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, 19941997
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$148,371,903 based upon the closing sales price
inreported by the NASDAQ National Market System on March 10, 1995,9, 1998, 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, 19959, 1998
Common Stock, par value $.20 10,001,858- 9,360,580 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, 199523, 1998
ASTEC INDUSTRIES, INC.
19941997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. BusinessBusiness............................................ 1
Item 2. PropertiesProperties.......................................... 8
Item 3. Legal ProceedingsProceedings................................... 9
Item 4. Submission of Matters to a Vote of Security HoldersHolders. 9
Executive Officers of the RegistrantRegistrant.......................... 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder MattersMatters............................ 10
Item 6. Selected Financial DataData............................. 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of OperationsOperations............ 11
Item 8. Financial Statements and Supplementary DataData......... 11
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial DisclosureDisclosure............ 11
PART III
Item 10. Directors and Executive Officers of the RegistrantRegistrant.. 11
Item 11. Executive CompensationCompensation.............................. 11
Item 12. Security Ownership of Certain Beneficial Owners
and ManagementManagement................................. 12
Item 13. Certain Relationships and Related TransactionsTransactions...... 12
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K8-K............................ 12
Appendix A
SIGNATURESA.................................................... A-1
SIGNATURES....................................................
-iii-
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, markets, and marketsfinances 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 100101 United States and 57 foreign patents,
has 47 patent applications pending, 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 andeight manufacturing 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; (iii) CEI Enterprises, Inc., which manufactures
heat transfer equipment and recycled rubber blending systems for the hot-
mix asphalt industry; (iv) Telsmith, Inc., which manufactures aggregate
processing equipment for the production and classification of sand,
gravel, and crushed stone for road and other construction applications;
(v) Kolberg-Pioneer, Inc., which manufactures aggregate processing
equipment for the crushed stone, manufactured sand, recycle, top soil and
remediation markets; (vi) Production Engineered Products, Inc., which
designs, manufactures and markets high-frequency vibrating screens for
sand and gravel and asphalt operations; (vii) Roadtec, Inc., which
manufactures milling machines used to recycle asphalt and concrete,
asphalt paving equipment and material transfer vehicles; (v)and (viii)
Trencor, Inc., which manufactures chain and wheel trenching equipment and
excavating equipmentequipment.
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's subsidiaries and log loaders; (vi) Wibau-Astec
Maschinenfabrik GmbH,their customers in arranging financing
for the Company's equipment. AFS provides loans, operating leases, floor
plans for dealers, fleet rental plans, and other financing plans to meet
the needs of the industry.
1
In 1996, the Company became a 50% shareholder of 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. PTI , which
manufactures asphalt pavement analyzers, vibratory compactors and sells batch asphalt plants,
partsother
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 controlsuniversities as a new standard for measuring rutting,
fatigue, and water susceptibility in Europehot-mix asphalt. The pavement
technology product line added 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
costlow-cost producer in each of
its product lines for any given product while continuing to develop
innovative new products and provide first class service for its
customers. Management believes that this strategy will provide the Company with a
competitive advantageis the technological
innovator in the marketplace and positionmarkets in which it operates. Management believes that
the Company is 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
19941997 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)(iii) aggregates
processing equipment; (iv) mobile construction equipment, including
asphalt pavers, milling machines and material transfer vehicles and other
auxiliary 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,
1994 1993 1992
(in1997 1996 1995
(In thousands)
Asphalt plants and components $100,514 $88,116 $81,438$117,849 $93,786 $110,321
Aggregate processing equipment 38,823 40,108 33,29855,362 52,739 46,586
Mobile construction equipment 49,704 37,845 29,706
Trenching and excavating equipment 25,867 16,535 14,803
Mobile construction equipment 30,291 22,120 14,660
26,803 23,543 21,110
Financial information in connection with the Company's international
sales is included in Note 113 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"Six PackTM 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, an improved version of the Six PackTM
plant was developed, making it considerably more portable and self-
erecting. This design eliminated the use of cranes for disassembly or
erection. The enhanced version of the Six PackTM, known as the Turbo Six
PackTM, is a highly portable plant which is especially useful in less
populated areas where plants must be moved from job to job.
The components in the Company'sAstec'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 theits existing Astec
products are suited for blending, vaporizing, drying and incinerating
contaminated products. As a result, the Astec division 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. A new
effective and efficient paver has been introduced which must be
used with the material transfer vehicle. Other additional new
paver models have also been introduced in 1994.
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
asphalt mix. By permitting continuous paving, the "Shuttle
Buggy" allows the asphalt paver to produce a smoother road
surface. Certain states are now requiring the use of the "Shuttle
Buggy" 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 models were introduced in 1994
to meet contractor needs.
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.
AggregatesAggregate 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 asservices in the worldwide
marketplace.
Kolberg-Pioneer, Inc. ("K-P") designs, manufactures and supports a
complete systems,
incorporating microprocessor based automated controlsline of aggregate processing equipment for the sand and gravel,
mining, quarry and concrete recycle markets. The product range includes
feeders, crushers, classifying tanks, material washers, conveyors,
portable screening plants and pugmills.
Rock Crushers. Kolberg-Pioneer rock crushers are used by mining,
quarry and sand and gravel producers to crush oversized aggregate to
salable size. Types of crushers include compression (jaw, cone and roll)
and impact (vertical shaft and horizontal shaft). Models are available
for primary, secondary, tertiary and quaternary applications.
Feeders. Feeders are used to transfer aggregate into crushing
operations. Crusher efficiency is increased as fines bypass the crusher.
Styles include vibrating grizzly, apron, pan and belt feeders.
Sand Classifying Tanks. These tanks are used to clean, segregate
and re-blend natural or manufactured sand to meet the fineness modulus
(FM) and sand equivalent (SE) specifications for concrete, mason and
other sand products.
Washers and Blademills. These provide aggressive scrubbing action
to remove unwanted clays, silts and foreign materials from contaminated
aggregate deposits.
Conveyors. Kolberg-Pioneer manufactures conveyors designed to move
or store aggregate and other bulk materials, typically in a radial cone-
shaped stockpile. Models offered include road portable, stationary, and
overland styles.
Portable Recycling Plants. Portable recycling plants are used to
reclaim aggregate from concrete, construction and demolition debris and
asphalt, while separating metal contaminants.
Portable Screening Plants. These are used by aggregate and top soil
producers to separate materials by size. They adapt easily to multiple
applications by changing the screen cloth. An optional hammermill
shredder conditions dry material for more efficient operationscreening. The
optional wet deck, when used with a fine material washer, replicates a
low-cost washing plant.
Pugmills. Kolberg-Pioneer pugmills are highly efficient homogenous
mixing chambers consisting of its equipment.twin shafts with timed, overlapping paddles
used for soil remediation, cement-treated base and cold-mix asphalt.
Pugmills are typically combined with either a bulk storage silo for
introducing dry additives or a pump for liquids.
Production Engineered Products, Inc. ("PEP") 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 into portable
crushing and screening plants serving the aggregate and industrial
markets.
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-
mix asphalt to the road surface. Roadtec pavers have been designed to
minimize maintenance costs while exceeding road surface smoothness
requirements. Roadtec manufactures one paver model which must be used
with a material transfer vehicle described below.
Material Transfer Vehicles. The patented Shuttle BuggyR 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 BuggyR allows the asphalt paver to produce
a smoother road surface. As a result of the pavement smoothness achieved
with this machine, certain states are now requiring the use of the
Shuttle BuggyR on their jobs. Recent studies using infrared technology
have revealed problems caused by differential cooling of the hot-mix
during hauling. The Shuttle BuggyR remixes the material to a uniform
temperature, eliminating the problem.
Milling Machines. Roadtec milling machines are designed to rmove
old asphalt from the road surface beforee new asphalt mix is applied.
They are manufactured with a simplified control system, wide conveyors,
direct drives and a wide range o horsepower and cutting capabilities to
provide versatility in product application. Additional upgrades and
options are available to enhance the products and their capabilities.
Trenching and Excavating Equipment
Trencor, Inc. designs, engineers, manufactures and markets chain and
wheel trenching equipment, canal excavators, rock saws and road miners and log 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.miners.
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 thirtythirty-
five 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.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.
Rock Saws. Trencor manufactures a rock saw which is utilized for
laying water and gas lines and fiber opticsoptic cable, constructing highway
drainage systems and for other applications.
Road Miners.Roadminers. Trencor manufactures four "Road Miner"Road MinerTM 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 MinerMinerTM has applications in the road construction industry and in
mining and aggregatesaggregate processing operations.
Log Loaders.Material Processors. Trencor also manufactures several different
models of log loaders. Its products include mobile/truck mounted
models,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 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.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 19941997 took place at sevennine 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 twoa 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%38 percent of Heatec's sales volume during 1994.1997. 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 1994,1997, approximately 200419 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, businessaggregate processing,
paving, milling, and other industry segmentsrecycle markets 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. In
1997, approximately 331 participants attended seminars at the Company's
state-of-the-art training center.
In addition to the seminars, the Company publishedpublishes a number of detailed technical
bulletins coveringdetailing various technological and business issues relating to
the asphalt industry.
The Company sponsors Paving Professionals workshops at its training
center for customers or potential customers of Roadtec, Inc. In 1997,
240 attended these classroom sessions. Actual equipment application
experience was provided at the Roadtec facility. Service training
seminars were also held at the Roadtec facility for 320 customer service
representatives.
In 1997, Telsmith had technical seminars for 85 English-speaking
customer representatives and another multi-lingual seminar with 40
attendees.
Patents and Trademarks
The Company seeks to obtain patents to protect the novel features of
its products. The Company and its subsidiaries hold 67101 United States
patents and 3957 foreign patents. There are 2447 United States and 16 foreign
patent applications pending.
The Company and its subsidiaries have approximately 4037 trademarks
registered in the United States, including logos for Astec, Telsmith,
Roadtec and Trencor, and the names ASTEC, TELSMITH, HEATEC, LOG HOG, ROADTEC,
TRENCOR and TRENCOR.
ManyKOLBERG. Ten of these trademarks are also registered in
foreign countries, including Canada, Great Britain, Mexico, AustraliaNew Zealand
and Japan.Indonesia. The Company has five trademark applications pending.
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, 1994,1997, the Company and its
subsidiaries had 143171 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, 1994,1997, the Company had a backlog for delivery of
products at certain dates in the future of approximately $50,500,000.$61,387,000. At
December 31, 19931996, the total backlog, updated to include Kolberg-Pioneer,
Inc., was approximately $33,100,000.$54,298,000. 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 isCompetitors
include Gencor/Hyway Heat Systems.Systems, Sundance, American Heating, Gentec,
and First Thermal. The Company's milling machine equipment competitors
include Ingersoll-Rand Company; CMI Corporation; Cedarapids, Inc.;
Caterpillar;Caterpillar, Inc.; and Wirtgen America, Inc. AggregatesAggregate processing
equipment competitors include the Pioneer Division of Portec,Nordberg, Inc.; Nordberg,Cedarapids, Inc.;
Powerscreen; Deister; Seco/Hewitt Robins; Eagle Iron Works; Boliden Allis, a member
of the Trelleborg Group; Cedarapids, Inc.;Finley;
Universal; Svedala; Greystone and other smaller manufacturers, both
domestic and foreign. Competition for sales of trenching and excavating
equipment includes Ditch Witch; J.I. Case; Tesmec; Vermeer and other
smaller manufacturers in the small utility trencher market. Competitors
of the captive finance company include 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.
RegulationRegulations
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 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 requested that a new
representation election be held. Recently, in response to Trencor's
appeal, the United States Court of Appeals for the Fifth Circuit returned
the matter to the National Labor Relations Board and ordered that an
evidentiary hearing on Trencor's complaints be held before an
administrative law judge. That hearing was held on January 15, 1998 with
the administrative law judge rejecting Trencor's claims. Consequently,
Trencor has appealed the decision to the National Labor Relations Board
where it is still pending.
At December 31, 1994,1997 the Company and its subsidiaries employed 1,5311,925
persons, of which 1,0451,435 were engaged in manufacturing operations, 176171 in
engineering, including support staff, and design
functions and 310319 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 National Labor Relations
Board, 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 FootageAcreage Principal Function
Chattanooga, 361,000 59.1 Corporate and
Tennessee subsidiary offices,
manufacturing - Astec
Chattanooga, --- 63.0 Storage yard - Astec
Tennessee
Chattanooga, 84,200 5.0 Offices,
Tennessee manufacturing -
Heatec
Chattanooga, 135,000 15.1 Offices,
Tennessee manufacturing -
Roadtec
Chattanooga, 1,820 --- Offices leased for
Tennessee Astec Financial
Services
North Aurora, 16,700 3.5 Roadtec and Trencor
Illinois (sales and service
office)
Mequon, Wisconsin 203,000 30.0 Offices and
manufacturing -
Telsmith
Walnut, Illinois 28,770 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,
manufacturing -
Trencor
Walpole, 1,800 --- Leased sales and
has relocated itsMassachusetts service office -
Telsmith
Odessa, Texas 4,072 .8 Sales office and
parts warehouse -
Trencor
Inman, South 13,600 8.0 Leased until
Carolina September 30, 2000
with option to buy
(office and warehouse
of former Soil
Purification of
Carolina, Inc.)
Albuquerque, New 110,700 14.0 Offices and
Mexico manufacturing - CEI
Yankton, South 252,000 50.0 Offices and
office
operations to this location. Except as set forth above,
managementDakota manufacturing -
Kolberg-Pioneer
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 directorDirector 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.
Albert E. Guth has been Chief Financial Officer of the
Company since 1987, Senior59.
Richard W. Bethea, Jr., became Vice President, since 1984,Corporate Counsel and
Secretary of the Company since 1972 and Treasurer since 1994.on February 1, 1997.
Mr. Guth, whoBethea has been a directorpracticing lawyer since 1972, was1978. He has an
undergraduate degree in accounting from the Vice
PresidentUniversity of Georgia.
Before joining the Company, from 1972 until 1984. From 1969 to
1972, Mr. GuthBethea was a member (stockholder) and
partner with the Controller oflaw firm Stophel & Stophel, P. C., in Chattanooga,
Tennessee. He has served as the Asphalt Division of
CMI Corporation.Company's litigation counsel since 1983.
He is 55.45.
F. McKamy Hall, a Certified Public Accountant, hasbecame Vice
President, Corporate Controller and Treasurer in April 1997 and served as
Controller of the Company since May 1987. From 1985 to 1987, Mr. Hall
was Vice President-FinancePresident of Finance at 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 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 45.55.
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 49.58.
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 59.
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 48.
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 56.
James G. May has served as President of Heatec, Inc. since December
1, 1994. From 19831984 until 1994 he served as Vice President of Engineering
of Astec, Inc. He is 50.53.
Albert E. Guth has been President of Astec Financial Services, Inc.
since June 1996. He served as Chief Financial Officer of the Company
from 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 58.
Richard A. Patek became President of Kolberg-Pioneer, Inc. on
December 2, 1997. From 1995 to 1997, he served as Director of Materials
of Telsmith, Inc. From 1992 to 1995, Mr. Patek was Director of Materials
and Manufacturing of the former Milwaukee plant location. From 1978 to
1992, he held various manufacturing management positions at Telsmith.
Mr. Patek is a graduate of Milwaukee School of Engineering. He is 41.
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 20 1/Price Per Share
1997 High Low
1st Quarter 10-1/8 8-1/4
2nd Quarter 12-7/8 9-5/8
3rd Quarter 17-3/4 12-5/16
4th Quarter 18-3/8 15-3/8
Price 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 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
The number of holders of record of the Company's Common Stock as of March
10,1995,9, 1998 was 821.approximately 600.
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, 199523, 1998, 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, 199523, 1998 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, 199523, 1998 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 stock of American Rock Products, Inc., an Ohio
corporation engaged inloan from Dr. Brock to reduce
the business of supplying crushed rockamount outstanding under the credit facility. The loan was repaid 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 soldDr. Brock on January 6, 1997, along with interest accrued 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.that date.
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, 19941997 and 1993.1996.
. Consolidated Statements of Income for the Years Ended December
31, 1994, 19931997, 1996 and 1992.1995.
. Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1994, 19931997, 1996 and 1992.1995.
. Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 19931997, 1996 and 1992.1995.
. 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. Consent of Independent Auditors.
. Schedule VIIIII - 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)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. (incorporated
by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1988, File No. 0-14714).
10.4 License and Trademark 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 Company (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 Annual Report on Form 10-K for the year
ended 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, 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)0-
14714).
10.73 Technology Contribution4.3 Shareholder Protection Rights Agreement, dated
July 12, 1993,
between the Company and Wibau-
Astec Maschinenfabrik GmbHDecember 22, 1995 (incorporated by reference to the
Company's AnnualCurrent Report on Form 10-K for the year ended8-K dated 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, 1993,22, 1995, 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 First Chicago NBD Credit Agreement
dated July 20, 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).
10.101 Loan Agreement dated December 5, 1996 between Astec
Financial Services, Inc. and The CIT Group/Equipment
Financing, Inc. (_CIT_) (incorporated by reference to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 0-14714).
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 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 0-14714).
10.103 Amended and Restated Credit Agreement dated November
27, 1997 between the Company, Astec Financial
Services, Inc. and First Chicago NBD.
10.104 Asset Purchase Agreement dated October 16, 1997
between Portec, Inc. and Astec Industries, Inc.
10.105 Amendment to Asset Purchase Agreement dated December
2, 1997 by and between Astec Industries, Inc. and
Portec, Inc.
10.106 Revolving Line of Credit Note dated December 2, 1997
between Kolberg-Pioneer, Inc. and Astec Holdings,
Inc.
10.107 Guaranty Joinder Agreement dated December 1997
between Kolberg-Pioneer, Inc. and Astec Holdings,
Inc. in favor of the First National Bank of Chicago Credit Agreement dated July 20, 1994.
11. Statement Regarding Computation of Per Share Earnings.
22.Chicago.
22 Subsidiaries of the Registrant.
23.23 Consent of Independent Auditors
(b)A report on Form 8-K was filed during the fourth
quarter of 1994 in connection with the Wibau-Astec
Maschinenfabrik GmbH acquisition.on December 2, 1997.
(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 DataData............................. A-1
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Report of Independent AuditorsOperations.................................................... A-2
Consolidated Balance Sheets at December 31, 19941997 and 19931996........ A-6
Consolidated Statements of Income for the Years Ended December 31, 1994, 1993 and19921997,
1996 and 1995............................................... A-7
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1994, 19931997,
1996 and 19921995............................................... A-8
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 19931997, 1996 and 19921995......................................... A-9
Notes to Consolidated Financial StatementsStatements....................... A-11
Report of Independent Auditors................................... A-23
Schedule VIIIII - Valuation and Qualifying Accounts
Accounts................ A-24
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT AS NOTED*)
1997 1996 1995 1994 1993
Consolidated Income Statement Data (1)
1994 1993 1992 1991 1990
Net sales $265,365 $ 221,413 $242,601 $213,806 $172,801 $149,133 $134,512 $134,982
Selling, general
and administrative
expenses 36,125 35,082 34,326 31,142 28,624
23,969 20,456 21,946Research and
development 3,707 5,868 5,128 3,166 2,923
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 24,661 8,051 2,566 27,236 9,974
Interest expense 2,398 1,656 2,125 713 1,788
3,241 4,597 6,310
Income loss from
continuing operationsNet income 13,809 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 lossEarnings per
common share from continuing
operations* share*(2)
Basic 1.45 .43 .45 2.38 1.07
.82 .07 (1.87)Diluted 1.42 .43 .45 2.35 1.06
Consolidated Balance Sheet Data
Working capital $71,459 $69,884 $58,015 $ 53,000 $ 40,767
$ 33,641 $ 31,167 $ 49,776
Total assets 192,243 167,853 154,356 155,964 102,967 87,885 90,989 112,414
Total short-term debt 500 2,051 774 8,573 10 3,103 4,862 8,836
Long-term debt, less
current maturities 35,230 30,497 17,150 16,155 22,660 29,387 50,305
Shareholders' equity 105,612 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/(1) 11.25 9.84 9.50 9.04 6.54
Quarterly Financial Highlights (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1997 Net sales $62,980 $73,159 $65,040 $64,186
Gross profit 15,875 17,765 14,633 16,220
Net income 3,525 4,625 2,821 2,838
Earnings per
common share*(2)
Basic .35 .48 .30 .30
Diluted .35 .48 .30 .30
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 (l,747)
Earnings per common
share*(2)
Basic .28 .22 .10 (.17)
Diluted .28 .22 .10 (.17)
Common Stock Price*
1997 High 10-1/8 12-7/8 17-3/4 18-3/8
1997 Low 8-1/4 9-5/8 12-5/16 15-3/8
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 17-5/8 15 15-7/8
1994 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
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.
2600.
(1) Restated to retroactively reflect
the two-for-one stock split effected in
the form of a dividend on August 12, 1993
1993.
(2) All earnings per share amounts have
been restated to comply with Statement
of Financial Standards No. 128, Earnings
per Share.
(3) Positive physical inventory
adjustments, offset by certain other
fourth quarter charges, increased
earnings per share in the fourth quarter
of 1997 by approximately $.04 per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations 19941997 vs. 19931996
Net income for 1997 was
$13,809,000, or $1.45 per share basic or $l.42 per share
diluted, compared to net income of $4,345,000, or $.43 per
share both basic and diluted in 1996. The
effect of the Company's purchase of its common shares in the
second quarter was to increase basic net income per share by
$.08 and diluted net income per share by $.07. The 1996
results included approximately $3,000,000 of charges related
to the discontinuance and writedown of a newly-developed
mining machine product line, increases in inventory reserves
related to the log loader business and litigation expenses.
In 1996 the Company experienced a decline in international
sales of asphalt plants of $25,447,000; however, the Company
improved international asphalt plant sales in 1997 by
$11,690,000.
Net sales for 1994 increased $41,005,0001997 were $265,365,000,
an increase of $43,952,000, or approximately 23.7%19.9% compared
to 1993. Of this increase, $10,133,000 is attributable to the acquisition of
Gibat Ohl and the remaining 50% of Wibau-Astec. Excluding these
acquisitions,1996. The 1997 international sales increased $30,872,000by
$20,593,000 (53.8%) to approximately $58,902,000 compared to
1996 international sales of $38,309,000. The 1997
international sales represented a return to within $63,000
of the 1995 international sales volume. The 1997 domestic
sales increased from $183,104,000 to $206,463,000, or
17.9%.$23,359,000, for a 12.8% increase from 1996. The increase
in domestic sales is principally attributed to increased
sales in asphalt plants and mobile equipment.
The increase in international sales was
attributed to all subsidiaries increasing their sales, with
asphalt plants, mobile equipment and rock crushing equipment
being the leaders. International sales by domestic
subsidiaries in 1997 were 24.3%22.2% of total sales compared to
17.3% in 1994 and 17.2% in 1993. The increase
in sales reflects the strength of our economy, the attitude of our customers
toward the economy, expectations for infrastructure contracts and the quality,
performance and competitiveness of our products as a result of many years of
investment in research and development.1996.
The gross profit margin for 1994 was 22.5%24.3% in
1997 compared to 24.2% for 1993.
Domestic22.3% in 1996. The improvement was
generated primarily from increased volumes in the asphalt
plant and mobile equipment operations gross profit margin for 1994 was 23.0% compared to
24.2% 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, Texasand efficiences being
realized from Grand
Prairie, Texas.
3) Inefficiencies related tocapital expenditures made over 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.last few
years.
In 1994,1997, selling, general, and
administrative expenses decreased to 14.6%13.6% of net sales from
16.6%15.8% of net sales in 1993.1996. The volume increase in net
sales, iscoupled with significant reductions in legal expenses
from 1996, are the primary reasonfactors responsible for the
percentage reduction.decreased percentage.
Research and development expenses
declined from 1.7%decreased to 1.4% of net sales in 19931997 from 2.7% in the
prior year. Research and development expenses decreased
from 1996 to 1.5%1997 primarily because of the product
development expenses related to the mining machine in 1994, again, primarily due to1996,
which were approximately $2,300,000. The reduction in
expenses, coupled with the increase in sales volume,
impacted the percentage of research and development expenses
to net sales.
In October 1994,Interest expense for 1997 increased to
.9% of sales from .8% of sales for 1996. The increase
related primarily to borrowings required for the decisioncaptive
finance company, which completed its first full year of
operations in 1997 and funds needed for the purchase of
shares under the Company's dutch tender offer completed in
May 1997.
Income tax expense for 1997 was
$9,156,977, or 39.9% of pre-tax income, compared to
$2,673,000 for 1996, or 38.1% of pre-tax income.
The backlog at December 31, 1997 was
$61,387,000 (including $8,022,000 for Kolberg-Pioneer)
compared to $54,298,000. This represents a 13.1% increase
over 1996. The backlog without Kolberg-Pioneer at December
31, 1996 was $44,911,000. The increase is principally
attributed to increased asphalt plant orders. The Company
is unable to determine whether this increase in backlog was
experienced by the United States Supreme Courtindustry 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
deny
certiorariperiodic fluctuations in sales volume given the nature of
the Company's products and customers.
Results of Operations 1996 vs. 1995
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 appeal filed by CMI Corporation "CMI"
broughtdiscontinuance and
writedown of a newly-developed mining machine product line,
increases in inventory reserves related to a successful end the Company's long-standing patentlog
loader business and additional litigation with CMI.expenses incurred
by the Company. The Supreme Court's actions effectively denied CMI's requestCompany also experienced a $25,447,000
decline in international asphalt plant sales from domestic
operations from 1995 to appeal1996. This decline had a
lower court ruling that found that Astec did not have any liabilitysignificant adverse impact on net income for infringement1996. In
addition, the Company experienced an increase in income tax
expense of CMI patentsapproximately $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 1996 were $221,413,000, a
decrease of $21,188,000, or approximately 8.7% compared to
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 left intact damages payabledomestic sales
increased by CMI$24,216,000 in 1996 compared to Astec. As1995. 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 previously established liabilities of $13,870,000,
payablea
$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 Company, were reversed and patent damages of $1,309,000 were
received from CMI. These amounts are shown in Consolidated Statements of
Income as net recoveries and accrual adjustments of patent damages. See
Contingencies and Note 9improvement
attributable to the Consolidated Financial Statements.
Because our joint venture, Wibau-Astec, continueddisposition of German operations
in 1995 where gross profit margin was low. Domestic
operations' gross profit margin for 1996 was 22.3% compared
to be unprofitable, it
became apparent that major changes were necessary22.5% for 1995.
In 1996, selling, general, and we began a plan of
restructuring. Restructuring costs of $1,500,000 relatedadministrative expenses
increased to Wibau-Astec are
discussed in Note 12 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%15.8% of net sales from 1.0%14.1% in 1993.1995.
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 is dueincrease in 1996 was principally
attributed to the product development expenses related to a
prototype mining machine.
Interest expense for 1996 decreased to .8%-of sales from .9%
of sales in 1995. The decrease in overallresulted from reduced
average borrowings and lower average interest expense combined with the
increase in sales. Plant expansion and improvements were financed by
industrial revenue bonds at favorable interest rates.rates during
1996.
Other income decreased by approximately $371,000 or 15.9% in 1994. As
noted in$5,076,000 from 1995 to 1996.
Excluding German operations, the 1993 Management Discussion and Analysis, one international
licensee thatdecrease was not renewed for 1994 produced $665,000 in license fees in
1993.only
$525,000. The equity in loss1995 other income, excluding Germany,
included gains on the sale of joint venture of $3,177,000 reflects 50%fixed assets, primarily
related to the sale of the losses
from the joint venture for the ten months prior to the purchase of the
remaining 50% interestformer manufacturing facility
operated by Telsmith, but no such comparable gains
occurred in Wibau-Astec.1996. Income tax expense for 19941996 was
$2,300,000$2,673,000, or approximately 8.9%38.1% of pre-
tax income.pre-tax income,
compared to $1,580,000, or approximately 25.7% of pre-tax
income in 1995. The primary reasons for the variance
from the normal corporate tax rate are the utilization of net operating loss carryforwards and
establishment ofin 1995 was primarily
attributed to a deferredlower effective tax benefit relative to net deductible temporary
differences which could be recovered against future taxes or taxes previously
paid. See Note 8 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.
Duerate related to the
utilization ofCompany's foreign operations. The Company has
previously utilized the majority of its tax credit
carryforwards, therefore,the Company expects itsCompany's tax rate for 1995 to1996 and
subsequent years will approximate the normal corporate
rate.
The backlog at December 31, 19941996 was $50,465,000$44,911,000 compared
to $33,100,000$34,751,000 at December 31, 1993,1995, 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 52.4% increase. The increasetrend, but is primarily dueattributed to periodic fluctuations in
sales volume given the nature of theCompany's products and
customers. In contrast to the optimism of our customers about the strength of the
economystrong domestic market,
international asphalt plant orders continue to be slow
and the performance and competitiveness of our products.
Results of Operations, 1993 vs. 1992
Netunpredictable. In an effort to improve international
asphalt plant 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 $25,753,000 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 $545,000has reviewed its
international sales efforts and has located a salesman in
prepayment penalties and expenses.
Other incomeSingapore
to develop that regional market. The Company held a
service school for Spanish-speaking customers 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.
Due 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.1997.
Liquidity and Capital Resources
Working capital increased to
$53,000,000$71,459,000 at December 31, 19941997 from $40,767,000$69,884,000 at
December 31, 1993.1996. The Company's debt to equitydebt-
to-equity ratio was .27.34 to 11.00 at December 31, 19941997 and .0001.33
to 11.00 at December 31, 1993.1996. The increaseCompany's principal
source of liquidity in 1994 reflects the utilization of industrial revenue bonds to
expand1997 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$500,000 at December 31, 19941997 and
$10,000$2,051,000 at December 31, 1993.1996. 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$35,230,000 at December 31,
19941997 and zero$30,497,000 at December 31, 1993.1996.
Major items impacting the borrowing include business
combinations of $22,383,000, the purchase of shares in
the 1997 dutch tender for $7,782,000 and capital expenditures
of $9,044,000, offset by funds generated from
operations.
Capital expenditures of $21,886,000$9,044,000, excluding those for
equipment leased to others, were made in 1994 as1997 compared to
capital expenditures in 19931996 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.$8,708,000.
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.$70,000,000.
This credit facility expires June 30, 1997.November 22, 2002. At
December 31, 1994, $2,655,0001997, $23,230,000 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 net worth,
leverage and interest coverage ratios, (ii) a limitation on
capital expenditures and rental expense, (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, 1997. As part of the Company's $70,000,000 revolving
credit facility, Astec Financial Services, Inc. has
a segregated portion of up to a $30,000,000 line is unsecured.of
credit. At December 31, 1994,1997, Astec Financial Services had
utilized $680,000 of this line. Advances under this
line are limited to "Eligible Receivables" of Astec
Financial Services as defined in the credit agreement.
The Company wasand Astec Financial Services were in
violation ofcompliance with all financial covenants related to the covenant relative to capital expenditures and
has received a waiver for such violation.
Wibau-Astec has German bank linesline
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 line1997.
In 1997, year-end trade receivables rose to $33,946,000 from
$30,040,000 at 31, 1996. This increase of credit available$3,906,000
reflects
the business combination which accounted for $4,913,000 of
$2,122,000
(3,300,000 DM), $2,925 of which was utilizedreceivables at December 31, 1994.
On January1997. Inventory levels
increased
$12,631,000 to $69,395,000 at December 31, 1989,1997 from
$56,764,000
at December 31, 1996. The increase in inventory
primarily reflects the Company placed $10,000,000 in Senior Notes and
$10,000,000 in Senior Subordinated Notes with Principal Mutual Life
Insurance Company. These notes were repaid duringbusiness combination which
accounted for $12,198,000 of the second and third
quarters of 1993 using cash received from the secondary public stock offering.increase at
December 31, 1997.
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,management believes the Company has no material reserve
requirements for potential environmental liabilities.
General
The Company recognizes the need to
ensure its operations will not be adversely impacted by Year
2000 software failures. The term "Year 2000" is a general
term used to describe the various problems that may result
from the improper processing of dates and date-sensitive
REPORT OF INDEPENDENT AUDITORScalculations by computers and other machinery as the year
2000 is approached and reached. These problems generally
arise from the fact that most of the world's computer
hardware and software have historically used only two digits
to identify the year in a date, often meaning that the
computer will fail to distinguish dates in the "2000s" from
dates in the "1900s." Software failures due to processing
errors potentially arising from calculations using the Year
2000 date are a known risk.
During the first quarter of 1998,the
Company commenced a Year 2000 project to address all
necessary code changes, testing and implementation. The
BoardCompany is utilizing both internal and external resources to
identify, correct or reprogram, and test its systems for
Year 2000 compliance. Although the total cost of Directorscompliance
and Shareholders
Astec Industries, Inc.
Weits effect on the Company's future results of operations
is impossible to project at this time, the Company is
attempting to determine the total costs and effect on
results of operations as part of the project. Total costs
associated with the Year 2000 issue have auditedbeen immaterial to
date but may be material in the accompanying consolidated balance sheetsfuture. The ultimate cost
is subject to a number of Astec
Industries, Inc.uncertainties beyond the Company's
control, including the availability of consultants and
subsidiariessufficient personnel to deal with the issue and the ability
to locate and correct all relevant computer codes.
FORWARD-LOOKING STATEMENTS
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
forward-looking statements are made based on management's belief as of
December 31, 1994 and 1993, 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.
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,date thereof, as well as evaluatingassumptions made by, and information
currently available to management, pursuant to "safe harbor_ provisions
of the overall financialPrivate 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 construction activities. The Company
does not undertake to update any forward-looking statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion,may be
made from time to time by, or on behalf of, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Astec Industries, Inc. and subsidiaries atCompany.
CONSOLIDATED BALANCE SHEETS
December 31,
19941997 1996
Assets
Current assets:
Cash and 1993,cash equivalents Note 1 $2,926,294 $ 3,382,484
Trade receivables less allowance for
doubtful accounts of $1,342,000 in 1997
and the consolidated results$1,267,000 in 1996 33,945,574 30,039,813
Finance receivables Note1 44,074,230 3,371,513
Notes and other receivables 751,235 1,191,223
Inventories Note 1, 4 69,395,351 56,764,085
Prepaid expenses 1,985,197 1,967,999
Refundable income taxes 2,071,063
Deferred tax asset Note 9 5,536,666 5,534,950
Other current assets 7,550 4,169
Total current assets 118,622,097 104,327,299
Property and equipment, net Note 5 61,605,153 54,317,352
Other assets:
Goodwill 8,226,831 5,285,051
Finance receivables Note 14 670,801 1,854,443
Notes receivable 1,261,985 320,000
Deferred tax asset Note 9 711,987 442,458
Other 1,144,245 1,306,113
Total other assets 12,015,849 9,208,065
Total $192,243,099 $167,852,716
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities of its operationslong-term
debt Note 7 $ 500,000 $ 2,051,003
Accounts payable 21,421,882 14,613,782
Customer deposits 6,464,842 2,150,852
Accrued product warranty 3,206,372 2,364,705
Accrued payroll and its cash flows for
eachrelated
liabilities 6,049,429 3,503,080
Income taxes payable 809,384
Deferred tax liability Note 9 275,687 173,388
Accrued insurance 2,242,447 2,672,274
Amounts payable in business
combination Note 2 2,405,145
Liabilities related to abandoned
subsidiary Note 3 360,760 593,886
Other accrued liabilities 5,832,716 3,915,162
Total current liabilities 47,163,519 34,443,277
Long-term debt, less
current maturities Note 7 35,230,000 30,496,734
Deferred tax liability Note 9 3,216,948 2,838,024
Deferred retirement costs Note 8 320,314 544,911
Other 700,155 136,842
Total liabilities 86,630,936 68,459,788
Shareholders' equity: Note 1,11
Preferred stock - authorized 2,000,000
shares of the three years$1.00 par value; none issued
Common stock - authorized 20,000,000
shares of $.20 par value; issued
and outstanding - 10,111,199 in the period ended December 31, 1994,1997
and 10,101,199 in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chattanooga, Tennessee
February 18, 1995
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 18,116,7731996 2,022,240 2,020,240
Additional paid-in capital 52,043,830 51,980,855
Retained earnings 60,096,397 46,286,983
Minimum pension liability adjustment (127,150)
114,162,467 100,160,928
Less common stock in treasury at cost -
790,619 shares in 1997 and 64,000
shares in 1996 (8,550,304) (768,000)
Total shareholders' equity 105,612,163 99,392,928
Total $192,243,099 $167,852,716
See 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]CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1997 1996 1995
Net sales $265,365,312 $221,412,796 $242,601,351
Cost of sales 200,872,181 172,147,913 192,844,160
Gross profit 64,493,131 49,264,883 49,757,191
Selling, general and
administative expenses 36,124,728 35,081,800 34,325,974
Research and development
expenses 3,706,909 5,867,909 5,128,495
Patent suit damages and expenses 263,978 699,222
Loss on abandonment of foreign
subsidiary Note 3 7,037,105
Income from operations 24,661,494 8,051,196 2,566,395
Other income (expense):
Interest expense (2,397,902) (1,656,466) (2,125,261)
Interest income 259,388 386,646 565,724
Other income - net 347,253 247,434 2,685,161
Gain on sale of foreign
subsidiary Note 2 2,448,551
Equity in income (loss) of joint
venture Note 1 96,158 (10,652)
Income before income taxes 22,966,391 7,018,158 6,140,570
Income taxes Note 9 9,156,977 2,673,282 1,580,210
Net income $ 13,809,414 $ 4,344,876 $4,560,360
Earnings per Common Share
Net income:
Basic $ 1.45 $ .43 $ .45
Diluted 1.42 .43 .45
Weighted average number of
common shares outstanding Note 1:
Basic 9,555,940 10,047,442 10,071,931
Diluted 9,726,096 10,158,658 10,195,917
See notesNotes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993 and 1992
Foreign
Additional Currency Pension Common
Common Stock notePaid-in Translation Retained Liability Stock in
Shares Note 1 Additional Foreign Currency Retained
Shares Amount Paid-In Capital Translation Adjustment Earnings Adjustment in Treasury
Balance
December 31,
1991 3,604,063 $ 720,813 $ 21,965,755 $ (1,407,089)
December 31, 1994 10,001,831 $2,000,366 $50,900,908 $89,975 $37,381,747
Issuance of
common stock 54,571 10,900 325,95090,368 18,074 1,039,672
Change during year (89,975)
Net income 6,014,2534,560,360
Balance
December 31, 1992 3,658,634 731,713 22,291,705 4,607,1641995 10,092,199 2,018,440 51,940,580 41,942,107
Issuance of
common stock 1,243,067 248,627 26,887,481
Stock
dividend 4,893,701 978,740 (978,740)9,000 1,800 40,275
Common stock
acquired for treasury
- 64,000 shares $ (768,000)
Minimum pension liability
adjustment $(127,150)
Net income 9,338,2094,344,876
Balance
December 31, 1993 9,795,402 1,959,080 48,200,446 13,945,3731996 10,101,199 2,020,240 51,980,855 46,286,983 (127,150) (768,000)
Issuance of
common stock 206,429 41,286 2,700,462
Change during year $89,97510,000 2,000 62,975
Common stock
acquired for treasury
- 726,619 shares (7,782,304)
Minimum pension liability
adjustment 127,150
Net income 23,436,37413,809,414
Balance
December 31, 1994 10,001,831 $2,000,366 $50,900,908 $89,975 $37,381,7471997 10,111,199 $2,022,240 $52,043,830 $ 0 $60,096,397 $ 0 $(8,550,304)
[FN]
See notesNotes 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]CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities
Year Ended December 31,
1997 1996 1995
Net income $ 13,809,414 $ 4,344,876 $4,560,360
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 6,944,918 5,812,723 5,697,862
Provision for doubtful accounts 272,578 157,183 533,136
Provision for inventory reserves 418,906 1,231,828 1,196,876
Provision for warranty 2,811,009 3,018,990 3,194,240
Foreign currency translation
adjustment (74,519)
(Gain) loss on sale of
fixed assets 747,112 59,118 (263,195)
(Gain) on sale of finance
receivables (663,516) (67,492)
Equity in (income) loss of joint
venture (96,158) 10,652
Gain on sale of foreign subsidiary (2,448,551)
Loss on abandonment of foreign
subsidiary 7,037,105
(Increase) decrease in:
Receivables 1,005,946 (3,855,177) (2,551,526)
Inventories (1,833,029) (1,353,245) (5,921,052)
Prepaid expenses (2,010) (991,145) (2,071,266)
Deferred tax asset 209,978 1,349,773 413,524
Other assets 261,094 196,607 (993,322)
Increase (decrease) in:
Accounts payable 3,867,396 (1,383,256) 6,062,733
Customer deposits 4,285,052 (2,838,705) (1,211,925)
Accrued product warranty (2,143,242) (3,127,860) (3,433,374)
Income taxes payable 2,880,447 270,786 (1,117,518)
Other accrued liabilities 1,885,445 (3,723,984) (2,373,657)
Total adjustments 20,851,926 (5,233,204) 1,675,571
Net cash (used) provided by
operating activities 34,661,340 (888,328) 6,235,931
Cash Flows from Investing Activities
Proceeds from sale of property
and equipment - net 459,024 1,202,335 953,766
Expenditures for property
and equipment, including those
for equipment
leased to others (25,339,464) (8,707,987) (15,159,921)
Additions to finance
receivables (13,480,827) (8,333,293)
Collections of finance
receivables 1,349,934 536,089
Proceeds from sale of finance
receivables 28,170,400 2,638,739
Cash received in connection
with sale of subsidiary (36,687)
Cash balance abandoned
w/subsidiary (203,643)
Additions to notes
receivable (116,536) (60,000)
Repayments on notes receivable 758,076 901,233 95,256
Investment in joint venture (100,000)
Cash payments in connection
with business combination, net
of cash acquired (22,383,071) 164,794 (834,591)
Net cash (used) by investing
activities (30,582,464) (11,758,090) (15,185,820)
See notesNotes 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)Year Ended December 31,
1997 1996 1995
Cash Flows From Financing Activities
Purchase of treasury shares $(7,782,304) $ (768,000)
Proceeds from issuance of
common stock 64,975 42,075 $ 9,750
Net borrowings under
revolving credit loan 9,908,000 11,680,000 1,495,000
Principal repayments of
industrial bonds, loans
and notes payable (6,725,737) (1,027,023) (1,523,213)
Proceeds from debt and
notes payable 2,968,780 1,629,978
Net cash provided (used) by
financing activities (4,535,066) 12,895,832 1,611,515
Increase (decrease) in cash and
cash equivalents (456,190) 249,414 (7,338,374)
Cash and cash equivalents,
beginning of period 3,382,484 3,133,070 10,471,444
Cash and cash equivalents
end of period $ 2,926,294 $ 3,382,484 $ 3,133,070
Supplemental Cash Flow Information
Cash paid during the year for:
Interest $ 2,369,389 $ 1,572,642 $1,800,598
Income taxes $ 8,142,405 $ 3,466,100 $5,088,465
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
Capital stock (17,467)
Additional paid-in capital (1,030,529)
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 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
For the Years Ended December 31, 1997, 1996 and 1995
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, 19941997 are as
follows:
Astec, Inc. Heatec,Production Engineered Products, Inc.
Astec Financial Services, Inc. Roadtec, Inc.
CEI Enterprises, Inc. Telsmith, Inc.
Roadtec,Heatec, Inc. Trencor, Inc.
Wibau-Astec Maschinenfabrik GmbH (Wibau-Astec)
Gibat Ohl Ingenieurgesellschaft fur Anlagentechnik (Gibat Ohl)Kolberg-Pioneer, Inc.
All significant intercompany transactions have been eliminated in
consolidation.
Segment InformationThe 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, the Company sold Wibau-Astec
Maschinenfabrik GmbH ("Wibau-Astec") and abandoned Gibat Ohl
Ingenieurgesellschaft fur Anlagentechnik ("Gibat Ohl") in 1995.
Use of Estimates - The Company operatespreparation of the financial statements in
one industry
segment. Its products are used predominately for road constructionconformity with generally accepted accounting principles
requires management to make estimates and forassumptions that affect
the manufactureamounts reported in the financial statements 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.accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents - The Company considers allconsidersall highly liquid instruments
purchased with a maturity of less than three months to be cash
equivalents.
Inventories - Inventories excluding(excluding used equipmentequipment) 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 methodcalculated for financial reporting purposes at rates considered sufficient to amortize costs
overusing the
straight-line method based on the estimated useful lives. Depreciation is computed generally on bothlives 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.
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 twenty20 years. Additions to
goodwill in
1994 reflect the purchase of assets and liabilities by
Kolberg-Pioneer, Inc. in 1997 and the Capital Trencher product line, the Log Hog
product line, the additional 50%purchase of Wibau-Astec,Production
Engineered Products, Inc. in 1996. Accumulated amortization
balances netted against goodwill were $1,320,000 and
Gibat Ohl.$1,040,000 at December 31, 1997 and 1996, respectively.
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 - The Company accounts for income taxes using the
liability method in accordance with Statement of
Financial Accounting Standards ("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 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 RiskAdvertising Expense - The cost of advertising is expensed as
incurred. The Company incurred $2,054,000, $2,661,000 and
$2,199,000 in advertising costs during 1997, 1996 and 1995,
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. Translation 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 sells productsgrants stock options for a fixed
number of shares to a wide varietyemployees with an exercise price equal to the
fair value of customers.the shares at the date of grant. The Company
performs ongoing credit evaluations of its customersaccounts for stock options in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees and, generally does
not require collateral.accordingly,
recognizes no compensation expense for the stock option grants.
The Company maintains an allowanceadopted SFAS No. 123, Accounting for doubtful accounts at a level which management believesStock-based
Compensation, in 1996 and is sufficient to cover
potential credit losses. As of December 31, 1994 concentrations of credit
risk with respect to trade receivables are limited due toutilizing the wide variety of
customers.disclosure only option
permitted by the statement. See Note 11.
Earnings Per Share - PrimaryIn 1997, the Financial Accounting Standards
Board issued SFAS No. 128, Earnings per Share. SFAS No. 128 replaced
the calculation of primary and fully diluted earnings per share are based on
the weighted average number of commonwith
basic and common equivalent shares outstanding
and include the potentiallydiluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings
per share is very similar to the exercisepreviously reported fully diluted
earnings per share. All earnings per share amounts for all
periods have been presented, and where appropriate, restated to
conform to the requirements of SFAS No. 128.
The following table sets forth the computation of basic and
diluted earnings per share:
Year Ended December 31,
1997 1996 1995
Numerator:
Net income $13,809,414 $4,344,876 $4,560,360
Denominator:
Denominator for basic
earnings per share 9,555,940 10,047,442 10,071,931
Effect of dilutive securities:
Employee stock options in years where there are earnings. Fully170,156 111,216 123,986
Denominator for diluted
earnings per share $ 9,726,096 $10,158,658 $10,195,917
Earnings per common share:
Basic $1.45 $.43 $.45
Diluted $1.42 $.43 $.45
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,
including goodwill and other intangible assets, 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 1996 have been reclassified
to conform with the 1997 presentation.
Accounting Policies Not Yet Adopted - In June 1997, the FASB issued
Statement No. 130, Reporting Comprehensive Income and Statement No.
131, Disclosures about Segments of an Enterprise and Related
Information. Statement No. 130 establishes standards for the
reporting and display of comprehensive income and
its components in a full set of general purpose financial statements.
Statement No. 131 generally requires that companies report
segment information for operating segments which are revenue
producing components and for which separate financial
information is produced internally.
The Company plans to adopt Statement No. 130 and Statement No. 131 in
1998, but has not presented for 1994 and 1993 sinceyet Accounting Policies completed its
analysis of the dilutionimpact, if any, that Statement No. 131 may
have on its financial statements. Statement No. 130 is not
material. Earnings
per share information has been restatedanticipated to retroactively reflecthave a material impact when adopted by 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.Company.
2.Business Combinations
On November 7, 1994,December 2, 1997, the Company acquired certain assets and
liabilities of the remaining sharesConstruction Equipment Division of Wibau-Astec from PutzmeisterPortec, Inc.
for $67,400.$19,978,176 in cash. The acquisitiontransaction was accounted for as a
purchase effective
November 7, 1994, and, accordingly, the operating results of operations
and accounts of Wibau-Astec subsequent to November 7, 1994 arethe new
company, Kolberg-Pioneer, Inc. ("K-P"), have been included
in the Company's consolidated financial statements.statements of income from the
effective date of acquisition. That portion of the
purchase price in excess of the fair market value of the
assets acquired was recorded as goodwill and is being
amortized using the straight-line method over 20 years. The
purchase was initially financed under the Company's
revolving credit agreement but was structured in such a way
to allow the utilization of industrial revenue bonds in the
future.
In connection with the acquisition, the
Company and K-P entered into an equipment lease with First
Chicago NBD under which the Company and K-P lease machinery
and equipment. The terms of the equipment leases range from
36 to 84 months, with total monthly lease payments of
approximately $69,000. These are included in the lease
commitments in Note 6.
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 of Wibau-Astecacquired based on the estimated
fair market valuesvalue of the assets acquired. As required by the purchase
method of accounting, theThe excess amount of the
purchase price over the fair market value of Wibau-Astec'sPEP'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,On February 28, 1995, the Company
acquired the operating assets and liabilities of Gibat Ohl Ingenieurgesellschaft fur Anlagentechnic (Gibat Ohl)Trace
Industries, Inc., a New Mexico corporation doing business as
CEI Enterprises ("CEI"), in exchange for 193,35787,333 shares of
the Company's common stock and approximately $2,760,000$852,000 in
cash. The acquisitionoperations of CEI-are included in the
consolidated statements of income from the effective date of
acquisition. The transaction 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$1,900,000
was allocated to the net tangible assets of Gibat Ohlacquired based on
the estimated fair market valuesvalue of the assets acquired.
The
excessThat portion of the purchase price overin excess of the fair
market value of Gibat
Ohl'sCEI'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 OhlK-P PEP CEI
Current assets $ 4,938,766 $ 11,007,164$16,530,866 $1,292,161 $1,035,148
Property, plant and
equipment 412,193 300,6574,714,500 551,289 243,877
Other assets 1,035,735
Current liabilities (8,678,984) (10,029,223)(5,032,911) (243,511) (768,647)
Other liabilities (2,038,165)(492,000) (1,094,453) (39,683)
Goodwill 1,193,259 4,153,3643,221,736 1,734,865 1,411,892
Net assets acquired
excluding cash (4,172,931) 5,431,96219,977,926 2,240,351 1,882,587
Cash 4,240,331 32,984250 164,794 17,413
Net assets acquired $ 67,400 $ 5,464,946$19,978,176 $2,405,145 $1,900,000
The following
unaudited pro forma summary presents the consolidated
results of operations as if the acquisition of Wibau-Astec and Gibat Ohlacquisitions discussed above
had occurred at the beginning of eachthe period presented. Pro forma adjustments have been made
to reflectpreceding the
restructuring of Wibau-Astec as described in Note 12.acquisition. The unaudited 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 occurredacquisitions taken place at the beginning of the periods
presented or of results which may occur in the future.
Year Ended December 31,
1994 19931997 1996 1995
Net sales $ 223,887,000 $ 188,823,000$300,336,000 $257,913,000 $247,256,000
Income from operations 28,380,000 10,576,00026,363,000 10,372,000 6,303,000
Net income 24,619,000 9,638,00014,917,000 5,459,000 4,630,000
Per common share outstanding:
Basic $ 1.56 $ .54 $ .46
Diluted $ 1.53 $ .54 $ .46
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.
3.Abandonment of Foreign Subsidiary
During 1995, the Company's subsidiary, Astec-Europa, incurred a net
loss of approximately $2,354,000 and common
equivalent share:
Net income $ 2.50 $ 1.11
Priorhad 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 acquisitiondecision to abandon Astec-Europa, the
Company has not recovered any amounts related to Astec-
Europa's assets nor has it been 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 remaining 50% interest in Wibau-Astec,
the Company's investment in Wibau-Astec was accounted for byAstec-Europa and the equity method.
Accordingly, net income as presentedremaining
goodwill associated with Astec-Europa of approximately
$3,911,000 resulted in the Consolidated Statements of
Income for 1994 and 1993 includes the Company's share of Wibau-Astec's
losses for periods priora total write-off related to the
acquisitionabandonment of $3,177,000approximately $7,037,000 before tax and
$720,000,
respectively.
3.$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,
1994 19931997 1996
Raw materials and parts $ 26,705,110 $ 18,418,839$27,986,696 $23,541,508
Work-in-process 14,380,192 6,017,94015,920,137 9,038,158
Finished goods 7,745,709 7,802,95619,911,602 16,994,736
Used equipment 7,478,724 7,765,5465,576,916 7,189,683
Total $ 56,309,735 $ 40,005,281
4.$69,395,351 $56,764,085
5. Property and Equipment
Property and equipment consisted of the following:
December 31,
1994 19931997 1996
Land, land improvements and buildings $ 26,676,486 $ 14,062,161$42,659,308 $38,161,554
Equipment 37,497,348 27,955,59848,175,111 41,217,853
Less accumulated depreciation (21,880,823) (18,437,672)(31,339,876) (26,829,232)
Land, buildings and equipment - net 42,293,011 23,580,08759,494,543 52,550,175
Rental property:
Equipment 1,703,608 1,703,6082,517,574 2,004,118
Less accumulated depreciation (1,647,827) (1,624,680)(406,964) (236,941)
Rental property - net 55,781 78,9282,110,610 1,767,177
Total $ 42,348,792 $ 23,659,015
5.$61,605,153 $54,317,352
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 $615,000, $427,000$1,569,000,
$1,272,000 and $384,000$1,213,000 for the years ended December 31, 1994, 19931997,
1996 and 19921995, respectively.
Minimum rental commitments for all noncancelable operating
leases at December 31, 1994,1997 are as follows:
19951998 $ 718,000
1996 492,000
1997 246,000
1998 97,0001,742,000
1999 1,456,000
2000 1,202,000
2001 208,000
2002 and beyond 189,00021,000
The Company also leases equipment to customers under short-term
contracts generally ranging from 2two months to 6forty-eight months.
Rental income under such leases was $1,394,000, $1,719,000$1,181,000, $2,073,000
and $2,470,000,$1,630,000 for the years ended December 31, 1994, 19931997, 1996
and 1992,1995, respectively.
6.Minimum rental payments to be received for equipment leased to
others at December 31, 1997 are as follows:
1998 $ 322,000
1999 208,000
2000 178,000
2001 33,000
7.Long-term Debt
Long-term Debt
Long term debt consisted of the following:
December 31,
1994 19931997 1996
Revolving credit loan of
$15,000,000$70,000,000 available through
November 22, 2002 at interest
rates from 6.6% to 8.25%
at December 31, 1994
and 1993, available1997 $23,230,000
Revolving credit loan of $22,000,000
at interest rates from 6.69% to 8.0%
at December 31, 1996 $13,322,000
Revolving credit loan at an interest
rate of prime, which was 8.25% at
December 31,1996 2,508,000
Loans payable maturing at various dates
through June 30, 19972000 at interest rates
from 8.0% to 9.25% 2,639,307
Industrial Development Revenue Bonds
payable in annual installments through
2006 at weekly negotiated interest
rates 4,500,000 5,000,000
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 8.25% and 6.0%8.0% 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 8,000,0001996 1,078,430
Total long-term debt 16,655,00035,730,000 32,547,737
Less current maturities 500,000 9,5202,051,003
Long-term debt less current maturities $ 16,155,000 $ 0
On January 31, 1989, the$35,230,000 $30,496,734
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 outstandinghas a $70,000,000 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,with First
Chicago NBD. The agreement contains borrowing sub-limits which
allow the Company wasand its subsidiary, Astec Financial Services,
Inc., to borrow up to $50,000,000 and $30,000,000 respectively, not to
exceed the total commitment amount. Advances under Astec Financial's
sub-limit are limited to eligible receivables as defined in violation of the
covenantagreement.
Amounts outstanding under the agreement bear interest, at the
Company's option, at a rate from .25% below prime to prime plus .50%, or
from .75% to 2.00% above the London Interbank Offering Rate. The
interest rate applied to borrowings is based upon a leverage ratio,
calculated quarterly, as defined by the credit agreement. The credit
agreement contains certain restrictive covenants relative to
operating ratios and capital expenditures and has receivedal the
payment of dividends. This agreement replaced two separate revolving
credit facilities with an aggregate availability of $37,000,000.
The former agreements also bore interest at rates based on prime or
LIBOR and contained certain restrictive covenants similar to those in the
new agreement.
Loan payable to related party at December 31, 1996 was a waivernote
payable to the Company's Chief Executive Officer. Interest expense
related to this note for such violation.1996 was calculated at the Company's
current bank borrowing rate and was approximately $1,580 in 1997
and $73,000 in 1996. This loan was paid off in January 1997.
The aggregate of all maturities of long-term debt in each of the next
five years is as follows:
1995 $1998 $500,000
1999 500,000
19962000 500,000
1997 3,155,000
19982001 500,000
19992002 and beyond 11,500,00033,730,000
For 1994,1997, the weighted average interest rate on short termshort-term
borrowings,
which includeincludes current maturities of Industrial Revenue Bonds, and notes payable,
were 3.46% and 8.75%, respectively.
7.was
3.90%.
8. Retirement Benefits
A former subsidiaryThe 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 Barber-Greene Company had defined
benefit pension plans ("Barber-Greene Plans") covering substantially allmatch is an amount equal to 50% of
its employees. Non-union benefits were frozen asemployee savings subject to certain limitations or 30% of
September 1, 1986,employee savings, subject to certain limitations, for
employees of Kolberg-Pioneer, Inc. The total expense for
such matching was approximately $856,000, $799,000 and
certain union benefits were frozen as of October 31, 1986. The Company
retained responsibility$777,000 for the Barber-Greene Plans when it sold the
Barber-Greene Company in 1991.years ended December 31, 1997, 1996 and
1995, respectively.
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,Plan, which is based on a valuation date of September
30, with amounts reported in the Company's
consolidated balance sheets, is as follows:
1994 1993Year Ended December 31,
1997 1996
Actuarial present value of
benefit obligations:
Vested $ 40,574,462 $ 38,229,010$3,179,694 $3,039,628
Nonvested 85,245 251,67794,386 88,965
Accumulated benefit obligation $ 40,659,707 $ 38,480,687$3,274,080 3,128,593
Projected benefit obligation $ 40,659,707 $ 38,480,687$3,274,080 3,128,593
Plan assets at fair value 40,589,417 43,018,5082,982,882 2,583,682
Projected benefit obligation in excess
of (less than) plan assets 70,290 (4,537,821)291,198 544,911
Unrecognized net gain 450,751 7,976,321(loss) 138,707 (127,150)
Prior service cost not yet recognized
in net periodic pension cost (320,665) (357,323)(109,591) (129,205)
Additional liability 256,355
Pension liability in the consolidated
balance sheets $ 200,376320,314 $ 3,081,177544,911
Net periodic pension cost for 1994, 1993,1997, 1996 and 19921995 included the
following components:
Year Ended December 31,
1994 1993 19921997 1996 1995
Service cost - benefits earned
during the period $ 31,50315,382 $ 26,87320,986 $ 34,42624,585
Interest cost on projected
benefit obligation 2,565,355 2,754,319 2,761,195222,812 227,815 219,465
Actual return on plan assets 2,148,873 12,318,009 833,167(623,731) (122,607) (238,493)
Net amortization and deferral 5,405,871 9,345,175 1,948,268417,295 (84,816) (6,682)
Net expense (income) expense $ 660,14031,758 $ 191,64241,378 $ 14,186(1,125)
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 8.5%7.5%
at September 30, 19941997 and 7.0% at September 30, 1993.1996. The expected long-term
rate of return on assets was 9.0% for the years ending September 30,
19941997 and 1993.1996. 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 postretirementpost-retirement 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 plan is accounted for
under the Company adoptedprovision of SFAS No. 106, (Employers'Employers' Accounting for PostretirementPost-
retirement Benefits Other than Pensions).Than Pensions. The accumulated postretirementpost-
retirement benefit obligation (APBO)("APBO") at adoption was approximately
$674,000 and is being amortized over twenty20 years.
The accumulated postretirementpost-retirement benefit obligation and the amount
recognized in the Company's consolidated balance sheets is as
follows:
December 31,
1994 19931997 1996
Accumulated postretirementpost-retirement
benefit obligation:
Retirees $ 130,600 $ 207,500$271,235 $241,700
Active employees 473,000 425,800
603,600 633,300499,068 471,000
770,303 712,700
Unamortized transition obligation 605,600 639,300(504,500) (538,200)
Unrecognized net gain 118,800 29,8002,875 64,100
Accrued postretirementpost-retirement benefit cost $ 116,800 $ 23,800$268,678 $238,600
Net periodic postretirementpost-retirement benefit cost included the following
components:
Year Ended December 31,
1994 19931997 1996
Service cost $ 53,50056,468 $ 53,50064,700
Interest cost 42,900 42,90055,241 48,300
Amortization of transition obligation 33,700 33,700
Amortization of net gain (1,473)
Net expense $ 130,100 $ 130,100
Postretirement benefit costs for 1992 were not material.$143,936 $146,700
A discount rate of 8.5%7.0% was used in calculating the APBO. The
APBO assumes a 13.5%7.5% increase in per capita health care costs decreasing
gradually to 5.8%5.5% for years 20122001 and later. A 1% increase in the
medical inflation rate would increase the APBO by
approximately $26,800$42,000 and the expense by approximately $6,000.
8.$7,700.
9. 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 19921997 1996 1995
United States $22,738,605 $ 30,726,395 $ 9,474,455 $ 6,436,0606,655,652 $16,497,616
Foreign:
License income 404,000 1,018,000
Equity in loss of
joint venture (3,176,834) (720,000)227,786 362,506 277,855
Loss from foreign subsidiary (2,217,061)subsidiaries (3,597,796)
Loss on abandonment (7,037,105)
Income before income
taxes $22,966,391 $7,018,158 $ 25,736,500 $ 9,772,455 $ 6,436,0606,140,570
The provision for income taxes consisted of the following:
Year Ended December 31,
1994 1993 19921997 1996 1995
Current $ 7,029,419 $ 434,246 $ 421,807$9,264,743 $1,416,242 $1,166,956
Deferred provision (benefit) (4,729,293)(107,766) 1,257,040 413,254
Total provision for income taxes $ 2,300,126 $ 434,246 $ 421,807$9,156,977 $2,673,282 $1,580,210
A reconciliation of the provision for income taxes at the statutory
rate to those provided is as follows:
Year Ended December 31,
1994 199 19921997 1996 1995
Tax at statutory rates $ 9,007,775 $ 3,322,635 $ 2,188,260$8,038,237 $2,386,174 $2,087,794
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)(1,344,000)
Benefit from foreign
sales corporation (265,000)(360,000) (125,000) (327,000)
State taxes, net of federal
income tax benefit 212,000 115,271 155,313912,000 424,000 522,000
Income taxes of
other countries 27,000 151,59338,000 20,000 (553,000)
Loss from foreign
operations 2,636,000(413,000)
Recognition of deferred
tax asset (4,729,000)
Reversal of prior temporary
differences (1,937,000)1,827,000
Other items 738,351528,740 (31,892) (219,584)
Income Taxes $ 2,300,126 $ 434,246 $ 421,807taxes $9,156,977 $2,673,282 $1,580,210
At December 31, 1994,1997, the Company had federal net operatinglong-term capital loss
carryforwards of approximately $3,800,000 for tax purposes, all of which are
limited by consolidated return rules to use$80,000 expiring 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.2000. 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 $.26$.13 for the yearsyear
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.1995.
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, 1997, the Company had deferred tax assets of
approximately $6,248,700, and deferred tax liabilities of approximately
$3,492,000, 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
and expected utilization of these carryforwards, the Company
determined that a valuation allowance was necessary for this item.
The change in valuation allowance in 1997 is due to the utilization of
the capital loss carryfowards.
Significant components of the Company's deferred tax liabilities and
assets are as follows:
Year Ended December 31,
1994 19931997 1996
Deferred tax assets:
Inventory reserves $ 1,753,000 $ 2,270,000
Legal$1,878,300 $1,556,000
Warranty reserves 100,000 487,000
Pension expense 109,000 1,098,000
Investment in foreign
joint venture 1,827,000 747,0001,098,400 898,000
Accrued insurance 820,800 864,000
Bad debt reserves 507,000 479,000
Other accrued expenses 3,002,000 2,703,0001,695,700 1,428,000
Alternative minimum tax credits 1,216,000
Net operating loss
carryforwards 1,344,000 4,216,000
Foreign net operating
loss carryforwards 8,085,000credit 98,500 560,000
Other credit carryforwards 641,000 760,000150,000 433,000
Total deferred tax assets 16,861,000 13,497,0006,248,700 6,218,000
Deferred tax liabilities:
Property and equipment 2,062,000 1,742,0003,176,300 2,793,000
Other 316,300 218,000
Total deferred tax liabilities 2,062,000 1,742,0003,492,600 3,011,000
Net deferred tax assets 14,799,000 11,755,0002,756,100 3,207,000
Valuation allowance (10,070,000) (11,182,000)(241,000)
Deferred tax asset $ 4,729,000 $ 573,000
9.$2,756,100 $2,966,000
10. 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$1,793,000 and $13,700,000$4,618,000 at December 31,
19941997 and 1993,1996, 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$12,993,000 issued for bid bonds and performance bonds.
10.Astec Financial Services, Inc. has sold
both finance and operating leases with limited recourse,
subject to elimination of recourse responsibilities through
remarketing of equipment. The limited recourse would not
exceed 15% of the purchase price.
11. Shareholders' Equity
The Company
has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Options -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, when 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 generally 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 nonqualified options,
incentivenon-
qualified options and stock appreciation rightsincentive options 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 forAll options to be granted.
Nonqualified options aregranted have ten-year terms and vest and
become fully exercisable at a price not less than 85%immediately or within one year of the
Boardgrant 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 Directors' determinationthat 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 1995, 1996 and 1997, respectively; risk-free interest rates of
6.06%, 6.04% and 5.78%; volatility factors of the fairexpected
market valueprice of the Company's common stock on the dateof .275, .275 and .281;
and a weighted-average expected life of the grant. Nonqualifiedoption of seven and one half
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 exercisable
starting one year fromfully transferable. In addition,
option valuation models require the dateinput of grant and expire ten years afterhighly
subjective assumptions, including the date
of grant. Incentiveexpected stock price
volatility. Because the Company's employee stock options
granted byhave characteristics significantly different from those of
traded options, and because changes in the Board of Directors must be
exercisable atsubjective input
assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not
necessarily provide a price not less than 100%reliable single measure of the fair
marketvalue 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 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.pro forma information follows.
1997 1996 1995
Pro forma net income $13,782,000 $3,734,000 $4,362,000
Pro forma earnings per share:
Basic $ 1.44 $ .37 $ .43
Diluted $ 1.42 $ .37 $ .43
A stock appreciation
right permits a grantee to receive payment in either cash or sharessummary of the Company's common stock equal to the difference between the fair market value
of the common stockoption activity and the exercise pricerelated
information for the related option.
The following is a summary of stock option information:
Number Option Price
of Shares Range Per Share
Outstanding,years ended 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 share1997, 1996 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.
1995
follows:
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 BALANCEYear Ended December 31,
1994:
Reserves deducted from assets to which they apply:
Allowance for
doubtful1997 1996 1995
Weighted Avg. Weighted Avg. Weighted Avg.
Options Exercise Price Options Exercise Price Options Exercise Price
Options
outstanding,
beginning
accountsof year 549,000 $9.23 308,000 $ 1,191,0838.33 244,000 $ 362,0896.92
Options
granted 10,000 $9.13 250,000 $ 467,607 (3)10.17 67,000 $ 336,537 $1,684,242
Reserve for
inventory13.26
Options
forfeited 23,000 $9.39
Options
exercised 10,000 $6.50 9,000 $ 6,494,533 $3,621,2184.68 3,000 $ 0 $5,121,716 $4,994,035
Other Reserves:
Product warranty $1,781,733 $2,616,5653.25
Options outstanding and
exercisable,
end of
year 526,000 $ 0 $927,595 $3,470,703
Reserve for
patent damages $13,250,0489.28 549,000 $ 620,2909.23 308,000 $ 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 $ 633,8668.33
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 $4.14, $3.97 and $4.65 for the years ended December 31, 1997,
1996 and 1995. 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 and $4.13 for the years ended December 31,
1996 and 1995. Exercise prices for options outstanding and
exercisable as of December 31, 1997 range from $1.38 to $3.25
(128,000 options) and from $9.13 to $16.36 (398,000 options).
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. 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, 1997,
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.
13. 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. See Notes 2 and 3. International sales by
domestic subsidiaries by major geographic region were as follows:
Year Ended December 31,
1997 1996 1995
Asia $14,217,777 $12,340,130 $22,294,203
Europe 3,076,510 8,792,885 11,257,809
South America 10,000,648 6,889,869 3,811,091
Canada 8,618,053 3,852,792 8,105,164
Australia 4,298,554 1,760,828 1,613,920
Africa 444,313 1,131,318 3,220,047
Central America 7,461,261 1,381,030 5,955,227
Middle East 5,224,857 467,146 293,006
West Indies 2,998,406 1,692,600 2,414,219
Other 2,561,868
TOTAL $58,902,247 $38,308,598 $58,964,686
14. Finance Receivables
Finance receivables
are receivables of Astec Financial Services, Inc.
Contractual maturities of outstanding receivables at
December 31, 1997 were:
Financing
Amounts Due In Leases Notes Total
1998 $ 933,951 $ 1,789,896 $ 2,723,847
1999 75,600 392,132 467,732
2000 37,800 408,629 446,429
2001 422,805 422,805
Thereafter 906,494 906,494
1,047,351 3,919,956 4,967,307
Less unearned
income (50,553) (171,723) (222,276)
Total $ 996,798 $ 3,748,233 $ 4,745,031
Receivables may be paid prior to contractual maturity
generally by payment of a prepayment penalty. At December 31, 1997,
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 are removed -- previously suspended income is recognized at that
time.
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, 1997. 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, 1997
and 1996, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1997, 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
Chattanooga, Tennessee
February 20, 1998
A-23
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE (II)
VALUATION AND QUALIFYING ACCOUNTS FOR CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
ADDITIONS
CHARGES TO
BEGINNING COSTS & OTHER ENDING
DESCRIPTION BALANCE EXPENSES ADDITIONS DEDUCTIONS BALANCE
December 31, 1997:
Reserves deducted from assets to which they apply:
Allowance
for
doubtful
accounts $1,266,939 $ 272,578 $ 523,507(3) $ 509,787(1) $1,553,237
accounts
Reserve for
inventory $4,873,922 $ 418,906 $ 0 $ 964,658 $4,328,170
Other
Reserves:
Product
warranty $2,364,705 $2,811,009 $ 173,900(3) $2,143,242(2) $3,206,372
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
Schedule (II) - Page 1
A-24
ADDITIONS
CHARGES TO
BEGINNING COSTS & OTHER ENDING
DESCRIPTION BALANCE EXPENSES ADDITIONS DEDUCTIONS BALANCE
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
(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 (II) - Page 2
A-25
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, SeniorF. McKamy Hall
F. 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, 199512, 1998
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, 199512, 1998
J. Don Brock and President
/s/ Albert E. Guth Senior Vice President, Astec Financial March 2, 199512, 1998
Albert E. Guth Secretary, TreasurerServices, Inc. and Director
/s/ W. Norman Smith President - Astec, Inc. March 2, 199512, 1998
W. Norman Smith and Director
/s/ Robert G. Stafford President - Telsmith, Inc. March 2, 199512, 1998
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. Sloan Jr. Director March 2, 199512, 1998
E.D. Sloan, Jr.
/s/ James R. SpearWilliam B. Sansom Director March 2, 1995
James R. Spear12, 1998
William B. Sansom
/s/ Joseph Martin, Jr.Ronald W. Dunmire Director March 2, 1995
Joseph Martin, Jr.12, 1998
Ronald W. Dunmire
/s/ George C. Dillon Director March ,199512, 1998
George C. Dillon
/s/ G.W. Jones Director March 2, 199512, 1998
G.W. Jones
/s/ Daniel K. Frierson Director March 2, 199512, 1998
Daniel K. Frierson
/s/ Robert Dressler Director March 12, 1998
Robert Dressler
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, 19941997
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 Purchase10.103 Amended and TransferRestated Credit Agreement by anddated
November 27, 1997 between the Company, Astec
Financial Services, Inc. and Gibat Ohl Ingenieurgesellschaft
fur Anlagentechnik mbH,First Chicago
NBD.
Exhibit 10.104 Asset Purchase Agreement dated as of October 5, 1994.16,
1997 between Portec, Inc. and Astec
Industries, Inc.
Exhibit 4.2 Indenture of Trust,10.105 Amendment to Asset Purchase Agreement dated
April 1, 1994,December 2, 1997 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 10.83 Loan Agreement dated as of April 1, 1994, between
Grapevine Industrial Development Corporation
and Trencor, Inc.
Exhibit 10.84 Letter 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, Inc. and Bank One, Texas, NA, as
Trustee.Portec, Inc.
Exhibit 10.8610.106 Revolving Line of Credit Note dated December
2, 1997 between Kolberg-Pioneer, Inc. and
Astec Holdings, Inc.
Exhibit 10.107 Guaranty Joinder Agreement dated April 29, 1994, of debit of Trencor,December,
1997 between Kolberg-Pioneer and Astec
Holdings, Inc. in favor of Thethe 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.
Exhibit 11 Statement Regarding Computation of 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 22
Subsidiaries of the Registrant
LIST OF SUBSIDIARIES
Jurisdiction of
Name Owned Incorporation
Astec, Inc. 100 Tennessee
Astec Financial Services, Inc. 100 Tennessee
Astec Holdings, Inc. 100 Tennessee
Astec Transportation, Inc. 100 Tennessee
CEI Enterprises, Inc. 100 Tennessee
Heatec, Inc. 100 Tennessee
Kolberg-Pioneer, 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 20, 1998, 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, 1997.
ERNST & YOUNG LLP
Chattanooga, Tennessee
March 19, 1998