, available through
June 30, 1997 at an interest rate of
prime less a quarter, which was 8.25% and 6.0%
at December 31, 1994 and 1993, respectively $ 2,655,000
Loans payable in monthly installments
maturing at various dates through
1995 at interest rates from 7.25% to 14.85% $ 9,520
Industrial Development Revenue Bonds
payable in semi-annual installments through
2006 at weekly negotiated interest rates 6,000,000
Industrial Development Revenue Bonds due in
2009 at weekly negotiated interest rates 8,000,000
Total long-term debt 16,655,000
Less current maturities 500,000 9,520
Long-term debt less
current maturities $ 16,155,000 $ 0
On January 31, 1989, the Company placed $10,000,000 in Senior Notes and
$10,000,000 in Senior Subordinated Notes with Principal Mutual Life Insurance
Company ("Principal"). The proceeds of the notes placed with Principal were
applied to the outstanding revolving credit loan with The First National
Bank of Chicago ("FNBC"). During 1993, both the Senior and Subordinated
Notes with Principal were repaid in full. Related prepayment penalties and
expenses are reflected on a separate line in the Consolidated Statements of
Income.
During 1994, the Company negotiated a new unsecured revolving loan agreement.
The line of credit is $15,000,000 and expires June 30, 1997. At December 31,
1994, the Company was in violation of the covenant relative to capital
expenditures and has received a waiver for such violation.
The aggregate of all maturities of long-term debt
in each of the next five years is as follows:
1995 $ 500,000
1996 500,000
1997 3,155,000
1998 500,000
1999 and beyond 11,500,000
For 1994, the weighted average interest rate on short term borrowings, which
include current maturities of Industrial Revenue Bonds and notes payable,
were 3.46% and 8.75%, respectively.
7. Retirement Benefits
A former subsidiary of the Company, the Barber-Greene Company, had defined
benefit pension plans ("Barber-Greene Plans") covering substantially all of
its employees. Non-union benefits were frozen as of September 1, 1986, and
certain union benefits were frozen as of October 31, 1986. The Company
retained responsibility for the Barber-Greene Plans when it sold the
Barber-Greene Company in 1991. Telsmith, Inc. also sponsors a defined
benefit pension plan covering certain employees hired prior to October 14,
1987 who have chosen not to participate in the Company's 401(k) savings plan.
The benefit is based on years of benefit service multiplied by a monthly
benefit as specified in the plan. The Company's funding policy for its
pension plans is to make the minimum annual contributions required by
applicable regulations.
During 1994, the Company made the decision to terminate the Barber- Greene
Plans and purchased annuities to fund the benefits provided for in the plans.
The Company has requested approval from the Internal Revenue Service to
terminate the plans but has yet to receive such approval. As a result, no
settlement of the plan will occur until 1995. The annuities purchased by the
Company during 1994 are included in plan assets.
A reconciliation of the funded status of the Plans, which is based on a
valuation date of September 30, with amounts reported in the Company's
consolidated balance sheets, is as follows:
1994 1993
Actuarial present value of
benefit obligations:
Vested $ 40,574,462 $ 38,229,010
Nonvested 85,245 251,677
Accumulated benefit obligation $ 40,659,707 $ 38,480,687
Projected benefit obligation $ 40,659,707 $ 38,480,687
Plan assets at fair value 40,589,417 43,018,508
Projected benefit obligation in
excess of (less than) plan assets 70,290 (4,537,821)
Unrecognized net gain 450,751 7,976,321
Prior service cost not
yet recognized in net
periodic pension cost (320,665) (357,323)
Pension liability in the
consolidated balance sheets $ 200,376 $ 3,081,177
Net periodic pension cost for 1994, 1993, and 1992 included the following
components:
Year Ended December 31,
1994 1993 1992
Service cost - benefits earned
during the period $ 31,503 $ 26,873 $ 34,426
Interest cost on projected
benefit obligation 2,565,355 2,754,319 2,761,195
Actual return on plan assets 2,148,873 12,318,009 833,167
Net amortization and deferral 5,405,871 9,345,175 1,948,268
Net (income) expense $ 660,140 $ 191,642 $ 14,186
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 8.5% at September 30, 1994 and
7.0% at September 30, 1993. The expected long-term rate of return on assets
was 9.0% for the years ending September 30, 1994 and 1993. Plan assets are
primarily comprised of corporate equity and corporate and U.S. Treasury debt
securities.
In 1987, the Company adopted deferred savings plans (Savings Plans) under
Section 401 (k) of the Internal Revenue Code, under which substantially all
employees of the Company and its subsidiaries are eligible. In 1991 the
Savings Plans were consolidated and provide that the Company will match an
amount equal to 50% of employee savings subject to certain limitations. The
total expense for such matching was approximately $696,000, $567,000 and
$485,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
In addition to the retirement plans discussed above, the Company has an
unfunded postretirement medical and life insurance plan covering employees of
its Telsmith, Inc. subsidiary and retirees of its former Barber-Greene
subsidiary. Effective January 1, 1993, the Company adopted SFAS No. 106,
(Employers' Accounting for Postretirement Benefits Other than Pensions). The
accumulated postretirement benefit obligation (APBO) at adoption was
approximately $674,000 and is being amortized over twenty years.
The accumulated postretirement benefit obligation and the amount
recognized in the Company's consolidated balance sheets, is as follows:
December 31,
1994 1993
Accumulated postretirement
benefit obligation:
Retirees $ 130,600 $ 207,500
Active employees 473,000 425,800
603,600 633,300
Unamortized transition obligation 605,600 639,300
Unrecognized net gain 118,800 29,800
Accrued postretirement
benefit cost $ 116,800 $ 23,800
Net periodic postretirement benefit cost included the following components:
Year Ended December 31,
1994 1993
Service cost $ 53,500 $ 53,500
Interest cost 42,900 42,900
Amortization of transition
obligation 33,700 33,700
Net expense $ 130,100 $ 130,100
Postretirement benefit costs for 1992 were not material. A discount rate of
8.5% was used in calculating the APBO. The APBO assumes a 13.5% increase in
per capita health care costs decreasing gradually to 5.8% for years 2012 and
later. A 1% increase in the medical inflation rate would increase the APBO by
approximately $26,800 and the expense by approximately $6,000.
8. Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109. "Accounting for
Income Taxes". Prior years' financial statements have not been restated nor
was there any cumulative effect on income from the adoption of SFAS No. 109.
For financial reporting purposes, income before income taxes includes the
following components:
Year Ended December 31,
1994 1993 1992
United States $ 30,726,395 $ 9,474,455 $ 6,436,060
Foreign:
License income 404,000 1,018,000
Equity in loss of
joint venture (3,176,834) (720,000)
Loss from foreign subsidiary (2,217,061)
Income before
income taxes $ 25,736,500 $ 9,772,455 $ 6,436,060
The provision for income taxes consisted of the following:
Year Ended December 31,
1994 1993 1992
Current $ 7,029,419 $ 434,246 $ 421,807
Deferred (benefit) (4,729,293)
Total provision for
income taxes $ 2,300,126 $ 434,246 $ 421,807
A reconciliation of the provision for income taxes at the statutory rate to
those provided is as follows:
Year Ended December 31,
1994 199 1992
Tax at statutory rates $ 9,007,775 $ 3,322,635 $ 2,188,260
Effect of utilization
of net operating loss
carryforwards net of
alternative minimum tax (3,008,000) (3,155,253) (1,921,766)
Effect of utilization
of alternative minimum
tax credits (382,000)
Benefit from foreign
sales corporation (265,000)
State taxes, net of federal
income tax benefit 212,000 115,271 155,313
Income taxes of
other countries 27,000 151,593
Loss from foreign
operations 2,636,000
Recognition of deferred
tax asset (4,729,000)
Reversal of prior temporary
differences (1,937,000)
Other items 738,351
Income Taxes $ 2,300,126 $ 434,246 $ 421,807
At December 31, 1994, the Company had federal net operating loss
carryforwards of approximately $3,800,000 for tax purposes, all of which are
limited by consolidated return rules to use in offsetting only the taxable
income of a subsidiary of the Company. The net operating loss carryforwards
expire at various dates from 1997 through 2005. For financial reporting
purposes, the federal net operating loss carryforwards approximate
$11,600,000. At December 31, 1994, the Company had foreign net operating
loss carryforwards of approximately $14,000,000 available to offset future
income of Wibau-Astec.
At December 31, 1994, the Company had investment tax and other credit
carryforwards of approximately $641,000 expiring at various dates principally
from 1995 through 1999. Utilization of these credits will be limited to use
in offsetting only the taxable income of a subsidiary of the Company.
As a result of utilizing the net operating loss carryforwards, net income from
continuing operations increased by approximately $3,008,000, $3,155,000 and
$1,922,000 and related per share amounts increased by approximately $.31,
$.36 and $.26 for the years ended December 31, 1994, 1993 and 1992,
respectively.
At December 31, 1994, the company had deferred tax assets of approximately
$16,861,000, and deferred tax liabilities of approximately $2,062,000,
related to temporary differences and tax loss and credit carryforwards. At
December 31, 1994, a valuation allowance of approximately $10,070,000 was
recorded. This valuation allowance offsets the deferred tax assets relative
to net operating loss and credit carryforwards as well as foreign net
operating loss carryforwards. Both the net operating loss and credit
carryforwards are SRLY carryforwards and can be used to offset only the
income of a certain subsidiary. Due to this, the Company determined that a
valuation allowance was necessary for these items as well as the foreign net
operating loss carryforward, the utilization of which is uncertain.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
statement purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
December 31,
1994 1993
Deferred tax assets:
Inventory reserves $ 1,753,000 $ 2,270,000
Legal reserves 100,000 487,000
Pension expense 109,000 1,098,000
Investment in foreign
joint venture 1,827,000 747,000
Other accrued expenses 3,002,000 2,703,000
Alternative minimum
tax credits 1,216,000
Net operating loss
carryforwards 1,344,000 4,216,000
Foreign net operating
loss carryforwards 8,085,000
Other credit carryforwards 641,000 760,000
Total deferred tax assets 16,861,000 13,497,000
Deferred tax liabilities:
Property and equipment 2,062,000 1,742,000
Total deferred tax liabilities 2,062,000 1,742,000
Net deferred tax assets 14,799,000 11,755,000
Valuation allowance (10,070,000) (11,182,000)
Deferred tax asset $ 4,729,000 $ 573,000
9. Contingencies
During 1994, and in previous years, the Company and its former Barber-Greene
subsidiary (now Telsmith, Inc.) were defendants in two patent infringement
actions brought by Robert L. Mendenhall and CMI Corporation ("CMI"), a
competitor, seeking monetary damages and an injunction to cease the alleged
infringement.
In 1990, CMI was awarded damages of $4,457,000 and prejudgment interest of
$2,838,000 or a total of $7,295,000 from Barber-Greene. During 1991, in a
separate trial, CMI was awarded damages of $8,463,000, prejudgment interest
of $5,309,000 and attorney's fees of $737,000 for a total of $14,509,000 from
Astec, and Astec was awarded damages of $667,000 plus $391,000 of prejudgment
interest or a total of $1,058,000 from CMI. The total damages and expenses
awarded to CMI were $20,746,000, net of the $1,058,000 awarded to Astec.
Both Astec and CMI appealed the judgments. In connection with its appeals,
the Company was directed by the courts to pledge substantially all of its real
property and to deposit funds in an escrow account to secure the judgments
against the Company pending the outcome of appeals.
On June 9, 1994, the Company announced that the United States Court of
Appeals for the Federal Circuit had reversed the lower court decision and did
not remand to the lower court for further proceedings the judgments
previously entered against Astec and its former Barber-Greene subsidiary in
the Robert L. Mendenhall and CMI patent litigation. Those judgments totaled
approximately $22,000,000. The Federal Circuit Court ruled in favor of Astec
because the allegedly infringing patents had been held invalid in a separate
third party case. CMI asked the Federal Circuit to reconsider its decision
and to have all of the Federal Circuit judges rehear the appeal. The Company
responded to this request. On September 20, 1994, the Company announced that
the United States Court of Appeals for the Federal Circuit denied the request
from Mendenhall and CMI to reconsider its earlier reversal. With the issuance
of this ruling, the Federal Circuit's review of this ongoing patent
litigation ended.
On October 11, 1994, CMI and Robert L. Mendenhall filed a Petition of Writ
Certiorari asking the U.S. Supreme Court to review the decision of the
Federal Circuit Court of Appeals. The Company filed a response opposing the
Petition and on November 28, 1994, the Supreme Court issued an Order denying
the Petition thus bringing the patent litigation to an end.
As a result of the Supreme Court's refusal to grant certiorari, the Company
received $12,917,000 which was being held in escrow pending the Company's
appeal of the two judgments. In addition, on December 15, 1994, the Company
received $1,309,000 from CMI in satisfaction of the judgment entered in favor
of the Company on its counterclaim against CMI. The receipt of these funds
effectively concluded the litigation between the Company and CMI and Robert
L. Mendenhall which had been pending for a number of years. As a result, the
Company has reversed its accrued liability for patent damages. The reversal
of $13,870,000 in accrued patent damages and the receipt of $1,309,000 in
patent damages from CMI total $15,179,000 and are included in the
Consolidated Statements of Income as Patent suit damages and expenses net
recoveries and accrual adjustments.
In an unrelated case, the Company's Telsmith subsidiary is a defendant in a
patent infringement action brought by Nordberg, Inc., a manufacturer of a
competing line of rock crushing equipment, seeking monetary damages and an
injunction to cease an alleged infringement of a patent on certain components
used in the production of its rock crushing equipment. This case, being
heard before the U.S. District Court for the Eastern District of Wisconsin,
has been bifurcated into liability and damages phases. The liability phase
was tried on January 11, 1993; however, no decision has been rendered by the
Court. Because of the uncertainties inherent in the litigation process, the
Company is unable to predict the ultimate outcome of this litigation.
On October 28, 1993, the Company was also named as a defendant in a patent
infringement action brought by Gencor, Inc., a manufacturer of a competing
line of asphalt plants, seeking monetary damages and an injunction to cease
an alleged infringement of a patent on certain components used in the
production of its asphalt plant product line. This case was filed in the
U.S. District Court for the Middle District of Florida, Orlando Division, and
is currently in the discovery phase. Management believes this case to be
without merit and intends to vigorously defend this suit; however, due to the
uncertainties inherent in the litigation process, the Company is unable to
predict the ultimate outcome of this litigation.
Management has reviewed all claims and lawsuits and, upon the advice of
counsel, has made provision for any estimable losses; however, the Company is
unable to predict the ultimate outcome of the outstanding claims and lawsuits.
Recourse Customer Financing - Certain customers have financed purchases of
the Company's products through arrangements in which the Company is
contingently liable for customer debt aggregating approximately $13,800,000
and $13,700,000 at December 31, 1994 and 1993, respectively. These
obligations average five years in duration and have minimal risk.
Other - The Company is contingently liable for letters of credit of
approximately $2,082,000 issued for bid bonds and performance bonds.
10. Shareholders' Equity
Stock Options - The Company has reserved 300,000 shares of common stock under
the 1986 Stock Option Plan and 500,000 shares of common stock under the 1992
Stock Option Plan for issuance upon exercise of nonqualified options,
incentive options and stock appreciation rights to officers and employees of
the Company and its subsidiaries at prices determined by the Board of
Directors. At December 31, 1994, a total of 328,800 shares of common stock
related to the 1992 Stock Option Plan are available for options to be granted.
Nonqualified options are exercisable at a price not less than 85% of the
Board of Directors' determination of the fair market value of the Company's
common stock on the date of the grant. Nonqualified options are exercisable
starting one year from the date of grant and expire ten years after the date
of grant. Incentive stock options granted by the Board of Directors must be
exercisable at a price not less than 100% of the fair market value of the
Company's common stock on the date of grant. Incentive stock options are
exercisable immediately after the date of grant, except for certain officers
of the Company, and expire ten years after the date of grant. Stock
appreciation rights may be granted by the Board of Directors in conjunction
with the grant of an incentive or nonqualified option. A stock appreciation
right permits a grantee to receive payment in either cash or shares of the
Company's common stock equal to the difference between the fair market value
of the common stock and the exercise price for the related option.
The following is a summary of stock option information:
Number Option Price
of Shares Range Per Share
Outstanding, December 31, 1991 238,800 $ 1.375 - 4.675
Granted 140,000 3.25
Expired (12,800) 4.675
Exercised (109,000) 1.375 - 4.675
Outstanding, December 31, 1992 257,000 1.375 - 4.675
Exercised (87,000) 1.375 - 4.675
Outstanding, December 31, 1993 170,000 1.375 - 4.675
Granted 87,000 14.875 - 16.363
Exercised (13,000) 1.375 - 3.25
Outstanding, December 31, 1994 244,000 $ 1.375 - 16.363
On July 29, 1993, the Company's Board of Directors approved a two-for-one
split of the Company's common stock in the form of a 100% stock dividend for
shareholders of record as of August 12, 1993. A total of 4,893,701 shares of
common stock were issued in connection with the split. The stated par value
of each share was not changed. A total of $978,740 was reclassified from
additional paid-in capital to the Company's common stock account. All share
and per share amounts for 1993 and prior years have been restated to
retroactively reflect the stock split.
11. Related Party Transactions
In September 1991, the Company's Chairman, its Senior Vice President, and the
President of its Telsmith, Inc. subsidiary formed a general partnership which
acquired 25% of the common stock of American Rock Products, Inc., an Ohio
corporation engaged in the business of supplying crushed rock to concrete and
asphalt producers in the southeastern Oklahoma area ("Amrock"). These
individuals own interests in the partnership of 50%, 25% and 25%,
respectively. In December 1992, the rock crushing business of Amrock was
sold to a competitor, exclusive of two used rock crushing machines and certain
other miscellaneous inventory and equipment.
In March 1994, Amrock sold two of these used rock crushing machines to
Telsmith for $50,000 and $70,000, respectively. The purchase price for each
of these machines was determined by the president of Telsmith based on his
opinion of their fair market value at the time of purchase. Telsmith intends
to market both rock crushing machines to its customers for sale in the
ordinary course of business.
12. Restructuring Costs
In the fourth quarter of 1994, the Company developed and implemented a plan
to restructure the operations of Wibau-Astec. In connection with the
restructuring, the Company accrued costs of $1,500,000 $1,250,000, net of
tax, or $0.12 per share. The plan included, among other things, the
cessation of manufacturing operations at Wibau-Astec along with related
personnel reductions as well as personnel reductions in engineering and
administration. Total personnel reductions were approximately 150. The plan
was communicated to employees and severance notices given during the fourth
quarter of 1994.
As of the end of 1994, the restructuring was substantially complete. Total
costs incurred were for the write-down of certain assets to estimated fair
market value, severance payments and lease termination expenses. Severance
costs and exit costs incurred were approximately $1,137,000 and $363,000,
respectively.
Wibau-Astec will sell Astec asphalt plants either manufactured in the United
States or subcontracted in Europe. Wibau-Astec will continue to sell
Wibau-Astec parts and service a large customer base and will utilize
subcontractors as needed for parts and/or manufacturing components in Europe.
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE (VIII)
VALUATION AND QUALIFYING ACCOUNTS FOR
CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
ADDITIONS
CHARGES TO
BEGINNING COSTS & OTHER ENDING
DESCRIPTION BALANCE EXPENSES ADDITIONS DEDUCTIONS BALANCE
December 31, 1996:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $ 1,278,638 $ 157,183 $ 0 $ 168,882(1) $ 1,266,939
Reserve for
inventory $ 5,438,510 $ 1,231,828 $ 0 $ 1,796,416 $ 4,873,922
Other Reserves:
Product
warranty $ 2,470,775 $ 3,018,990 $ 0 $ 3,125,060(2) $ 2,364,705
December 31, 1995:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $ 1,684,242 $ 533,136 $ 20,000(3) $ 958,740 (1) $ 1,278,638
Reserve for
inventory $ 4,994,035 $ 1,196,876 $ 0 $ 752,401 $ 5,438,510
Other Reserves:
Product
warranty $ 3,470,703 $ 3,194,240 $ 0 $ 4,194,168(2) $ 2,470,775
Schedule (VIII) - Page 1
A-25
December 31, 1994:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $ 1,191,083 $ 362,089 $ 467,607 (3)467,607(3) $ 336,537 $1,684,242(1) $ 1,684,242
Reserve for
inventory $ 6,494,533 $3,621,218$ 3,621,218 $ 0 $5,121,716 $4,994,035$ 5,121,716 $ 4,994,035
Other Reserves:
Product
warranty $1,781,733 $2,616,565$ 1,781,733 $ 2,616,565 $ 0 $927,595$ 927,595 (2) $3,470,703
Reserve for
patent
damages $13,250,048$ 13,250,048 $ 620,290 $ 0 $ 13,870,338 $0
ADDITIONS
CHARGES TO
BEGINNING COSTS & OTHER ENDING
DESCRIPTION BALANCE EXPENSES ADDITIONS DEDUCTIONS BALANCE
December 31, 1993:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $ 1,060,588 $ 742,752 $ 21,609 $ 633,866 (1) $ 1,191,083
Reserve for
inventory $ 5,948,084 $ 2,952,918 $ 0 $ 2,406,469 $ 6,494,533
Other Reserves:
Product warranty $1,551,850 $ 2,689,441 $0 $ 2,459,558 (2) $ 1,781,733
Reserve for
patent damages 12,554,640 $ 695,408 $ 0 $ 0 13,250,048
ADDITIONS
CHARGES TO
BEGINNING COSTS & OTHER ENDING
DESCRIPTION BALANCE EXPENSES ADDITIONS DEDUCTIONS BALANCE
December 31, 1992:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $ 1,038,155 $ 719,117 $ 152,052 848,736 (1) $ 1,060,588
Reserve for
inventory $ 8,567,872 $ 2,937,459 $ 0 5,557,247 $ 5,948,084
Other Reserves:
Product warranty $ 1,273,824 $ 2,699,657 $ 0 $2,421,631 (2) $ 1,551,850
Reserve for
patent damages $ 11,912,403 $ 642,237 $ 0 0 $12,554,640
[FN]
(1) Uncollectible accounts written off, net of recoveries.
(2) Warranty costs charged to the reserve.
(3) Represents reserve balances of subsidiaries acquired in 1994.
the year.
Schedule (VIII) - Page 2
A-26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Astec Industries, Inc. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ASTEC INDUSTRIES, INC.
BY: /s/ J. Don Brock
BY: J. Don Brock Chairman of the Board and
President (Principal Executive Officer)
BY: /s/ Albert E. Guth
Albert E. Guth, SeniorF. McKamy Hall Vice President, SecretaryCorporate Controller, and Treasurer
(Principal Financial and Accounting Officer)
Date: March 2, 1995
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by a majority of
the Board of Directors of the Registrant on the dates indicated:
SIGNATURE TITLE DATE
Chairman of the Board March 2, 1995
J. Don Brock and President
Senior Vice President, March 2, 1995
Albert E. Guth Secretary, Treasurer
and Director
President - Astec, Inc. March 2, 1995
W. Norman Smith and Director
President - Telsmith, Inc. March 2, 1995
Robert G. Stafford and Director
President - Trencor, Inc. March 2, 1995
Jerry F. Gilbert and Director
SIGNATURE TITLE DATE
Director March 2, 1995
E. D. Sloan, Jr.
Director March 2, 1995
James R. Spear
Director March 2, 1995
Joseph Martin, Jr.
Director March __, 1995
George C. Dillon
Director March 2, 1995
G.W. Jones
Director March 2, 1995
Daniel K. Frierson
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, Astec Industries, Inc. has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASTEC INDUSTRIES, INC.
BY: /s/ J. Don Brock
J. Don Brock, Chairman of the Board and
President (Principal Executive Officer)
BY: /s/ Albert E. Guth
Albert E. Guth, Senior Vice President,
Secretary and Treasurer(Principal
Financial and Accounting Officer)
Date: March 2, 199514, 1997
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by a majority of the Board
of Directors of the Registrant on the dates indicated:
SIGNATURE TITLE DATE
/s/ J. Don Brock Chairman of the Board March 2, 199514, 1997
J. Don Brock and President
/s/ Albert E. Guth Senior Vice President, Astec Financial March 2, 199514, 1997
Albert E. Guth Secretary, TreasurerServices, Inc. and Director
/s/ W. Norman Smith President - Astec, Inc. March 2, 199514, 1997
W. Norman Smith and Director
/s/ Robert G. Stafford President - Telsmith, Inc. March 2, 199514, 1997
Robert G. Stafford and Director
/s/ Jerry F. Gilbert President - Trencor, Inc. March 2, 1995
Jerry F. Gilbert and Director
SIGNATURE TITLE DATE
/s/ E.D.E. D. Sloan, Jr. Director March 2, 1995
E.D.14, 1997
E. D. Sloan, Jr.
/s/ James R. SpearWilliam B. Sansom Director March 2, 1995
James R. Spear14, 1997
William B. Sansom
/s/ Joseph Martin, Jr.Ronald W. Dunmire Director March 2, 1995
Joseph Martin, Jr.14, 1997
Ronald W. Dunmire
/s/ George C. Dillon Director March ,199514, 1997
George C. Dillon
/s/ G.W. Jones Director March 2, 199514, 1997
G.W. Jones
/s/ Daniel K. FriersonFrierosn Director March 2, 199514, 1997
Daniel K. Frierson
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Astec Industries, Inc. has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ASTEC INDUSTRIES, INC.
Commission File No. 0-14714
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS FILED WITH ANNUAL REPORT
ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 19941996
ASTEC INDUSTRIES, INC.
4101 Jerome Avenue
Chattanooga, Tennessee 37407
ASTEC INDUSTRIES, INC.
FORM 10-K
INDEX TO EXHIBITS
Sequentially
Exhibit Number Description Numbered Page
Exhibit 2.2 Share Purchase and Transfer Agreement by and10.100 Demand Note dated March 18, 1996
between the Company and Gibat Ohl Ingenieurgesellschaft
fur Anlagentechnik mbH, dated as of October 5, 1994.the Company's
Chief Executive Officer,
Dr. J. Don Brock.
Exhibit 4.2 Indenture of Trust, dated April 1, 1994, by and
between Grapevine Industrial Development Corporation and
Bank One, Texas, NA, as Trustee.
Exhibit 10.80 Guarantee of Wibau-Astec Maschinenfabrik GmbH in
favor of Dresdner Bank Aktiengensellschaft, dated
as of December 22, 1993.
Exhibit 10.81 Letter of Guarantee of Wibau-Astec Maschinenfabrik GmbH
in favor of Berliner Hondels - und Frankfurter Bank,
dated as of December 22, 1993.
Exhibit 10.82 Guarantee of Wibau-Astec Maschinenfabrik GmbH in
favor of Bayerische Vereinsbank, dated as of
December 22, 1993.
Exhibit 10.8310.101 Loan Agreement dated
asDecember 5, 1996
between Astec Financial
Services, Inc. and The
CIT Group/Equipment
Financing, Inc. ("CIT").
Exhibit 10.102 Astec Industries, Inc. Guaranty dated
December 5, 1996 of April 1, 1994, between
Grapevine Industrial Development Corporation
and Trencor, Inc.
Exhibit 10.84 LetterLine of Credit
Agreement dated April 1,
1994, between The First National Bank of Chicago
and Trencor, Inc.
Exhibit 10.85 Guaranty Agreement, dated April 1, 1994, between Astec Industries,Financial
Services, Inc. and Bank One, Texas, NA, as
Trustee.
Exhibit 10.86 Astec Guaranty, dated April 29, 1994, of debit of Trencor,The
CIT Group/Equipment
Financing, Inc. in favor of The First National Bank of Chicago.
Exhibit 10.87 Credit Agreement, dated as of July 20, 1994, between
the Company and The First National Bank of Chicago.
Exhibit 10.88 Guarantee of Wibau-Astec Maschinenfabrik GmbH in
favor of Bayerische Vereinsbank, dated as of
January 16, 1995.
Exhibit 10.89 Waiver for December 31, 1994, dated February 24,
1995 with respect to the First National Bank of
Chicago Credit Agreement dated July 29, 1994.("CIT").
Exhibit 11 Statement Regarding Computationregarding
computation of Per Share Earnings.per
share earnings.
Exhibit 22 Subsidiaries of the Registrant.registrant.
Exhibit 23 Consent of Independent Auditors.independent auditors.
For a list of certain Exhibits not filed with this Report that are
incorporated by reference into this Report, see Item 14(a)(3).
EXHIBIT 10.100
Demand note dated March 18, 1996 between the Company
and the Company's Chief Executive Officer, Dr. J. Don Brock.
Exhibit 10.100
DEMAND NOTE
Chattanooga, Tennessee
$1,175,000
March 18, 1996
On demand the undersigned promises to pay to the order of J.
DON BROCK the sum of ONE MILLION ONE HUNDRED
SEVENTY-FIVE THOUSAND DOLLARS ($1,175,000.00),
value received, with interest at a rate equal to 0.25% less than
"prime rate" as charged from time to time by The First National
Bank of Chicago.
Accrued interest on the unpaid balance shall be paid on the first
day of each month until this note is paid in full.
If this note is placed in the hands of an attorney for collection,
by suit or otherwise, the undersigned will pay all costs of
collection and litigation, together with a reasonable attorney's fee.
The drawer and endorser hereof severally waive demand,
protest and notice of nonpayment. It is further agreed that the
right of recourse of the holder hereof against the endorser of this
note shall not be impaired by any renewal, extension,
modification or other indulgence which the holder may grant
with respect to the indebtedness above mentioned, or any part
thereof, although the same may be done without notice to or
consent of such endorser.
ASTEC INDUSTRIES, INC.
By: /s/ Albert E. Guth
Albert E. Guth
Senior Vice President
EXHIBIT 10.101
Loan Agreement dated December 5, 1996 between
Astec Financial Services, Inc. and
The CIT Group/Equipment Financing, Inc. ("CIT")
EXHIBIT 10.101
LOAN AGREEMENT
LOAN AGREEMENT (the "Agreement") dated December 5, 1996 between
Astec Financial Services, Inc. a corporation organized under the
laws of the state of Tennessee
(the "Company"), and The CIT Group/Equipment Financing, Inc. ("CIT").
1. LOAN ADVANCES
CIT agrees subject to the terms and conditions of this
Agreement, from time to time to make
loans to the Company on a revolving basis in such amounts as
may be mutually agreed upon, the
maximum amount of such loans outstanding at any one time not
to exceed one hundred percent
(100%) of the amounts validly owing on "Eligible Receivables"
(as hereinafter defined).
2. LOAN AMOUNT
The aggregate loans made under this Agreement shall, in no
event, exceed either the limitations
set forth under Paragraph 1 hereof or the sum of $15,000,000.00
at any one time outstanding,
unless CIT in its sole discretion shall agree to requests of the
Company for loans in excess of said amounts.
3. INTEREST
Interest shall be payable from the date hereof at the "Governing Rate",
payable monthly on the
average daily balance. The per annum rate is based on a year of 12
months of 30 days each computed on the basis of the average daily
unpaid balance of principal outstanding during the
preceding monthly period. As used herein, "monthly period" shall mean
the period commencing on the first day of a calendar month and ending
on the first day of the following calendar month,
except that the first monthly period shall be payable within five
days after your receipt of our statement therefore. As used herein
the "Prime Rate" shall mean the rate publicly announced by
The Chase Manhattan Bank from time to time as its Prime Rate.
The Prime Rate of The Chase Manhattan Bank is not intended to be the
lowest rate of interest charged by The Chase Manhattan
Bank to its borrowers. The "commercial paper rate" means the
average rate quoted by the Wall
Street Journal, or such other sources as CIT may determine for
30-day dealer commercial paper. The "Wall Street Journal Prime Rate"
shall mean the Prime Rate listed by The Wall Street Journal.
If more than one Prime Rate is listed in The Wall Street
Journal, then the highest rate shall apply.
The "Governing Rate" shall mean a rate equal to the highest of:
(i) the Prime Rate of The Chase
Manhattan Bank or (ii) The Wall Street Journal Prime Rate or
(iii) the commercial paper rate. In the event that the Governing
Rate on the first day of any monthly period shall be more or less than
the Governing Rate in effect on the date of this Agreement, the
rate of interest on the loan during
such monthly period shall be increased or decreased by a
percentage per annum corresponding to
the percentage per annum increase or decrease in the Governing
Rate, but in no event, however, shall the rate of interest be more
than that permitted by law.
4. LOAN ACCOUNTS; MONTHLY STATEMENTS
All loans made hereunder shall be disbursed by CIT to
Astec Financial Services, Inc., Chattanooga, Tn., and will be repayable
at CIT's account at the CIT-Industrial
Finance, File # 54224, Los Angeles, CA. 90074-4224, or such
other bank of which we may hereafter advise you in writing and the
Company promises to repay all such loans and
all other "Obligations" (as hereinafter defined) to CIT in the
manner set forth in this Agreement, without the necessity on CIT's
part of resorting to or having recourse to any
collateral. In addition to the monthly payment of interest by the
Company to CIT pursuant to the terms of Paragraph 3 hereof, the outstanding
principal amount of each
loan shall be repaid to CIT upon the earlier of (i) thirteen
months after the disbursement of its proceeds or (ii) the
Anniversary Date of this Agreement. Loans measured by Eligible
Receivables will be charged to one or more open accounts
maintained in the Company's name on CIT's books (the "Loan Accounts").
In the event CIT should for any reason
honor requests for advances in excess of the limitations set forth in
Paragraphs 1 and 2, such "overadvances" shall be made solely at CIT's
option upon such additional terms as
CIT shall determine, and shall be payable on demand. Each
month CIT will render to the
Company statements of the Loan Accounts, which the Company
hereby agrees shall be deemed to be accounts stated and correct and
acceptable to and binding on the Company
unless CIT shall receive a written statement of exceptions from the
Company within thirty (30) days after the monthly statements have been
rendered to the Company. The Company will provide to CIT a borrowing
base certificate for each loan request stating the
amount of the request, current levels of funded accounts and the
delinquencies thereunder.
In the event CIT should so request, the Company agrees to also
execute and deliver to CIT copies of such promissory notes of the
Company as CIT shall request in order to
evidence the loans, but unless and until CIT should so request,
the borrowing base certificate and the Loan Accounts (and the monthly
statements thereof rendered by CIT to the Company)
shall constitute the primary evidence of the loans made hereunder.
5. DEFINITIONS
(a) "Receivables" shall mean accounts, contract rights, chattel
paper, notes, drafts, rental receivables, conditional sale contracts,
security agreements, installment paper, installment sales,
revolving charge accounts, and other obligations for the
payment of money, including inter-
company accounts and notes receivable, and all documents,
contracts, invoices and instruments evidencing or constituting the same
and all security instruments and security agreements relating
thereto, which are created or acquired by the Company, all
property the sale or lease of which
gives rise or purports to give rise to Receivables, and all cash
and non-cash proceeds thereof, including any merchandise returned or
rejected by, or repossessed from, customers.
(b) "Eligible Receivables" shall mean Receivables created or
acquired by the Company in the
regular course of its business as presently conducted. In
general, no Receivable shall be deemed
eligible unless: such Receivable represents an existing, valid
and legally enforceable indebtedness
based upon an actual and bona fide sale and delivery or lease of
property or rendition of services
to the named obligor, which has been finally accepted by the
obligor and for which the obligor is
unconditionally liable to make payment in the amount stated in
each invoice, document or instrument evidencing, constituting or accompanying
the Receivable in accordance with the terms
thereof, without rights of rejection or return or offset, defense,
counterclaim or claim of discount or dedication; all statements made and
all unpaid balances appearing in the invoices, documents
and instruments representing or constituting the Receivables,
are true and correct and are in all respects what they purport to be, and all
signatures and endorsements that appear thereon are
genuine and all signatories and endorsers, if any, have full
capacity to contract, and the obligor
owing such Receivable is not affiliated with or employed by the
Company; absolute title to each Receivable, free and clear of any liens
and encumbrances or claims of others, including liens or
encumbrances or claims of ownership on the property the sale
or lease of which purports to give rise to such Receivable, is
vested absolutely in the Company and no other assignment of or
security interest or other interest in the Receivable in favor of
others is then in effect; the
transactions underlying or giving rise to any Receivable do not
violate any applicable state or
federal law or regulation and all documents relating to the
Receivables are legally sufficient under
such laws and regulations and are legally enforceable in
accordance with their terms; and any
contract under which any Receivable arises does not contain a
prohibition against assignment or
require the consent of or notice to the obligor with respect to
any assignment of monies arising thereunder.
(c) "Obligations" shall mean all loans and advances from
time to time made by CIT to the Company hereunder and to others at
the request of or for the account of or for the benefit of the
Company, all other indebtedness and obligations which may be
now or hereafter owing by the
Company to CIT under this Agreement or any other agreement
which may now or hereafter be
entered into by CIT with the Company, howsoever arising,
whether absolute or contingent, joint
or several, matured or unmatured, direct or indirect, primary or
secondary, including, but not limited to, CIT's interest or other charges
hereunder or under any other agreement between the
Company and CIT. The Company hereby agrees to pay on
demand all costs and fees CIT may
incur in the event of default by the Company hereunder, all
costs and expenses (including, all out-of-pocket expenses and attorneys'
fees actually paid by CIT) incurred by CIT, its employees or
agents in protecting, maintaining, preserving, enforcing or
foreclosing CIT's security interest in
any collateral, including all efforts made to enforce collection of
any Receivable, whether through
judicial proceedings or otherwise, or in defending or
prosecuting any action or proceeding arising
out of or relating to CIT's transactions with the Company, all of
which are hereby also included in
the definition of "Obligations" and which may be charged at
CIT's option to the Loan Accounts in
the event the same are not promptly paid after demand.
(d) "Anniversary Date" shall mean the date occurring two
years from the date hereof and the same date in every year thereafter.
6. GRANT OF SECURITY INTEREST; COLLATERAL
As security for the prompt payment in full of all present and
future Obligations, the Company
hereby grants to CIT a security interest in and hereby assigns
and pledges to CIT, its successors
and assigns, (which grant, assignment and pledge shall continue
until payment in full of all
Obligations, whether or not this Agreement shall have sooner
terminated) all right, title and
interest of the Company in and to the following (which, together
with any other security at any
time pledged, assigned or delivered by the Company to CIT or
received by CIT in connection
with any Obligations are herein sometimes collectively called
"Collateral"):
(a) All Receivables of the Company, whether or not
the same be Eligible Receivables
and whether or not specifically listed on any schedules,
assignments or exports furnished to CIT
from time to time, whether now existing or arising or created or
acquired at any time hereafter,
together with all rights to any and all sums due and to become
due on Receivables, all proceeds of
Receivables in whatever form, including cash, checks, notes,
drafts and other instruments for the
payment of money, and all right, title and interest in and to any
merchandise the sale or lease of which gives rise to, or purports to create any
Receivable or which secures any Receivable, all
property allocable to unshipped orders and all merchandise
returned by or reclaimed or
repossessed from customers, all rights of stoppage in transit,
replevin, repossession and
reclamation and all other rights of any unpaid vendor or lienor.
The continuing general assignment and pledge of and security interest in
Receivables contained herein shall include all
accounts, all documents, instruments, contracts, liens and
security instruments, all credit insurance
polices and other insurance and all guaranties relating to
Receivables, all books and records
evidencing, securing or relating to Receivables, all collateral,
deposits, dealer reserves, or other
security securing the obligations of any person under or relating
to Receivables, all credit balances
in favor of the Company on CIT's books, and all rights and
remedies of whatever kind or nature
the Company may hold or acquire for the purpose of securing or
enforcing Receivables, and all
general intangibles relating to or arising out of Receivables;
(b) All general intangibles of the Company, now existing or
hereafter arising or acquired, as such term is defined under the Uniform
Commercial Code.
7. COLLECTION OF RECEIVABLES
Until the Company's authority to do so is terminated by written
notice from CIT, which notice
CIT may give at any time after there has been a material adverse
change in the Company's business or manner of operation or at any time after
the occurrence of any "Event of Default" as specified below, the Company may
continue to adjust all claims and disputes with obligors on
Receivables and promptly collect and otherwise enforce all
amounts owing on Receivables. Notwithstanding anything in the previous
sentence to the contrary, all cash and non-cash proceeds
of such sales or leases and all collections, including
prepayments on Receivables, whether cash,
other Receivables, checks, notes or other evidence of payment,
and all documents and instruments
relating thereto, are to be held in trust as CIT's property, and
remitted to CIT in such manner and
with such frequency as CIT shall determine. The Company
shall notify CIT if any Receivable
includes any tax due to any governmental taxing authority. If a
Receivable includes a charge for
any tax payable to any governmental taxing authority, CIT is
authorized,in its discretion, to pay the amount thereof for the account of the
Company and to charge the appropriate Loan Account therefor.
8. LOAN ACCOUNTS; CASH PROCEEDS, CHECKS AND OTHER INSTRUMENTS
Any remittance received by the Company from customers shall be
presumed to relate to the
Collateral and shall be held in trust for and immediately
delivered to CIT as set forth herein. Cash
received with respect to the Collateral shall be credited to the
appropriate Loan Account as of the
same day such proceeds are received by CIT. Checks, drafts
and other instruments for the
payment of money shall be credited to the appropriate Loan
Account the day following the day
CIT's bank has made the proceeds of such instruments available
as of right based on the bank's
determination that the instrument has been finally paid. The
excess of collections over the amount
of Obligations owing to CIT hereunder may, at CIT's option, be
paid by CIT from time to time to
the Company, provided, however, that CIT may at any time in
its discretion retain and apply such
excess to any Obligations until all such Obligations have been
paid in full. CIT shall have the right
at all times to receive, receipt for, endorse, assign, deposit and
deliver, in CIT's name or in the
name of the Company, any and all checks, notes, drafts and
other instruments for the payment of
money constituting proceeds of or otherwise relating to the
Collateral. The Company hereby
authorizes CIT to affix, by facsimile signature or otherwise, the
general or special endorsement of
the Company, in such manner as CIT shall deem advisable, to
any such instrument in the event the
same has been delivered to CIT without appropriate
endorsement, and CIT and any bank in which
CIT may deposit any such instrument is hereby authorized to
consider such endorsement to be a
sufficient, valid and effective endorsement by the Company to
the same extent as though it were
manually executed by the duly authorized officer of the
Company, regardless of by whom or
under what circumstances or by what authority such facsimile
signature or other endorsement is
actually affixed, without duty of inquiry or responsibility as to such
matters, and the Company and each guarantor and endorser of the Company's
Obligations hereby waives demand, presentment,
protest and notice of protest or dishonor and all other notices of
every kind and nature with respect to any such instruments.
9. COMPANY BOOKS AND RECORDS
CIT shall have the right at any time and from time to time to request
from obligors indebted on
Receivables, in the name of the Company or in the name of
CIT's accountants, information
concerning the Receivables and the amounts owing thereon.
The Company agrees to maintain
books and records pertaining to the Collateral in such detail,
form and scope as CIT shall require,
and to promptly notify CIT of any changes of name or address
of the Company or of the legal
entity of the Company or of the corporate structure of the
Company and its subsidiaries or of the
location of the Collateral. All records, computer tapes, discs
and other data storage devices,
ledger sheets, correspondence, invoices, delivery receipts,
documents and instruments relating to
the Collateral shall, unless and until delivered to CIT, be kept
by the Company, without cost to
CIT, in appropriate containers and in safe places, and if CIT
should so request, shall bear suitable
legends identifying them as being under CIT's dominion and
control. CIT shall at all reasonable
times have full access to and the right to audit any and all of the
Company's books, computer tapes, discs and other data storage devices and
records, including, but not limited to, books and
records pertaining to the Collateral and including all files and
correspondence with creditors and customers, and to confirm and verify the
amounts owing on Receivables and the value and
collectibility of other Collateral and to do whatever else CIT
reasonably may deem necessary to protect its interest.
10. REPORTS; ASSIGNMENTS OF RECEIVABLES
In furtherance of the continuing assignment and security interest
herein contained, the Company
will execute and make available to CIT from time to time in
such form and manner and with such
frequency as may be required by CIT, solely for CIT's
convenience in maintaining a record of the
Collateral, such confirmatory assignments of Receivables,
designating, identifying or describing
the Collateral and copies of invoices to customers, agreements
of any kind with its customers,
copies of suppliers' invoices, evidence of shipment and delivery
and such further documentation
and information relating to the Collateral as CIT may require,
provided,however, that if the
Company should fail to execute and deliver such reports or
assignments, such failure shall not
affect, diminish, modify or otherwise limit CIT's security
interest in all present and future
Inventory and Receivables of the Company and the proceeds
thereof. The Company agrees to advise CIT promptly of any substantial change
relating to the type, quantity or quality of
Collateral or of any event which would have a material effect on
the value of the Collateral or on the security interested granted to CIT
therein.
1l. INSURANCE AND RISK OF LOSS
All risk of loss, damage to or destruction of the Collateral shall
at all times be on the Company.
The Company agrees to maintain in full force and effect at the
Company's expense, policies of
insurance covering all the Collateral with such insurance
companies, in such amounts and
covering such risks as are at all times satisfactory to CIT.
Copies of certificates are to be made
available to CIT on or prior to the date of disbursement of loans.
12. FINANCIAL STATEMENTS
The Company agrees to furnish to CIT such information
regarding the business affairs and
financial condition of the Company, its parent, and its
subsidiaries, if any, as CIT shall from time
to time reasonably request, including, but not limited to,
financial statements of the Company, its
parent and such subsidiaries in such scope and detail and
furnished with such frequency as CIT
shall determine and certified by such independent certified
public accountants as shall be
satisfactory to CIT, including, but not by way of limitation, the
financial statements referred to in
Paragraph 25 hereof.
13. TAXES; USE
The Company agrees that it will, and will cause each of the
Company's subsidiaries, if any, to pay
and discharge all taxes, assessments, licensing obligations and
governmental charges or levies
imposed on the income, profits, sale, business or properties of
the Company or its subsidiaries
prior to the date upon which penalties attach for non-payment
thereof, and promptly discharge
any liens, encumbrances or other claims which may be levied or
claimed against any of the
Collateral, provided that any such tax, assessment, charge or
levy need not be paid if the payment
thereof is being contested in good faith and by appropriate
proceedings and for which adequate
book reserves, determined in accordance with generally
accepted accounting practices, shall be
set aside, and if any such tax, assessment, charge or levy
lawfully imposed shall remain unpaid
after the date upon which a lien on any collateral arises or may
be imposed as a result of such non-
payment, or if any lien is claimed for any other reason against
any of the Collateral, which if
foreclosed would in CIT's opinion adversely affect the value of
CIT's security interest in any of
the Collateral, CIT may pay and discharge such taxes,
assessments, charges, levies and liens, and
the amount so paid by CIT shall be payable on demand and if
not paid promptly, will be charged
to the appropriate Loan Account and shall be secured by the
Collateral. The Company agrees to
comply and to cause its subsidiaries to comply with all laws and
all acts, rules, regulations and
orders of any legislative, administrative or judicial body or
official, applicable to the Collateral or
to the operation of the business of the Company or its
subsidiaries.
14. TITLE TO COLLATERAL; INSPECTION
The Company represents, warrants and agrees to take all steps and
observe such formalities as
CIT may request from time to time in order to create, perfect
and maintain in CIT's favor a valid
first lien upon and security interest in the Collateral, including
the filing or recording of any
financing statements or similar instruments which CIT deems
necessary or appropriate, and to
defend at its expense, Receivables and other Collateral from all
liens, security interests,
encumbrances, claims and demands of all other persons. The
Company hereby further agrees that
CIT may enter upon the Company's premises at any time and
from time to time to inspect the Collateral.
15. DEFAULT
The following shall constitute an "Event of Default" under this
Agreement: (a) the Company or
any of its subsidiaries fails to pay any Obligation as defined
herein within fifteen (15) days of the
due date thereof, by acceleration or otherwise; (b) there is a
breach in the performance of any of
the terms or provisions of this Agreement, as at any time
amended, or of any of the terms or
provisions of any other agreement between CIT and the
Company or any of its subsidiaries,
including, but not limited to, and any guaranty agreement under
which any Obligation is
guaranteed to CIT, or under any agreement between CIT and
any other party with respect to
CIT's transactions with the Company or with respect to any
Obligations or the Collateral therefor,
whether such agreements are now existing or are hereafter
entered into, provided that such breach
by the Company of any of the terms, provisions, warranties,
representations or covenants referred
to in this paragraph shall not be deemed an Event of Default
unless and until such breach shall
remain unremedied to CIT's satisfaction for a period of fifteen
(15) days from the date at such
breach, (c) any representation, covenant or warranty made by
the Company in connection with
this Agreement is breached; (d) any statement or data furnished
by or for the Company relating to
the Collateral or to the operations, financial condition or
business affairs of the Company, or its
subsidiaries, and any guarantor proves to be false in any
material respect; (e) the Company fails to
maintain any of the loans-to-collateral ratios specified in this
Agreement or in any amendment or
modification hereof; (f) the Company, any of its subsidiaries, or
any guarantor becomes insolvent
or unable to meet its debts as they mature, suspends operations
as presently conducted,
discontinues business as a going concern, or makes an
assignment for the benefit of creditors; (g)
a meeting of creditors is called by or for the Company, any of
its subsidiaries, or any guarantor;
(h) there is filed by or against the Company, any of its
subsidiaries or any guarantor a petition
under any of the provisions of the Bankruptcy Code, as at any
time amended, or any proceedings
are commenced by or against the Company, any of its
subsidiaries, or any guarantor under any
insolvency law, or a receiver or trustee is appointed to
administer the assets or affairs of the
Company, or any guarantor of its subsidiaries; (i) a judgment is
entered or an attachment is levied
against the assets of the Company, any of its subsidiaries or any
guarantor which, in the judgment
of CIT, will adversely affect the Company's ability to perform
this Agreement or impair the enforceability of CIT's security interest in the
Collateral; (j) CIT, in the good faith belief that the
prospect for payment or performance by the Company is
impaired, or deems itself or any of the
Collateral to be insecure; or (k) any indebtedness to others
owing by the Company, any of its
subsidiaries or any guarantor is accelerated because of a default
under any note or agreement relating thereto.
16. REMEDIES
Upon the occurrence of any Event of Default, all Obligations
shall, at CIT's option, immediately
become due and payable, anything in any note evidencing any
such Obligation or in this
Agreement or in any other agreement to the contrary
notwithstanding, without notice to the
Company, and CIT shall have in any jurisdiction where
enforcement hereof is sought, in addition
to all other rights and remedies which CIT may have under law
and at equity, the following rights
and remedies, all of which may be exercised with or without
further notice to the Company: (a)
to notify any and all obligors on Receivables that the same have
been assigned to CIT and that all
payments thereon are to be made directly to CIT; (b) to settle,
compromise, or release, on terms
acceptable to CIT, in whole or in part, any amounts owing on
Receivables; (c) to enforce payment
and prosecute any action or proceeding with respect to any and
all Receivables, to extend the time
of payment, make allowances and adjustments and to issue
credits in CIT's name or in the name of
the Company; (d) to foreclose the liens and security interests
created under this Agreement or
under any other agreement relating to the Collateral by any
available judicial procedure or without
judicial process, to enter any premises where any of the
Collateral may be located for the purpose
of taking possession or removing the same; and (e) to sell,
assign, lease or otherwise dispose of
the Collateral or any part thereof, either at public or private sale
or at any broker's board, in lots
or in bulk, for cash, on credit or otherwise, with or without
representations or warranties, and upon such terms as shall be acceptable to
CIT, all at CIT's sole option
and as CIT in its sole discretion may deem advisable, and CIT may bid or become
a purchaser at any such sale if public,
free from any right of redemption which is hereby expressly
waived by the Company, and CIT
shall have the right at its option to apply or be credited with the
amount of all or any part of the
Obligations owing to CIT against the purchase price bid by CIT
at any such sale. The net cash
proceeds resulting from the collection, liquidation, sale, lease or
other disposition of the Collateral
shall be applied first, to the expenses (including all attorneys' fees) of
retaking, holding, storing, processing and preparing for sale, selling,
collecting, liquidating and the like, and then to the
satisfaction of all Obligations, application as to particular
Obligations or against principal or
interest to be in CIT's absolute discretion. The Company shall
be liable to CIT and shall pay to
CIT on demand any deficiency which may remain after such
sale, disposition, collection or
liquidation of the Collateral, and CIT in turn agrees to remit to
the Company any surplus
remaining after all Obligations have been paid in full. If any of
the Collateral shall require
repairing, maintenance, preparation, or the like, or is in process
or other unfinished state, CIT shall have the right, but shall not be
obligated, to do such repairing,
maintenance, preparation,
processing or completion of manufacturing for the purpose of
putting the same in such saleable form as CIT shall deem appropriate, but CIT
shall have the right to sell or dispose of such
Collateral without such processing. The Company will, at CIT's
request, assemble the Collateral
and make it available to CIT at places which CIT may select,
whether at the premises of the
Company or elsewhere, and will make available to CIT all
premises and facilities of the Company
for the purpose of CIT's taking possession of the Collateral or of
removing or putting the Collateral in saleable form. In the event any goods
called for in any sales order, contract, invoice
or other instrument or agreement evidencing or purporting to
give rise to any Receivable included
in any assignment submitted to CIT for collateral purposes shall
not have been delivered or shall
be claimed to be defective by any customer, CIT shall have the
right in its discretion to use and
deliver to such customer any goods of the Company to fulfill
such order, contract or the like so as
to make good any such Receivable. The enumeration of CIT's
rights and remedies set forth in this
Agreement is not intended to be exhaustive and the exercise by
CIT of any right or remedy shall
not preclude the exercise of any other rights or remedies, all of
which shall be cumulative and
shall be in addition to any other rights or remedy given
hereunder or under any other agreement
between the parties or which may now or hereafter exist in law
or at equity or by suit or
otherwise. To facilitate the exercise by CIT of the rights and
remedies set forth in this Paragraph,
the Company hereby constitutes CIT or its agents, or any other
person whom CIT may designate,
as attorney-in-fact for the Company, at the Company's own cost
and expense, to exercise all or
any of the following powers, which being coupled with an
interest, shall be irrevocable, shall
continue until all Obligations have been paid in full and shall be in
addition to any other rights and remedies that CIT may have: (i) to
remove from any premises where the same may be located,
any and all documents, instruments, files and records, and any
receptacles and cabinets containing the same, relating to the Collateral,
and CIT may at the Company's cost and expense, use such of
the personnel, supplies and space of the Company at its places
of business as may be necessary to properly administer and control the
Collateral or the handling of collections and realizations
thereon; (ii) to receive, open and dispose of all mail addressed
to the Company and to notify
postal authorities to change the address for delivery thereof to such
address as CIT may designate; and (iii) to take or bring, in CIT's name or in
the name of the Company, all steps,
actions, suits or proceedings deemed by CIT necessary or
desirable to effect the collection of or
to realize upon the Collateral. CIT shall not, under any
circumstances or in any event whatsoever,
have any liability for any error or omission or delay of any kind
occurring in the liquidation of the Collateral including the settlement,
collection or payment of any Receivable or any instrument
received in payment thereof, or for any damage resulting therefrom.
17. CROSS SECURITY
It is understood and agreed that all of the collateral which CIT may at
any time acquire from the Company or from any other source in connection with
the Obligations of the Company to CIT,
shall constitute collateral for each and every Obligation, without
apportionment or designation as
to particular Obligations, and that all Obligations, howsoever
and whensoever incurred, shall be
secured by all collateral howsoever and whensoever acquired,
and that CIT shall have the right, in
its sole discretion, to determine the order in which CIT's rights
in or remedies against any
collateral are to be exercised and which type of collateral or
which portions of collateral are to be
proceeded against and the order of application of proceeds of
collateral as against particular
Obligations. Notwithstanding anything which may be
contained in any of the Receivables
assigned to CIT hereunder, upon execution of this Agreement the
Company agrees not to make
any claims, or take any action against the property covered by
the Receivables or to attempt to accelerate any of the Obligations due
thereunder.
18. EFFECT OF WAIVER
No delay on the part of CIT in exercising any right, power or
privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other
or further exercise thereof or the exercise of any other right,
power or privilege or shall be
construed to be a waiver of any event of default. No course of
dealing between the Company and
CIT or its agents or employees shall be effective to change,
modify or discharge any provision of
this Agreement or to constitute a waiver of any default.
19. SEVERABILITY
Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
20. CONDITIONS PRECEDENT
CIT's obligation to make any loan hereunder at any time is
subject to compliance in full by the
Company with all of the terms and provisions of this
Agreement, as at any time amended, and to
the further condition that at the time of the proposed making of
any such loan there shall have
been no material adverse change in the financial condition or
business of the Company, its
subsidiaries, and any guarantor and that no event of default, as
defined herein and no event which
with the lapse of time or the notice and lapse of time specified
for the purpose of constituting such
an event of default has occurred and is continuing at the time of
such proposed loan.
21. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, covenants and warrants to CIT that
the Company is duly organized,
validly existing and in good standing under the laws of the state
of incorporation mentioned in the introductory Paragraph of this Agreement, and
that the Company and its subsidiaries are duly
qualified as foreign corporations to do business in every other
state where the nature of the business of the Company or its subsidiaries
requires such qualification, and that the Company and
its subsidiaries are duly licensed to transact business under all
applicable laws; that the Company
and its subsidiaries have good and marketable title to all
properties and assets, whether real or
personal, shown on the latest balance sheets of the Company
and its subsidiaries furnished to CIT
before the execution of this Agreement, subject to no mortgage,
pledge, lien or encumbrance
except as are shown on said balance sheets and except for
current taxes not now in default, and
since the date of the latest of such balance sheets there has been
no material adverse change in the
condition, financial or otherwise, of the Company or its
subsidiaries from that shown on said
balance sheets; that the Company and its subsidiaries have no
liabilities or obligations of any nature, whether absolute, accrued, contingent
or otherwise, due or to become due, except for
taxes not now in default and except for operating expenses in
the ordinary course of business,
other than as reflected or reserved against in said balance sheets,
and the Company and its subsidiaries have no liability for federal income or
excess profits taxes or other than as shown on
said balance sheets and except for taxes relating to operations
since the date of said balance sheets
and no federal tax deficiency assessment has been made or
threatened against the Company or any
of its subsidiaries and there is no pending claim of deficiency or
recommendation of the assessment of any deficiency against the Company or any
of its subsidiaries; that the execution
and delivery of this Agreement and the full performance thereof
by the Company and the granting
of security to CIT as contemplated hereunder do not and will
not violate any provisions of any of
the Company's Certificate of Incorporation, Charter or By-Laws
or any indenture or mortgage or
other agreement to which the Company is a party or is bound;
and that all collateral subject to the
security interest in favor of CIT pursuant to this Agreement at
the time of execution hereof is
owned by the Company free and clear of all liens, encumbrances and
claims in favor of others.
22. EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective only upon the written
acceptance hereof by CIT.
23. ENTIRE AGREEMENT; SUCCESSORS
When so accepted, this Agreement shall supersede all previous
verbal or written agreements,
commitments or understandings relating to CIT's loans to the
Company and shall be binding on
and inure to the benefit of the respective successors and assigns
of the Company and of CIT.
24. RECORDING FEES
CIT shall issue a statement to the Company indicating the cost of
recording taxes and the Company shall pay the statement within 20 days therein.
25. ASSIGNMENT
The Company may not assign this Agreement or its rights
hereunder without the prior written consent of CIT.
26. ADDITIONAL AFFIRMATIVE COVENANTS OF THE COMPANY
As long as any Obligations remain outstanding hereunder, the
Company, in addition to the
covenants made elsewhere in this Agreement, hereby covenants
that, unless CIT shall otherwise
consent in writing, (i) it shall maintain at each fiscal year end a
tangible net worth of at least
$3,500,000.00 for the first year of this Agreement, and (ii)
Astec Industries, Inc. (the "Guarantor") shall:
(a) Net Worth: Maintain at each fiscal year end a
tangible net worth of at least $50,000,000.00
(b) Current Ratio: Maintain at each fiscal year end a
ratio of current assets to current liabilities of at least 1.5 to 1.
(c) Additional Reporting Requirements: Furnish CIT:
(i) Within one hundred twenty (120) days after the end
of each fiscal year of the Guarantor a balance sheet and statements of income
and surplus, together with
supporting schedules, all certified by independent certified
public accountants of recognized standing selected by the Guarantor and
acceptable to CIT showing the
financial condition of the Guarantor at the close of such year
and the results of operations of the Guarantor during such year, and prepared
in accordance with generally accepted accounting principles and practices
consistently applied;
(ii) Within forty-five (45) days after the end of
each quarter, similar financial
statements similar to those referred to in subparagraph (i) above, each set
of respective statements, all unaudited, but certified by the
principal financial officer
of the Company, such balance sheets to be as of the end of such
month and such statements of income and surplus to be for the period from the
beginning of the fiscal year to the end of such month, in each case subject to
audit and year-end
adjustments, and prepared in accordance with generally
accepted accounting principles and practices consistently applied;
(iii) Promptly, from time to time, such other
information regarding the operations, business affairs and financial condition
of the Company as CIT may reasonably request including, but not limited to, all
business plans prepared by, or at the request of, the Company, annually during
the term of this Agreement.
(d) Dividends: The Company will not declare or pay any
dividend (other than a
dividend payable in stock of the Company) or authorize or make
any other distribution on any stock of the Company, whether now or
hereafter outstanding or make any payment on account of the purchase,
acquisition, redemption or other
retirement of any shares of such stock which would exceed in
any fiscal year fifty
percent (50%) of the after tax net profit of the Company for
such fiscal year.
(e) Debt to Worth Ratio: The ratio of the Company's total
liabilities to tangible net worth at each fiscal year end shall not
exceed .9 to 1.
(f) Changes in Company: The Company will not, without
CIT's prior written
substantial portion of its assets; or (c) change its name or the
form of organization of its business; or (d) sell, cause to have sold or
permit or suffer the sale of any shares of consent, (a) liquidate or dissolve;
or (b) sell or otherwise dispose of all or any voting stock of the Company
to any person or entity than the Guarantor.
(g) Minimum Fixed Charge Coverage Ratio: The Company's
fiscal year end ratio of pre-tax income excluding non-recurring gains and
losses divided by the sum of: (i) interest expense, plus, (ii) amortization of
debt discount and related
expenses, plus (iii) payments of principal and indebtedness shall
be at least 2.5 to 1.
27. NOTICES
Any notice or request required or permitted to be given under this
Agreement shall be sufficient if
in writing and sent by hand or by Certified Mail, in either case
return receipt requested, to the parties at the following addresses:
The CIT Group/Equipment Financing, Inc. Astec Financial Services, Inc.
1620 West Fountainhead Parkway 6400 Lee Highway Suite 620
Suite 107
Tempe, AZ 85282 Chattanooga, TN. 37421
28. TERMINATION
Except as otherwise permitted herein, the Company or CIT may
terminate this Agreement only as
of the date two years from the date hereof or any subsequent
Anniversary Date and then only by
giving the other at least sixty (60) days prior written notice of
termination. Notwithstanding the
foregoing CIT may terminate this Agreement immediately upon
the occurrence of an Event of
Default. This Agreement, unless terminated as herein provided,
shall automatically continue from
Anniversary Date to Anniversary Date. All Obligations shall
become due and payable as of any termination hereunder and, pending a final
accounting, may withhold any balances in the
Company's account (unless supplied with an indemnity
satisfactory to CIT) to cover all of the
Company's Obligations, whether absolute or contingent. All of
CIT's rights, liens and security
interests shall continue after any termination until all
Obligations have been paid and satisfied in full.
29. GOVERNING LAW
This Agreement shall be governed by, and construed in
accordance with, the laws applicable to
contracts made or performed in the State of Tennessee, without
giving effect to the principles of conflicts of laws.
IN WITNESS WHEREOF, the Company and CIT have caused this
Agreement to be executed by their respective officers duly authorized thereto.
THE CIT GROUP/EQUIPMENT SERVICES, INC.
FINANCING, INC.
By: CIT Group
Name: CIT Group
ASTEC FINANCIAL
By: /S/ Albert E. Guth
Name: Albert E. Guth
Title: President, Astec Financial Services, Inc.
EXHIBIT 10.102
Astec Industries, Inc. Guaranty dated December 5, 1996
of Line-of-Credit Agreement
between Astec Financial Services, Inc. and The CIT
Group/Equipment Financing, Inc.
Exhibit 10.102
Guaranty
To: The CIT Group/Equipment Financing, Inc.
P.O. Box 27248
Tempe, AZ 85285-7248
Each of us severally requests you to extend credit to or purchase
security agreements, leases, notes, accounts and/or other obligations
(herein generally termed "paper") of or from or otherwise to do
business with Astec Financial Services, Inc., Chattanooga, TN
hereinafter called the "Company", and to induce you so to do and in
considerations thereof and of benefits to accrue to each of us
therefrom, each of us, as a primary obligor, jointly and severally and
unconditionally guarantees to you that the Company will fully and
promptly pay and perform all its present and future obligations to you,
whether direct or indirect, joint or several, absolute or contingent,
secured or unsecured, matured or unmatured and whether originally
contracted with you or otherwise acquired by you, irrespective of any
invalidity or unenforceability of any such obligation or the insufficiency,
invalidity or unenforceability of any security therefor; and agrees
without your first having to proceed against the Company or to
liquidate paper or any security therefor, to pay on demand all sums
due and to become due to you from the Company and all losses,
costs, attorneys' fees or expenses which may be suffered by you by
reason of the Company's default or default of any of the undersigned
hereunder; and agrees to be bound by and on demand to pay any
deficiency established by a sale of paper and/or security held, with or
without notice to us. This guaranty is an unconditional guarantee of
payment and performance. No guarantor shall be released or
discharged, either in whole or in part, by your failure or delay to
perfect or continue the perfection of any security interest in any
property which secures the obligations of the Company or any of us to
you, or to protect the property covered by such security interest.
No termination hereof shall be effected by the death of any or all of us.
No termination shall be effective except b notice sent to you by
certified mail return receipt requested naming a termination date
effective not less and 90 days after the receipt of such notice by you;
or effective as to any of us who has not given such notice; or affect
any transaction effected prior to the effective date of termination.
Each of us waives: notice of acceptance hereof; presentment,
demand, protest and notice of nonpayment of protest as to any note
or obligation signed, accepted, endorsed or assigned to you by the
Company; any and all rights of sub rogation, reimbursement,
indemnity, exoneration, contribution or any other claim which any of
us may now or hereafter have against the Company or any other
person directly or contingently liable for the obligations guaranteed
hereunder, or against or with respect to the Company's property
(including, without limitation, property collateralizing its obligations to
you), arising from the existence or performance of these guaranty; all
exemptions and homestead laws and any other demands and notices
required by law; all rights and defenses arising out of ( i ) an election
of remedies by you even though that election of remedies may have
destroyed rights of subrogation and reimbursement against the
Company by operation of law or otherwise, ( ii ) protections afforded to
the Company pursuant to antideficiency or similar laws limiting or
discharging the Company's obligations to you, ( iii ) the invalidity or
unenforceability of this guaranty, (iv) the failure to notify any of us of
the disposition of any property securing the obligations of the
Company, (v) the commercial reasonableness of such disposition or
the impairment, however caused, of the value of such property, and
(vi) any duty on your part (should such duty exist) of the Company or
its affiliates or property, whether now or hereafter known by you.
You may at any time and from time to time, without our consent,
without notice to us and without affecting or impairing the obligation of
any of us hereunder, do any of the following:
(a) renew, extend (including extensions beyond the original term of
the respective item of paper), modify (including changes in
interest rates), release or discharge any obligations of the
Company, of its customers, of co-guarantors (whether hereunder
or under a separate instrument) or of any other party at any time
directly or contingently liable for the payment of any of said
obligations;
(b) accept partial payments of said obligations;
(c) accept new or additional documents, instruments or agreements
relating to or in substitution of said obligations;
(d) settle, release ( by operation of law or otherwise), compound,
compromise, collect or liquidate any of said obligations and the
security therefor in any manner;
(e) consent to the transfer or return of the security, take and hold
additional security or guaranties for said obligations;
(f) amend, exchange, release or waive any security or guaranty ; or
(g) bid and purchase at any sale of paper or security and apply any
proceeds or security, and direct the order and manner or sale.
If a claim is made upon you at any time for repayment or recovery of
any amount(s) or other value received by you, form any source, in
payment of or on account of any of the obligations of the Company
guaranteed hereunder and you repay or otherwise become liable for
all or any part of such claim by reason of;
(a) any judgment, decree or order of any court or administrative body
having competent jurisdiction; or
(b) any settlement or compromise of any such claim,
we shall remain jointly and severally liable to you hereunder for the
amount so repaid r for which you are otherwise liable to the same
extent as if such amount(s) had never been received by you,
notwithstanding any termination hereof or the cancellation of any note
or other agreement evidencing any of the obligations of the Company.
This guaranty shall bind our respective heirs, administrators,
representatives, successors, and assigns, and shall incur to your
successors and assigns, including, but no limited to, any party to
whom you may assign any item or items of paper, we hereby waiving
notice of any such assignment. All of your rights are cumulative and
not alternative.
By execution of this guaranty each guarantor hereunder agrees to
waive all rights to trial by jury in any action, proceeding, or
counterclaim or any matter whatsoever arising out of, in connection
with, or related to this guaranty.
Executed December 5, 1996.
Guarantors
Astec Industries, Inc.
Chattanooga TN 37407
By: J. Don Brock, President
Corporate Seal
Attest: Sam M. Sprouse
EXHIBIT 11
Statement Regarding Computation of Per Share Earnings
ASTEC INDUSTRIES, INC.
EXHIBIT (11) - COMPUTATIONS OF EARNINGS PER SHARE
(In Thousands)
12-31-96 12-31-95 12-31-94
Shares for Earnings Per
Share Computations
Primary:
Weighted average outstanding
during year 10,047 10,072 9,844
Common Stock equivalent for
stock options & warrants 111 124 141
TOTAL 10,158 10,196 9,985
Fully Diluted:
Weighted average outstanding
during year 10,047 10,072 9,844
Common Stock equivalent for
stock options & warrants 112 125 146
TOTAL 10,159 10,197 9,990
Earnings Applicable to Common Stock:
Income from continuing
operations $ 4,345 $4,560 $23,426
Net Income $ 4,345 $4,560 $23,436
Earnings Per Common Share (Based on Weighted Average Number
of Common and Uncommon Equivalent Shares Outstanding):
Income from continuing operations $ .43 $ .45 $ 2.38
Net Income $ .43 $ .45 $ 2.38
Additional Computations of EPS:
Fully Diluted:
Income from continuing
operations $ .43 $ .45 $ 2.38
Net Income $ .43 $ .45 $ 2.38
EXHIBIT 22
Subsidiaries of the Registrant
LIST OF SUBSIDIARIES
Jurisdiction of
Name Owned Incorporation
Astec Financial Services, Inc. 100 Tennessee
Astec, Inc. 100 Tennessee
Astec Transportation, Inc. 100 Tennessee
CEI Enterprises, Inc. 100 Tennessee
Heatec, Inc. 100 Tennessee
Roadtec, Inc. 100 Tennessee
Telsmith, Inc. 100 Delaware
Trencor, Inc. 100 Texas
Production Engineered
Products, Inc. 100 Nevada
Pavement Technology, Inc. 50 Georgia
EXHIBIT 23
Consent of Independent Auditors
CONSENT OF INDEPENDENT AUDITORS
We consent to the
incorporation by reference in the
Registration Statements (Form S-8
No. 33-14738 and 0-14714)
pertaining to the Astec Industries,
Inc. 1986 and 1992 Stock Option
Plans of our report dated February
21, 1997, with respect to the
consolidated financial statements
and schedule of Astec Industries, Inc.
included in the Annual Report (Form
10-K) for the year ended December
31, 1996.
/s/ Ernst & Young, LLP
ERNST & YOUNG LLP
Chattanooga, Tennessee
March 14, 1997