FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal
year ended December 31, 1994
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) 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 the aggregate market value of the voting stock held by non-
affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the stock 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 based upon the closing sales price in the NASDAQ
National Market System on March 10, 1995, 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, 1995
Common Stock, par value $.20, 10,001,858 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, 1995
ASTEC INDUSTRIES, INC.
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Executive Officers of the Registrant
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
Appendix A
SIGNATURES
PART I
Item 1. BUSINESS
General
Astec designs, engineers, manufactures and markets
equipment and components used primarily in road building and
related construction activities. The Company's products are used
in each phase of road building, from quarrying and crushing the
aggregate to application of the road surface. The Company also
manufactures certain equipment and components unrelated to
road construction including trenching and excavating equipment,
environmental remediation equipment, log loading and industrial
heat transfer equipment. The Company holds over 100 United
States and foreign patents, and has been responsible for many
technological and engineering innovations in the industry. The
Company currently manufactures over 125 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 and
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 mix asphalt plants, soil
purification and environmental remediation equipment and
related components; (ii) Telsmith, Inc. which manufactures
aggregate processing equipment for the production and
classification of sand, gravel and crushed stone for road and other
construction applications; (iii) Heatec, Inc. which manufactures
thermal oil heaters, asphalt heaters and other heat transfer
equipment used in the Company's asphalt mixing plants and in
other industries; (iv) Roadtec, Inc., which manufactures milling
machines used to recycle asphalt and concrete, asphalt paving
equipment and material transfer vehicles; (v) Trencor, Inc.
which manufactures chain and wheel trenching equipment,
excavating equipment and log loaders; (vi) Wibau-Astec
Maschinenfabrik GmbH, 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, which manufactures and sells batch asphalt plants,
parts and controls in Europe and the Eastern bloc countries.
The Company's strategy is to become the high quality, low
cost producer in each of its product lines while continuing to
develop innovative new products for its customers. Management
believes that this strategy will provide the Company with a
competitive advantage in the marketplace and position it to
capitalize on rebuilding the infrastructure in the United States
and abroad.
Products
The Company operates in a single business segment. In
1994 it manufactured and marketed products in five principal
categories: (i) hot mix asphalt plants, soil purification and
environmental remediation equipment and related components;
(ii) mobile construction equipment, including asphalt pavers
from Roadtec, milling machines and material transfer vehicles
and other auxiliary equipment; (iii) hot oil heaters, asphalt
heaters and other heat transfer equipment; (iv) aggregates
processing equipment; and (v) chain and wheel trenching and
excavating equipment. The 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
(in thousands)
Asphalt plants and components $100,514 $88,116 $81,438
Aggregate processing equipment 38,823 40,108 33,298
Trenching and excavating equipment 25,867 16,535 14,803
Mobile construction equipment 30,291 22,120 14,660
Financial information in connection with the Company's
international sales is included in Note 1 to "Notes to Consolidated
Financial Statements - Segment Information", appearing at Page
A-11 of this report.
Hot Mix Asphalt Plants
The Astec division designs, engineers, manufactures and
markets a complete line of portable, stationary and relocatable
hot mix asphalt plants and related components under the "ASTEC"
trademark. An asphalt mixing plant 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 mix asphalt and a control house. The
Company introduced the concept of plant portability in 1979. Its
current generation of portable asphalt plants is marketed as the
"Six Pack" and consists of six portable components which can be
disassembled and moved to the construction site to reduce
relocation expenses. Plant portability represents an industry
innovation developed and successfully marketed by the Company.
The components in the Company's asphalt mixing plants
are fully automated and use microprocessor based control
systems for efficient operation. The plants are manufactured to
meet or exceed federal and state clean air standards.
The Company has also developed specialized asphalt
recycling equipment for use with its hot mix asphalt plants.
Many of the 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 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.
Asphalt Heating Equipment. Heatec manufactures a
complete line of heating and liquid storage equipment for the
asphalt paving industry. The equipment includes portable and
stationary tank models with capacities up to 35,000 gallons
each. Heaters are offered in both direct-fired and helical coil
models.
Industrial Heating Equipment. Heatec builds a wide
variety of industrial heaters to fit a broad range of applications,
including equipment for emulsion plants, roofing material
plants, refineries, chemical processing, rubber plants and the
agribusiness. Heatec has the technical staff to custom design
heating systems and has systems operating as large as
40,000,000 BTU's per hour.
Aggregates Processing Equipment
Telsmith has served the quarry business since 1906.
Telsmith designs, engineers, manufactures and markets a wide
range of portable and stationary equipment for the production
and classification of sand, gravel, and quarried stone for road and
other construction applications. Telsmith's products include
jaw, cone and impact crushers; several types of feeders which
transport the aggregate from the storage site to the crushing
equipment; vibrating screens to separate the aggregate into
various mixes; and washing and conveying equipment. Telsmith
markets its products individually and as complete systems,
incorporating microprocessor based automated controls for the
efficient operation of its equipment.
Trenching and Excavating Equipment
Trencor, Inc. designs, engineers, manufactures and
markets chain and wheel trenching equipment, canal excavators,
rock saws, 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.
Chain Trenchers. Trencor chain trenching machines
utilize a heavy duty chain (equipped with cutting teeth attached
to steel plates) wrapped around a long moveable boom. These
machines, with weights up to 400,000 pounds, are capable of
cutting a trench up to eight feet wide and thirty feet deep through
rock. Trencor also makes foundation trenchers used in areas
where drilling and blasting are prohibited.
Wheel Trenchers. Trencor wheel trenching machines are
used in pipeline excavation in soil and soft rock. The wheel
trenchers weigh up to 390,000 pounds and have a trench
capacity of up to seven feet in width and ten feet in depth.
Canal Excavator. Trencor canal excavators are used to
make finished and trimmed trapezoidal canal excavations within
close tolerances. The canals are primarily used for irrigation
systems.
Rock Saws. Trencor manufactures a rock saw which is
utilized for laying water and gas lines, fiber optics cable,
constructing highway drainage systems and for other
applications.
Road Miners. Trencor manufactures four "Road Miner"
models weighing up to 400,000 pounds with an attachment
which allows it to cut a path up to twelve and a half feet wide and
five feet deep on a single pass. The Road Miner has applications
in the road construction industry and in mining and aggregates
processing operations.
Log Loaders. Trencor also manufactures several different
models of log loaders. Its products include mobile/truck mounted
models, as well as track mounted and stationary models, each of
which is used in harvesting and processing wood products. The
equipment is sold under the Log-Hog name.
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 1994 took place at
seven separate locations. The Company's manufacturing
operations consist primarily of fabricating steel components and
the assembly and testing of its products to ensure quality control
standards have been achieved.
Marketing
The Company markets its products both domestically and
internationally. The principal purchasers of the Company's
products include highway and heavy equipment contractors,
utility contractors, pipeline contractors, open mine operators,
quarry operators and foreign and domestic governmental
agencies. The Astec division (now Astec, Inc.) sells directly to
its customers with domestic, soil remediation and international
sales departments. Astec, Inc. also has a branch in Chino,
California to service customers in the western United States.
Telsmith products are sold through two leased branch locations
in San Francisco, California and Sharon, Massachusetts, as well
as through a combination of direct sales, domestic and
international and dealer sales. Heatec, 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%
of Heatec's sales volume during 1994. Direct sales employees
are paid salaries and are generally entitled to commissions after
obtaining certain sales quotas. See "Business - 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, approximately 200
representatives of contractors and owners of hot 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 mix asphalt business and
other industry segments in which the Company manufactures
products.
In addition to the seminars, the Company published a
number of detailed technical bulletins covering various
technological and business issues relating to the asphalt
industry.
Patents and Trademarks
The Company seeks to obtain patents to protect the novel
features of its products. The Company and its subsidiaries hold
67 United States patents and 39 foreign patents. There are 24
United States and 16 foreign patent applications pending.
The Company and its subsidiaries have approximately 40
trademarks registered in the United States, including logos for
Astec, Telsmith, Roadtec and Trencor, and the names ASTEC,
TELSMITH, HEATEC, LOG HOG, ROADTEC and TRENCOR.
Many of
these trademarks are also registered in foreign countries,
including Canada, Great Britain, Mexico, Australia and Japan.
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,
the Company and its subsidiaries had 143 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, the Company had a backlog for
delivery of products at certain dates in the future of
approximately $50,500,000. At December 31, 1993 the total
backlog was approximately $33,100,000. 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 held companies with resources significantly greater
than the Company and various smaller manufacturers. Hot mix
asphalt plant competitors include CMI Corporation; Cedarapids,
Inc., a division of Raytheon Company; and Gencor Industries,
Inc.
Paving equipment competitors include Caterpillar Paving
Products Inc. (including the Company's former Barber-Greene
product line), a subsidiary of Caterpillar Inc.; Blaw-Knox
Construction Equipment Company, a subsidiary of Clark
Equipment Co.; Ingersoll-Rand Company; and Cedarapids, Inc.
The market for the Company's heat transfer equipment is
diverse because of the multiple applications for such equipment.
Its principal competitor is Gencor/Hyway Heat Systems. The
Company's milling machine equipment competitors include
Ingersoll-Rand Company; CMI Corporation; Cedarapids, Inc.;
Caterpillar; and Wirtgen America, Inc. Aggregates processing
equipment competitors include the Pioneer Division of Portec,
Inc.; Nordberg, Inc.; Eagle Iron Works; Boliden Allis, a member
of the Trelleborg Group; Cedarapids, Inc.; and other smaller
manufacturers, both domestic and foreign. Competition for sales
of trenching and excavating equipment includes Ditch Witch; J.I.
Case; Vermeer and other smaller manufacturers in the small
utility trencher market.
As a whole, imports do not constitute significant
competition in the United States; however, in international sales,
the Company generally competes with foreign manufacturers
which may have a local presence in the market the Company is
attempting to penetrate.
Asphalt and concrete are generally considered competitive
products as a surface choice for new roads and highways. A
portion of the interstate highway system is paved in concrete,
but a majority of all surfaced roads in the United States are
paved with asphalt. Although concrete is used for some new road
surfaces, asphalt is used for virtually all resurfacing, even the
resurfacing of most concrete roads. Management does not believe
that concrete, as a competitive surface choice, materially
impacts the Company's business prospects.
Regulation
The Company does not operate within a highly regulated
industry. However, air pollution equipment manufactured by the
Company principally for hot 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
At December 31, 1994, the Company and its subsidiaries
employed 1,531 persons, of which 1,045 were engaged in
manufacturing operations, 176 in engineering and design
functions and 310 in selling, administrative and management
functions. Telsmith has a labor agreement expiring October 14,
1995. None of the Company's other employees are covered by a
collective bargaining agreement. 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,
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 and has relocated its manufacturing and office
operations to this location. Except as set forth above,
management believes that each of the Company's facilities
provide 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 has been President and a director of Astec
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, Senior Vice President since 1984,
Secretary of the Company since 1972 and Treasurer since 1994.
Mr. Guth, who has been a director since 1972, was the Vice
President of the Company from 1972 until 1984. From 1969 to
1972, Mr. Guth was the Controller of the Asphalt Division of
CMI Corporation. He is 55.
F. McKamy Hall, a Certified Public Accountant, has
served as Controller of the Company since May 1987. From
1985 to 1987, Mr. Hall was Vice President-Finance of Quadel
Management Corporation, a company engaged in real estate
management. He is 52.
Thomas R. Campbell has served as President of Roadtec,
Inc. since 1988. From 1981 to 1988 he served as Operations
Manager of Roadtec. Mr. Campbell and J. Don Brock, President
of the Company, are first cousins. Mr. Campbell is 45.
W. Norman Smith has served as the President of Astec,
Inc. since December 1, 1994. He formerly served as President
of Heatec, Inc. from 1977 to 1994. From 1972 to 1977, Mr.
Smith was a Regional Sales Manager with the Company. From
1969 to 1972, Mr. Smith was an engineer with the Asphalt
Division of CMI Corporation. Mr. Smith has also served as a
director of the Company since 1972. He is 55.
Jerry F. Gilbert has served as President of Trencor, Inc.
since 1981. From 1973 to 1980, Mr. Gilbert was self-
employed in the real estate investment and insurance field. Mr.
Gilbert has also served as a director of the Company since May,
1991. He is 49.
Robert G. Stafford has served as President of Telsmith,
Inc., formerly the Barber-Greene Company, since April 1991.
Between January 1987 and January 1991, Mr. Stafford served
as President of Telsmith, Inc., a subsidiary of Barber-Greene.
From 1984 until the Company's acquisition of Barber-Greene in
December 1986, Mr. Stafford was Vice President - Operations
of Barber-Greene and General Manager of Telsmith. From 1979
to 1984 he served as Director-Engineering and Operations for
Telsmith. He became a director of the Company in March 1988.
He is 56.
James G. May has served as President of Heatec, Inc.
since December 1, 1994. From 1983 until 1994 he served as Vice
President of Engineering of Astec, Inc. He is 50.
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".
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, were as
follows:
Price Per Share
1994 High Low
1st Quarter 20 1/8 13 1/2
2nd Quarter 17 5/8 13
3rd Quarter 15 12 1/2
4th Quarter 15 7/8 11 5/8
Price Per Share
1993 High Low
1st Quarter 13 8 1/2
2nd Quarter 14 9 7/8
3rd Quarter 14 7/8 11 3/8
4th Quarter 15 3/4 11
The number of holders of record of the Company's
Common Stock as of March 10,1995, was 821.
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-4 of this
Report.
Item 8. Financial Statements and Supplementary Data
Financial statements and supplementary financial
information appear on pages A-5 to A-22 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, 1995 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". 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, 1995 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", "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, 1995 is incorporated herein by reference.
Item 13. Certain Relationships and Related 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.
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,
1994 and 1993.
Consolidated Statements of Income for the Years
Ended December 31, 1994, 1993 and 1992.
Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1994, 1993
and 1992.
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1994, 1993 and
1992.
Notes to Consolidated Financial Statements.
(a)(2) Other than as described below, Financial
Statement Schedules are not filed with this Report because the
Schedules are either inapplicable or the required information is
presented in the Financial Statements or Notes thereto. The
following Schedules appear in Appendix "A" to this Report and
are filed as a part hereof:
Report of Independent Auditors.
Schedule VIII - Valuation and Qualifying Accounts.
(a)(3) The following Exhibits* are incorporated by
reference into or are filed with this Report:
2.1 Share Purchase and Transfer Agreement, dated October 13,
1994, between the Company and Wibau-Astec Maschinenfabrik
GmbH (incorporated by reference to the Form 8-K effective
November 7, 1994, File No. 0-14714).
2.2 Share Purchase and Transfer Agreement by and between the
Company and Gibat Ohl Ingenieurgesellschaft fur Anlagentechnik mbH,
dated as of October 5, 1994.
3.1 Restated Charter of the Company (incorporated by reference to the
Company's Registration Statement on Form S-1, effective June 18,
1986, File No. 33-5348).
3.2 Articles of Amendment to the Restated Charter of the Company,
effective September 12, 1988 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1988,
File No. 0-14714).
[FN]
The Exhibits are numbered in accordance with Item 601 of
Regulation S-K. Inapplicable Exhibits are not included in the
list.
3.3 Articles of Amendment to the Restated Charter of the Company,
effective June 8, 1989 (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1989, File No. 0-14714).
3.4 Amended and Restated Bylaws of the Company, adopted March 14, 1990
(incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1989, File No. 0-14714).
4.1 Trust Indenture between City of Mequon and Firstar Trust
Company, as Trustee, dated as of February 1, 1994 (incorporated
by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1993, File No. 0-14714).
4.2 Indenture of Trust, dated April 1, 1994, by and between Grapevine
Industrial Development Corporation and Bank One, Texas, NA, as Trustee.
10.1 Agreement, dated December 24, 1976, between the Company and
Jemco International, Inc. (incorporated by reference to the
Company's Registration Statement on Form S-1, effective June 18,
1986, File No. 33-5348).
10.2 Supplemental Agreement, dated December 30, 1982, between the
Company and Jemco International, Inc. (incorporated by reference to
Company's Registration Statement on Form S-1, effective June 18,
1986, File No. 33-5348).
10.3 Restated License and Trademark Agreement, dated March 25, 1988,
between the Company and Barber-Greene Europa B.V. (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).
10.73 Technology Contribution
Agreement, dated July 12, 1993,
between the Company and Wibau-
Astec Maschinenfabrik GmbH
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1993, File No. 0-14714).
10.74 Seventh Amendment, dated January
21, 1994 between the Company
and The First National Bank of
Chicago, with respect to the
Amended and Restated Credit
Agreement, dated April 27, 1989
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1993, File No. 0-14714).
10.75 Loan Agreement between City of
Mequon, Wisconsin and Telsmith,
Inc. dated as of February 1, 1994
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1993, File No. 0-14714).
10.76 Credit Agreement by and between
Telsmith, Inc. and M&I Marshall &
Ilsley Bank, dated as of February
1, 1994 (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1993, File No.
0-14714).
10.77 Security Agreement by and between
Telsmith, Inc. and M&I Marshall &
Ilsley Bank, dated as of February
1, 1994 (incorporated by
reference to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1993, File No.
0-14714).
10.78 Mortgage and Security Agreement
and Fixture Financing Statement by
and between Telsmith, Inc. and M&I
Marshall & Ilsley Bank, dated as of
February 1, 1994 (incorporated
by reference to the Company's
Annual Report on Form 10-K for
the year ended December 31,
1993, File No. 0-14714).
10.79 Guarantee of Astec Industries, Inc.
in favor of M&I Ilsley Bank, dated
as of February 1, 1994
(incorporated by reference to the
Company's Annual Report on Form
10-K for the year ended December
31, 1993, File No. 0-14714).
10.80 Guarantee of Wibau-Astec Maschinenfabrik GmbH in favor of
Dresdner Bank Aktiengensellschaft,dated as of December 22, 1993.
10.81 Letter of Guarantee of Wibau-Astec Maschinenfabrik GmbH in favor of
Berliner Hondels - und Frankfurter Bank, dated as of
December 22, 1993.
10.82 Guarantee of Wibau-Astec Maschinenfabrik GmbH in favor of
Bayerische Vereinsbank, dated as of December 22, 1993.
10.83 Loan Agreement dated as of April 1,1994, between Grapevine
Industrial Development Corporation and Trencor, Inc.
10.84 Letter of Credit Agreement, dated April 1, 1994, between The First
National Bank of Chicago and Trencor, Inc.
10.85 Guaranty Agreement, dated April 1, 1994, between Astec Industries,
Inc. and Bank One, Texas, NA, as Trustee.
10.86 Astec Guaranty, dated April 29, 1994, of debit of Trencor, Inc. in
favor of The First National Bank of Chicago.
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.
10.89 Waiver for December 31, 1994, dated February 24, 1995 with respect
to the First National Bank of Chicago Credit Agreement dated July 20, 1994.
11. Statement Regarding Computation of Per Share Earnings.
22. Subsidiaries of the Registrant.
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.
(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.
APPENDIX "A"
to
ANNUAL REPORT ON FORM 10-K
ITEMS 8 and 14(a)(1) and (2), (c) and (d)
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
ASTEC INDUSTRIES, INC.
Contents Page
Selected Consolidated Financial Data
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Report of Independent Auditors
Consolidated Balance Sheets at December 31, 1994 and 1993
Consolidated Statements of Income for the Years Ended December
31, 1994, 1993 and1992
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Schedule VIII - Valuation and Qualifying Accounts
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT AS NOTED*)
Consolidated Income Statement Data (1)
1994 1993 1992 1991 1990
Net sales $213,806 $172,801 $149,133 $134,512 $134,982
Selling, general, and
administrative expenses 31,142 28,624 23,969 20,456 21,946
Patent suit damages
and expenses
net recoveries
and accrual adjustments (14,947) 375 567 3,868 8,329
Research and development 3,166 2,923 2,580 2,503 1,918
Interest expense 713 1,788 3,241 4,597 6,310
Income loss from
continuing operations 23,436 9,338 6,014 524 (13,463)
Discontinued operations 3,530 (2,771)
Net income loss 23,436 9,338 6,014 4,054 (16,234)
Income loss per common
share from continuing
operations* (2) 2.38 1.07 .82 .07 (1.87)
Consolidated Balance Sheet Data
Working capital $ 53,000 $ 40,767 $ 33,641 $ 31,167 $ 49,776
Total assets 155,964 102,967 87,885 90,989 112,414
Total short-term debt 8,573 10 3,103 4,862 8,836
Long-term debt, less current
maturities 16,155 22,660 29,387 50,305
Shareholders' equity 90,373 64,105 27,631 21,279 17,208
Book value per common
share at year-end* (2) 9.04 6.54 3.78 2.95 2.39
Quarterly Financial Highlights (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994
Net sales $ 46,226 $ 62,694 $ 49,021 $ 55,865
Gross profit 11,029 14,013 11,216 11,839
Net income 2,876 5,212 3,131 12,217
Net income per
common share* (2) .29 .53 .32 1.23
1993
Net sales $ 43,401 $ 52,436 $ 38,838 $ 38,126
Gross profit 10,380 11,878 9,268 10,369
Net income 1,578 3,481 2,116 2,163
Net income per
common share* (2) .22 .45 .22 .22
Common Stock Price* (2)
1994 High 20-1/8 17-5/8 15 15-7/8
1994 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 is approximately 900.
[FN]
1 Restated to reflect paving equipment business of Barber-Greene as a
discontinued operation.
2 Restated to retroactively reflect the two-for-one stock split effected in
the form of a dividend on August 12, 1993
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations, 1994 vs. 1993
Net sales for 1994 increased $41,005,000 or approximately 23.7% 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, sales increased $30,872,000 or 17.9%. International sales by
domestic subsidiaries were 24.3% 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.
The gross profit margin for 1994 was 22.5% compared to 24.2% for 1993.
Domestic 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, Texas from Grand
Prairie, Texas.
3) Inefficiencies related to the training of a significant number of new
manufacturing employees at Trencor and training of replacements for
retirees at Telsmith.
4) Trencor's introduction of the Log Hog product line.
Offsetting these negative factors were improved margins at Heatec and
increased manufacturing efficiencies at Roadtec, both of which positively
affected the gross profit margin.
In 1994, selling, general, and administrative expenses decreased to 14.6% of
net sales from 16.6% in 1993. The increase in sales is the primary reason for
the percentage reduction.
Research and development expenses declined from 1.7% of net sales in 1993
to 1.5% in 1994, again, primarily due to the increase in sales.
In October 1994, the decision by the United States Supreme Court to deny
certiorari in connection with the appeal filed by CMI Corporation "CMI"
brought to a successful end the Company's long-standing patent litigation
with CMI. The Supreme Court's actions effectively denied CMI's request to
appeal a lower court ruling that found that Astec did not have any liability
for infringement of CMI patents and left intact damages payable by CMI to
Astec. As a result, previously established liabilities of $13,870,000,
payable by 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 9 to the Consolidated Financial Statements.
Because our joint venture, Wibau-Astec, continued to be unprofitable, it
became apparent that major changes were necessary and we began a plan of
restructuring. Restructuring costs of $1,500,000 related 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% of net sales from 1.0% in 1993.
This is due to a decrease in overall interest expense combined with the
increase in sales. Plant expansion and improvements were financed by
industrial revenue bonds at favorable interest rates.
Other income decreased by approximately $371,000 or 15.9% in 1994. As
noted in the 1993 Management Discussion and Analysis, one international
licensee that was not renewed for 1994 produced $665,000 in license fees in
1993.
The equity in loss of joint venture of $3,177,000 reflects 50% of the losses
from the joint venture for the ten months prior to the purchase of the
remaining 50% interest in Wibau-Astec.
Income tax expense for 1994 was $2,300,000 or approximately 8.9% of pre-
tax income. The primary reasons for the variance from the normal corporate
tax rate are the utilization of net operating loss carryforwards and
establishment of a deferred tax benefit relative to net deductible temporary
differences which could be recovered against future taxes or taxes previously
paid. 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.
Due to the utilization of the majority of its credit carryforwards, the
Company expects its tax rate for 1995 to approximate the normal corporate
rate.
The backlog at December 31, 1994 was $50,465,000 compared to $33,100,000 at
December 31, 1993, which represents a 52.4% increase. The increase is
primarily due to the optimism of our customers about the strength of the
economy and the performance and competitiveness of our products.
Results of Operations, 1993 vs. 1992
Net sales from continuing operations for 1993 increased $23,668,000, or
approximately 15.9% compared to 1992. International sales declined from
21.9% of total company net sales in 1992 to 17.2% in 1993. Domestic sales
increased by 22.9% in 1993 and 18% in 1992. The improved sales reflect the
optimism of our customers with respect to both the continued improvement of
the economy and the federal role in providing funding for the nation's
surface transportation systems through 1997 with the passage of the
Intermodal Surface Transportation Efficiency Act at the end of 1991.
The gross profit margin for 1993 was 24.2% compared to 22.9% for 1992.
Pricing improved slightly in 1993, but the greatest impact on gross profit
margins was the manufacturing efficiency achieved with improved volume.
In 1993, selling, general, and administrative expenses increased to 16.6% of
net sales from 16.1% in 1992. Large increases were incurred for exhibition
expense for the Conexpo show, legal expenses, international dealer
commissions and profit sharing bonuses.
Research and development expenses as a percentage of sales remained
constant at 1.7% of sales for both 1993 and 1992.
Patent suit damages and expenses decreased by $192,000 compared to 1992
and were 0.2% of 1993 net sales compared to .4% in 1992. The patent suit
damages and expenses relate to the patent suits by CMI against Astec and its
former Barber-Greene subsidiary and the countersuit by Astec against CMI.
See "Contingencies" and Note 9 to the Consolidated Financial Statements.
Interest expense for 1993 decreased to 1.0% of net sales from 2.2% of net
sales in 1992. This decrease was primarily the result of the Company's
reduction of its debt by approximately $25,753,000 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 $545,000 in prepayment penalties and expenses.
Other income in 1993 increased by approximately $370,000 or 16.6% over
1992. The increase is primarily due to increased license fee income which
more than offset a nonrecurring refund of unemployment taxes in 1992.
Increases in service income and the forfeiture of two customer deposits also
contributed to the increase. One international licensee was not renewed for
1994 that produced approximately $665,000 of license fee income in 1993.
The equity in loss of joint venture of $720,000 reflects 50% of the loss from
the Wibau-Astec joint venture in 1993. This loss reflects the continued
European recession in 1993.
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.
Liquidity and Capital Resources
Working capital increased to $53,000,000 at December 31, 1994 from
$40,767,000 at December 31, 1993. The Company's debt to equity ratio was
.27 to 1 at December 31, 1994 and .0001 to 1 at December 31, 1993. The
increase in 1994 reflects the utilization of industrial revenue bonds to
expand and modernize plant facilities as well as debt assumed in connection
with acquisitions.
Total short-term borrowings, including current maturities of long-term debt,
were $8,573,000 at December 31, 1994 and $10,000 at December 31, 1993.
Long-term debt, less current maturities was $16,155,000 at December 31,
1994 and zero at December 31, 1993.
Capital expenditures of $21,886,000 were made in 1994 as compared to
capital expenditures in 1993 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.
The Company has a revolving credit loan agreement with The First National
Bank of Chicago. The line of credit is $15,000,000. This credit facility
expires June 30, 1997. At December 31, 1994, $2,655,000 of the line of
credit was utilized. The credit line is unsecured. At December 31, 1994, the
Company was in violation of the covenant relative to capital expenditures and
has received a waiver for such violation.
Wibau-Astec has German bank lines of credit available totaling $11,253,669
(17,500,000 DM) of which $8,069,577 was outstanding at December 31,
1994. Gibat Ohl has a German bank line of credit available of $2,122,000
(3,300,000 DM), $2,925 of which was utilized at December 31, 1994.
On January 31, 1989, the Company placed $10,000,000 in Senior Notes and
$10,000,000 in Senior Subordinated Notes with Principal Mutual Life
Insurance Company. These notes were repaid during the second and third
quarters of 1993 using cash received from the secondary public stock offering.
For additional information on current and long-term debt, see Note 6 to the
Consolidated Financial Statements.
Contingencies
See Note 9 to Consolidated Financial Statements for information on certain
pending litigation and contingent liabilities arising from recourse financing
arrangements.
Environmental Matters
Based on information available from environmental consultants, the
Company has no material reserve requirements for potential environmental
liabilities.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Astec Industries, Inc.
We have audited the accompanying consolidated balance sheets of Astec
Industries, Inc. and subsidiaries as of December 31, 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, 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, 1994 and
1993, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31, 1994, 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 18,116,773
Notes and other receivables 215,390 973,507
Inventories note 1, 3 56,309,735 40,005,281
Prepaid expenses 2,149,795 1,272,524
Deferred tax asset note 8 2,901,799
Other current assets 236,229 349,886
Patent damage escrow funds note 9 12,309,420
Total current assets 102,136,572 76,485,609
Property and equipment, net note 4 42,348,792 23,659,015
Other assets:
Goodwill 8,370,662 1,966,233
Notes receivable 9,541
Deferred tax asset note 8 1,827,494 572,498
Other 1,280,069 274,038
Total other assets 11,478,225 2,822,310
Total $ 155,963,589 $ 102,966,934
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 8,072,502
Current maturities of long-term debt note 6 500,000 $ 9,520
Accounts payable 14,262,518 10,169,871
Customer deposits 6,301,481 1,430,449
Accrued product warranty 3,470,703 1,781,733
Income taxes payable note 8 1,987,511 1,111,928
Reserve for patent damages note 9 13,250,048
Other accrued liabilities 14,541,920 7,965,112
Total current liabilities 49,136,635 35,718,661
Long-term debt, less
current maturities note 6 16,155,000
Deferred retirement costs note 7 192,242 3,033,536
Other 106,716 109,838
Total liabilities 65,590,593 38,862,035
Shareholders' equity: note 1,10
Preferred stock, authorized 2,000,000 shares of
$1.00 par value; none issued
Common stock, authorized 20,000,000 shares of
$.20 par value; issued and outstanding,
10,001,831 in 1994 and 9,795,402 in 1993 2,000,366 1,959,080
Additional paid-in capital 50,900,908 48,200,446
Foreign currency translation adjustment 89,975
Retained earnings 37,381,747 13,945,373
Total shareholders' equity 90,372,996 64,104,899
Total $ 155,963,589 $ 102,966,934
[FN]
See notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
1994 1993 1992
Net sales $ 213,806,411 $ 172,801,465 $ 149,132,958
Cost of sales 165,709,245 130,906,009 114,960,249
Gross profit 48,097,166 41,895,456 34,172,709
Selling, general, and
administrative expenses 31,142,335 28,624,179 23,968,553
Research and
development expenses 3,165,795 2,922,921 2,580,146
Patent suit damages
and expenses (net recoveries
and accrual
adjustments) note 9 (14,947,498) 374,740 566,502
Restructuring costs note 12 1,500,469
Income from operations 27,236,065 9,973,616 7,057,508
Other income (expense):
Interest expense (712,853) (1,787,742) (3,241,066)
Loan prepayment penalty
and expenses note 6 (544,783)
Interest income 426,489 516,957 392,798
Other income - net 1,963,633 2,334,407 2,226,820
Equity in loss of joint
venture note 2 (3,176,834) (720,000)
Income before income taxes 25,736,500 9,772,455 6,436,060
Income taxes note 8 2,300,126 434,246 421,807
Net income $ 23,436,374 $ 9,338,209 $ 6,014,253
Earnings per Common and Common Equivalent Share:
Net income: note 1
Primary $ 2.38 $ 1.07 $ .82
Fully diluted .81
Weighted average number of
common and common
equivalent shares outstanding: note 1
Primary 9,843,980 8,694,478 7,349,612
Fully diluted 7,459,304
[FN]
See notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993 and 1992
Common Stock note 1 Additional Foreign Currency Retained
Shares Amount Paid-In Capital Translation Adjustment Earnings
Balance,
December 31,
1991 3,604,063 $ 720,813 $ 21,965,755 $ (1,407,089)
Issuance of
common
stock 54,571 10,900 325,950
Net income 6,014,253
Balance,
December 31,
1992 3,658,634 731,713 22,291,705 4,607,164
Issuance of
common
stock 1,243,067 248,627 26,887,481
Stock
dividend 4,893,701 978,740 (978,740)
Net income 9,338,209
Balance,
December 31,
1993 9,795,402 1,959,080 48,200,446 13,945,373
Issuance of
common
stock 206,429 41,286 2,700,462
Change during year $89,975
Net income 23,436,374
Balance,
December 31,
1994 10,001,831 $2,000,366 $50,900,908 $89,975 $37,381,747
[FN]
See notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
1994 1993 1992
Cash Flows from Operating Activities
Net income $ 23,436,374 $ 9,338,209 $ 6,014,253
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 3,941,871 3,105,694 3,448,398
Provision for doubtful
accounts 362,089 742,752 719,117
Provision for inventory
reserves 3,621,218 2,952,918 2,937,459
Provision for warranty 2,616,565 2,689,441 2,699,657
Provision for patent damages
(net recoveries and
accrual adjustments) (13,250,048) 13,697
Foreign currency translation
adjustment 89,975
(Gain) loss on sale of
fixed assets 322,587 (19,976) (224,367)
Equity in loss of joint venture 3,176,834 720,000
(Increase) decrease in:
Receivables (7,660,990) (7,105,758) (2,646,546)
Inventories (3,537,955) (2,988,734) (563,442)
Prepaid expenses (803,177) (337,248) (38,676)
Patent damage escrow funds 12,309,420 (705,431) (3,667,305)
Deferred tax asset (4,156,695) (572,598)
Other assets (1,916,921) (400,318) 198,238
Increase (decrease) in:
Accounts payable 2,138,449 1,054,970 (138,856)
Customer deposits (1,738,643) 113,091 (555,655)
Accrued product warranty (2,256,128) (2,459,558) (2,421,631)
Income taxes payable 400,355 877,225 169,777
Reserve for patent damages 681,711 642,237
Other accrued liabilities (947,201) 1,376,519 (1,363,786)
Total adjustments (7,288,395) (261,603) (805,381)
Net cash provided by
operating activities 16,147,979 9,076,606 5,208,872
Cash Flows From Investing Activities
Proceeds from sale of property
and equipment - net 307,099 74,284 1,827,358
Expenditures for property
and equipment (21,886,011) (8,767,135) (2,492,249)
Repayments on notes receivable 600,499 47,672 89,071
Investment in joint venture (635,700) (589,900)
Cash payments in connection
with business combination,
net of cash acquired 1,447,965
Net cash (used by)
investing activities (20,166,148) (9,235,079) (575,820)
[FN]
See notes to Consolidated Financial Statements.
Year Ended December 31,
1994 1993 1992
Cash Flows From Financing Activities
Proceeds from industrial
bonds 14,000,000
Proceeds from issuance of
common stock 34,750 27,136,109 336,850
Net (repayments) borrowings
under revolving credit loan 2,655,000 (4,675,000) (1,655,000)
Principal repayments of
loans and notes payable (5,658,355) (21,078,374) (6,831,560)
Net cash provided by (used by)
financing activities 11,031,395 1,382,735 (8,149,710)
Increase (decrease) in cash
and cash equivalents 7,013,226 1,224,262 (3,516,658)
Cash and cash equivalents,
beginning of period 3,458,218 2,233,956 5,750,614
Cash and cash equivalents,
end of period $ 10,471,444 $ 3,458,218 $ 2,233,956
Supplemental Cash Flow Information
Cash paid during the year for:
Interest $ 595,767 $ 2,600,688 $ 3,213,499
Income taxes $ 6,282,709 $ 176,021 $ 462,210
Excluded from the Consolidated
Statements of Cash Flows
were the following effects
of non-cash investing and
financing activities:
Non-cash assets assumed in
connection with repossessions:
Trade receivables $ (1,421,239)
Notes receivable (183,855)
Inventories 1,421,239
Other current assets 183,855
Capital stock issued for purchase
of foreign subsidiary:
Investment in foreign subsidiary $2,706,996
Capital stock (39,871)
Additional paid-in-capital (2,667,125)
Non-cash sale of assets
by assumption of receivable:
Property and equipment $ (8,244)
Receivable - other 8,244
Non-cash transfer of assets:
Trade receivables $90,435
Notes receivable (90,435)
[FN]
See notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Astec
Industries, Inc. and its subsidiaries. The Company's wholly-owned
subsidiaries at December 31, 1994 are as follows:
Astec, Inc.
Heatec, Inc.
Telsmith, Inc.
Roadtec, Inc.
Trencor, Inc.
Wibau-Astec Maschinenfabrik GmbH (Wibau-Astec)
Gibat Ohl Ingenieurgesellschaft fur Anlagentechnik (Gibat Ohl)
All significant intercompany transactions have been eliminated in
consolidation.
Segment Information - The Company operates in one industry
segment. Its products are used predominately for road construction and for
the manufacture and processing of construction aggregates. International
sales by domestic subsidiaries were $52,031,000, $29,693,000, and $32,659,000,
for the years ended December 31, 1994, 1993 and 1992, respectively. Net sales
and net loss (including equity in loss of joint venture) of foreign
operations for the year ended December 31, 1994, were $10,133,000 and
$5,394,000, respectively. At December 31, assets of foreign subsidiaries were
$23,953,000.
Cash Equivalents - The Company considers all highly liquid instruments
purchased with a maturity of less than three months to be cash equivalents.
Inventories - Inventories excluding used equipment are stated at the
lower of first-in, first-out cost or market. Used equipment inventories are
stated on the specific unit cost method, which in the aggregate is
less than market.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is computed generally on the straight-line method for financial
reporting purposes at rates considered sufficient to amortize costs
over estimated useful lives. Depreciation is computed generally on both
accelerated and straight-line methods for tax reporting purposes.
Maintenance and repairs are expensed as incurred.
Goodwill - Goodwill represents the excess of cost over the fair value of net
assets acquired. Goodwill amounts are being amortized using
the straight-line method over twenty years. Additions to goodwill in
1994 reflect the purchase of the Capital Trencher product line, the Log Hog
product line, the additional 50% of Wibau-Astec, and Gibat Ohl.
Product Warranty - The Company provides product warranties against defects in
materials and workmanship for periods ranging from ninety days to one
year following the date of sale. Estimated costs
of product warranties are charged to cost of sales in the period of the sale.
Revenue Recognition - A portion of the Company's equipment sales represents
equipment produced in the Company's plants under short-term contracts for a
specific customer project or equipment designed to
meet a customer's specific requirements. Equipment revenues are recognized in
compliance with the terms and conditions of each contract, which is ordinarily
at the time the equipment is shipped. Certain
contracts include terms and conditions through which the Company recognizes
revenues upon completion of equipment production which is subsequently stored
at the Company's plant at the customer's request. Revenue is recorded on
such contracts upon the customer's assumption of title and all risks of
ownership.
Credit Risk - The Company sells products to a wide variety of customers. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains an allowance for
doubtful accounts at a level which management believes is sufficient to cover
potential credit losses. As of December 31, 1994 concentrations of credit
risk with respect to trade receivables are limited due to the wide variety of
customers.
Earnings Per Share - Primary and fully diluted earnings per share are based on
the weighted average number of common and common equivalent shares outstanding
and include the potentially dilutive effects of the exercise of stock options
in years where there are earnings. Fully diluted earnings per share are not
presented for 1994 and 1993 since the dilution is not material. Earnings
per share information has been restated to retroactively reflect
the two-for-one stock split effected in the form of a dividend on August 12,
1993.
2. Business Combinaions
Effective July 1, 1993, the Company entered into a joint venture with
Putzmeister-Werk Maschinenfabrik GmbH (Putzmeister) to form
a new German limited liability company,Wibau-Astec Maschinenfabrik
GmbH (Wibau-Astec). Wibau-Astec designed, engineered, manufactured and
marketed asphalt plants, stabilization plants, asphalt and thermal
heaters, hot storage systems and soil remediation equipment. Putzmeister
and the Company each owned 50% of Wibau-Astec. On November 7, 1994, the
Company acquired the remaining shares of Wibau-Astec from Putzmeister for
$67,400. The acquisition was accounted for as a purchase effective
November 7, 1994, and accordingly, the results of operations
and accounts of Wibau-Astec subsequent to November 7, 1994 are included in the
Company's consolidated financial statements. The purchase price was allocated
to the net tangible assets of Wibau-Astec based on the estimated fair market
values of the assets acquired. As required by the purchase
method of accounting, the excess amount of the purchase price over the fair
value of Wibau-Astec's net tangible assets was recorded as goodwill
and is being amortized using the straight-line method over 20
years. Subsequent to the acquisition of Wibau-Astec, the Company undertook a
plan to restructure Wibau-Astec's operations. See Note 12 - Restructuring
Costs.
Effective October 17, 1994, the Company acquired the operating assets and
liabilities of Gibat Ohl Ingenieurgesellschaft fur Anlagentechnic (Gibat Ohl)
in exchange for 193,357 shares of the Company's common stock and approximately
$2,760,000 in cash. The acquisition was accounted for as a purchase
effective October 17, 1994, and accordingly, the results of operations and
accounts of Gibat Ohl subsequent to October 17, 1994 are included
in the Company's consolidated financial statements. The purchase price of
approximately $5,460,000 was allocated to the net tangible assets of Gibat Ohl
based on the estimated fair market values of the assets acquired. The
excess of the purchase price over the fair market value of Gibat
Ohl's net tangible assets was recorded as goodwill and is being amortized
using the straight-line method over 20 years.
A summary of the net assets acquired is as follows:
Wibau-Astec Gibat Ohl
Current assets $ 4,938,766 $ 11,007,164
Property, plant and equipment 412,193 300,657
Current liabilities (8,678,984) (10,029,223)
Other liabilities (2,038,165)
Goodwill 1,193,259 4,153,364
Net assets acquired excluding cash (4,172,931) 5,431,962
Cash 4,240,331 32,984
Net assets acquired $ 67,400 $ 5,464,946
The following unaudited pro forma summary presents the consolidated results of
operations as if the acquisition of Wibau-Astec and Gibat Ohl had occurred at
the beginning of each period presented. Pro forma adjustments have been made
to reflect the restructuring of Wibau-Astec as described in Note 12. The pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results that would have occurred had the
acquisition occurred at the beginning of the periods presented or of results
which may occur in the future.
Year Ended December 31,
1994 1993
Net sales $ 223,887,000 $ 188,823,000
Income from operations 28,380,000 10,576,000
Net income 24,619,000 9,638,000
Per common and common
equivalent share:
Net income $ 2.50 $ 1.11
Prior to its acquisition of the remaining 50% interest in Wibau-Astec, the
Company's investment in Wibau-Astec was accounted for by the equity method.
Accordingly, net income as presented in the Consolidated Statements of
Income for 1994 and 1993 includes the Company's share of Wibau-Astec's
losses for periods prior to the acquisition of $3,177,000 and $720,000,
respectively.
3. Inventories
Inventories consisted of the following:
December 31,
1994 1993
Raw materials and parts $ 26,705,110 $ 18,418,839
Work-in-process 14,380,192 6,017,940
Finished goods 7,745,709 7,802,956
Used equipment 7,478,724 7,765,546
Total $ 56,309,735 $ 40,005,281
4. Property and Equipment
Property and equipment consisted of the following:
December 31,
1994 1993
Land, land improvements, and buildings $ 26,676,486 $ 14,062,161
Equipment 37,497,348 27,955,598
Less accumulated depreciation (21,880,823) (18,437,672)
Land, buildings, and equipment - net 42,293,011 23,580,087
Rental property:
Equipment 1,703,608 1,703,608
Less accumulated depreciation (1,647,827) (1,624,680)
Rental property - net 55,781 78,928
Total $ 42,348,792 $ 23,659,015
5. Leases
The Company leases certain land, buildings and equipment which are used in its
operations. Total rental expense charged to operations under operating
leases was approximately $615,000, $427,000 and $384,000 for the years ended
December 31, 1994, 1993 and 1992 respectively.
Minimum rental commitments for all noncancelable
operating leases at December 31, 1994, are as follows:
1995 $ 718,000
1996 492,000
1997 246,000
1998 97,000
1999 and beyond 189,000
The Company also leases equipment to customers under short-term contracts
generally ranging from 2 months to 6 months. Rental income under
such leases was $1,394,000, $1,719,000 and $2,470,000, for
the years ended December 31, 1994, 1993 and 1992, respectively.
6. Long-term Debt
Long term debt consisted of the following:
December 31,
1994 1993
Revolving credit loan of
$15,000,000 at December 31, 1994
and 1993, available through
June 30, 1997 at an interest rate of
prime less a quarter, which was 8.25% and 6.0%
at December 31, 1994 and 1993, respectively $ 2,655,000
Loans payable in monthly installments
maturing at various dates through
1995 at interest rates from 7.25% to 14.85% $ 9,520
Industrial Development Revenue Bonds
payable in semi-annual installments through
2006 at weekly negotiated interest rates 6,000,000
Industrial Development Revenue Bonds due in
2009 at weekly negotiated interest rates 8,000,000
Total long-term debt 16,655,000
Less current maturities 500,000 9,520
Long-term debt less
current maturities $ 16,155,000 $ 0
On January 31, 1989, the Company placed $10,000,000 in Senior Notes and
$10,000,000 in Senior Subordinated Notes with Principal Mutual Life Insurance
Company ("Principal"). The proceeds of the notes placed with Principal were
applied to the outstanding revolving credit loan with The First National
Bank of Chicago ("FNBC"). During 1993, both the Senior and Subordinated
Notes with Principal were repaid in full. Related prepayment penalties and
expenses are reflected on a separate line in the Consolidated Statements of
Income.
During 1994, the Company negotiated a new unsecured revolving loan agreement.
The line of credit is $15,000,000 and expires June 30, 1997. At December 31,
1994, the Company was in violation of the covenant relative to capital
expenditures and has received a waiver for such violation.
The aggregate of all maturities of long-term debt
in each of the next five years is as follows:
1995 $ 500,000
1996 500,000
1997 3,155,000
1998 500,000
1999 and beyond 11,500,000
For 1994, the weighted average interest rate on short term borrowings, which
include current maturities of Industrial Revenue Bonds and notes payable,
were 3.46% and 8.75%, respectively.
7. Retirement Benefits
A former subsidiary of the Company, the Barber-Greene Company, had defined
benefit pension plans ("Barber-Greene Plans") covering substantially all of
its employees. Non-union benefits were frozen as of September 1, 1986, and
certain union benefits were frozen as of October 31, 1986. The Company
retained responsibility for the Barber-Greene Plans when it sold the
Barber-Greene Company in 1991. Telsmith, Inc. also sponsors a defined
benefit pension plan covering certain employees hired prior to October 14,
1987 who have chosen not to participate in the Company's 401(k) savings plan.
The benefit is based on years of benefit service multiplied by a monthly
benefit as specified in the plan. The Company's funding policy for its
pension plans is to make the minimum annual contributions required by
applicable regulations.
During 1994, the Company made the decision to terminate the Barber- Greene
Plans and purchased annuities to fund the benefits provided for in the plans.
The Company has requested approval from the Internal Revenue Service to
terminate the plans but has yet to receive such approval. As a result, no
settlement of the plan will occur until 1995. The annuities purchased by the
Company during 1994 are included in plan assets.
A reconciliation of the funded status of the Plans, which is based on a
valuation date of September 30, with amounts reported in the Company's
consolidated balance sheets, is as follows:
1994 1993
Actuarial present value of
benefit obligations:
Vested $ 40,574,462 $ 38,229,010
Nonvested 85,245 251,677
Accumulated benefit obligation $ 40,659,707 $ 38,480,687
Projected benefit obligation $ 40,659,707 $ 38,480,687
Plan assets at fair value 40,589,417 43,018,508
Projected benefit obligation in
excess of (less than) plan assets 70,290 (4,537,821)
Unrecognized net gain 450,751 7,976,321
Prior service cost not
yet recognized in net
periodic pension cost (320,665) (357,323)
Pension liability in the
consolidated balance sheets $ 200,376 $ 3,081,177
Net periodic pension cost for 1994, 1993, and 1992 included the following
components:
Year Ended December 31,
1994 1993 1992
Service cost - benefits earned
during the period $ 31,503 $ 26,873 $ 34,426
Interest cost on projected
benefit obligation 2,565,355 2,754,319 2,761,195
Actual return on plan assets 2,148,873 12,318,009 833,167
Net amortization and deferral 5,405,871 9,345,175 1,948,268
Net (income) expense $ 660,140 $ 191,642 $ 14,186
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 8.5% at September 30, 1994 and
7.0% at September 30, 1993. The expected long-term rate of return on assets
was 9.0% for the years ending September 30, 1994 and 1993. Plan assets are
primarily comprised of corporate equity and corporate and U.S. Treasury debt
securities.
In 1987, the Company adopted deferred savings plans (Savings Plans) under
Section 401 (k) of the Internal Revenue Code, under which substantially all
employees of the Company and its subsidiaries are eligible. In 1991 the
Savings Plans were consolidated and provide that the Company will match an
amount equal to 50% of employee savings subject to certain limitations. The
total expense for such matching was approximately $696,000, $567,000 and
$485,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
In addition to the retirement plans discussed above, the Company has an
unfunded postretirement medical and life insurance plan covering employees of
its Telsmith, Inc. subsidiary and retirees of its former Barber-Greene
subsidiary. Effective January 1, 1993, the Company adopted SFAS No. 106,
(Employers' Accounting for Postretirement Benefits Other than Pensions). The
accumulated postretirement benefit obligation (APBO) at adoption was
approximately $674,000 and is being amortized over twenty years.
The accumulated postretirement benefit obligation and the amount
recognized in the Company's consolidated balance sheets, is as follows:
December 31,
1994 1993
Accumulated postretirement
benefit obligation:
Retirees $ 130,600 $ 207,500
Active employees 473,000 425,800
603,600 633,300
Unamortized transition obligation 605,600 639,300
Unrecognized net gain 118,800 29,800
Accrued postretirement
benefit cost $ 116,800 $ 23,800
Net periodic postretirement benefit cost included the following components:
Year Ended December 31,
1994 1993
Service cost $ 53,500 $ 53,500
Interest cost 42,900 42,900
Amortization of transition
obligation 33,700 33,700
Net expense $ 130,100 $ 130,100
Postretirement benefit costs for 1992 were not material. A discount rate of
8.5% was used in calculating the APBO. The APBO assumes a 13.5% increase in
per capita health care costs decreasing gradually to 5.8% for years 2012 and
later. A 1% increase in the medical inflation rate would increase the APBO by
approximately $26,800 and the expense by approximately $6,000.
8. Income Taxes
Effective January 1, 1993, the Company adopted SFAS No. 109. "Accounting for
Income Taxes". Prior years' financial statements have not been restated nor
was there any cumulative effect on income from the adoption of SFAS No. 109.
For financial reporting purposes, income before income taxes includes the
following components:
Year Ended December 31,
1994 1993 1992
United States $ 30,726,395 $ 9,474,455 $ 6,436,060
Foreign:
License income 404,000 1,018,000
Equity in loss of
joint venture (3,176,834) (720,000)
Loss from foreign subsidiary (2,217,061)
Income before
income taxes $ 25,736,500 $ 9,772,455 $ 6,436,060
The provision for income taxes consisted of the following:
Year Ended December 31,
1994 1993 1992
Current $ 7,029,419 $ 434,246 $ 421,807
Deferred (benefit) (4,729,293)
Total provision for
income taxes $ 2,300,126 $ 434,246 $ 421,807
A reconciliation of the provision for income taxes at the statutory rate to
those provided is as follows:
Year Ended December 31,
1994 199 1992
Tax at statutory rates $ 9,007,775 $ 3,322,635 $ 2,188,260
Effect of utilization
of net operating loss
carryforwards net of
alternative minimum tax (3,008,000) (3,155,253) (1,921,766)
Effect of utilization
of alternative minimum
tax credits (382,000)
Benefit from foreign
sales corporation (265,000)
State taxes, net of federal
income tax benefit 212,000 115,271 155,313
Income taxes of
other countries 27,000 151,593
Loss from foreign
operations 2,636,000
Recognition of deferred
tax asset (4,729,000)
Reversal of prior temporary
differences (1,937,000)
Other items 738,351
Income Taxes $ 2,300,126 $ 434,246 $ 421,807
At December 31, 1994, the Company had federal net operating loss
carryforwards of approximately $3,800,000 for tax purposes, all of which are
limited by consolidated return rules to use in offsetting only the taxable
income of a subsidiary of the Company. The net operating loss carryforwards
expire at various dates from 1997 through 2005. For financial reporting
purposes, the federal net operating loss carryforwards approximate
$11,600,000. At December 31, 1994, the Company had foreign net operating
loss carryforwards of approximately $14,000,000 available to offset future
income of Wibau-Astec.
At December 31, 1994, the Company had investment tax and other credit
carryforwards of approximately $641,000 expiring at various dates principally
from 1995 through 1999. Utilization of these credits will be limited to use
in offsetting only the taxable income of a subsidiary of the Company.
As a result of utilizing the net operating loss carryforwards, net income from
continuing operations increased by approximately $3,008,000, $3,155,000 and
$1,922,000 and related per share amounts increased by approximately $.31,
$.36 and $.26 for the years ended December 31, 1994, 1993 and 1992,
respectively.
At December 31, 1994, the company had deferred tax assets of approximately
$16,861,000, and deferred tax liabilities of approximately $2,062,000,
related to temporary differences and tax loss and credit carryforwards. At
December 31, 1994, a valuation allowance of approximately $10,070,000 was
recorded. This valuation allowance offsets the deferred tax assets relative
to net operating loss and credit carryforwards as well as foreign net
operating loss carryforwards. Both the net operating loss and credit
carryforwards are SRLY carryforwards and can be used to offset only the
income of a certain subsidiary. Due to this, the Company determined that a
valuation allowance was necessary for these items as well as the foreign net
operating loss carryforward, the utilization of which is uncertain.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
statement purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
December 31,
1994 1993
Deferred tax assets:
Inventory reserves $ 1,753,000 $ 2,270,000
Legal reserves 100,000 487,000
Pension expense 109,000 1,098,000
Investment in foreign
joint venture 1,827,000 747,000
Other accrued expenses 3,002,000 2,703,000
Alternative minimum
tax credits 1,216,000
Net operating loss
carryforwards 1,344,000 4,216,000
Foreign net operating
loss carryforwards 8,085,000
Other credit carryforwards 641,000 760,000
Total deferred tax assets 16,861,000 13,497,000
Deferred tax liabilities:
Property and equipment 2,062,000 1,742,000
Total deferred tax liabilities 2,062,000 1,742,000
Net deferred tax assets 14,799,000 11,755,000
Valuation allowance (10,070,000) (11,182,000)
Deferred tax asset $ 4,729,000 $ 573,000
9. Contingencies
During 1994, and in previous years, the Company and its former Barber-Greene
subsidiary (now Telsmith, Inc.) were defendants in two patent infringement
actions brought by Robert L. Mendenhall and CMI Corporation ("CMI"), a
competitor, seeking monetary damages and an injunction to cease the alleged
infringement.
In 1990, CMI was awarded damages of $4,457,000 and prejudgment interest of
$2,838,000 or a total of $7,295,000 from Barber-Greene. During 1991, in a
separate trial, CMI was awarded damages of $8,463,000, prejudgment interest
of $5,309,000 and attorney's fees of $737,000 for a total of $14,509,000 from
Astec, and Astec was awarded damages of $667,000 plus $391,000 of prejudgment
interest or a total of $1,058,000 from CMI. The total damages and expenses
awarded to CMI were $20,746,000, net of the $1,058,000 awarded to Astec.
Both Astec and CMI appealed the judgments. In connection with its appeals,
the Company was directed by the courts to pledge substantially all of its real
property and to deposit funds in an escrow account to secure the judgments
against the Company pending the outcome of appeals.
On June 9, 1994, the Company announced that the United States Court of
Appeals for the Federal Circuit had reversed the lower court decision and did
not remand to the lower court for further proceedings the judgments
previously entered against Astec and its former Barber-Greene subsidiary in
the Robert L. Mendenhall and CMI patent litigation. Those judgments totaled
approximately $22,000,000. The Federal Circuit Court ruled in favor of Astec
because the allegedly infringing patents had been held invalid in a separate
third party case. CMI asked the Federal Circuit to reconsider its decision
and to have all of the Federal Circuit judges rehear the appeal. The Company
responded to this request. On September 20, 1994, the Company announced that
the United States Court of Appeals for the Federal Circuit denied the request
from Mendenhall and CMI to reconsider its earlier reversal. With the issuance
of this ruling, the Federal Circuit's review of this ongoing patent
litigation ended.
On October 11, 1994, CMI and Robert L. Mendenhall filed a Petition of Writ
Certiorari asking the U.S. Supreme Court to review the decision of the
Federal Circuit Court of Appeals. The Company filed a response opposing the
Petition and on November 28, 1994, the Supreme Court issued an Order denying
the Petition thus bringing the patent litigation to an end.
As a result of the Supreme Court's refusal to grant certiorari, the Company
received $12,917,000 which was being held in escrow pending the Company's
appeal of the two judgments. In addition, on December 15, 1994, the Company
received $1,309,000 from CMI in satisfaction of the judgment entered in favor
of the Company on its counterclaim against CMI. The receipt of these funds
effectively concluded the litigation between the Company and CMI and Robert
L. Mendenhall which had been pending for a number of years. As a result, the
Company has reversed its accrued liability for patent damages. The reversal
of $13,870,000 in accrued patent damages and the receipt of $1,309,000 in
patent damages from CMI total $15,179,000 and are included in the
Consolidated Statements of Income as Patent suit damages and expenses net
recoveries and accrual adjustments.
In an unrelated case, the Company's Telsmith subsidiary is a defendant in a
patent infringement action brought by Nordberg, Inc., a manufacturer of a
competing line of rock crushing equipment, seeking monetary damages and an
injunction to cease an alleged infringement of a patent on certain components
used in the production of its rock crushing equipment. This case, being
heard before the U.S. District Court for the Eastern District of Wisconsin,
has been bifurcated into liability and damages phases. The liability phase
was tried on January 11, 1993; however, no decision has been rendered by the
Court. Because of the uncertainties inherent in the litigation process, the
Company is unable to predict the ultimate outcome of this litigation.
On October 28, 1993, the Company was also named as a defendant in a patent
infringement action brought by Gencor, Inc., a manufacturer of a competing
line of asphalt plants, seeking monetary damages and an injunction to cease
an alleged infringement of a patent on certain components used in the
production of its asphalt plant product line. This case was filed in the
U.S. District Court for the Middle District of Florida, Orlando Division, and
is currently in the discovery phase. Management believes this case to be
without merit and intends to vigorously defend this suit; however, due to the
uncertainties inherent in the litigation process, the Company is unable to
predict the ultimate outcome of this litigation.
Management has reviewed all claims and lawsuits and, upon the advice of
counsel, has made provision for any estimable losses; however, the Company is
unable to predict the ultimate outcome of the outstanding claims and lawsuits.
Recourse Customer Financing - Certain customers have financed purchases of
the Company's products through arrangements in which the Company is
contingently liable for customer debt aggregating approximately $13,800,000
and $13,700,000 at December 31, 1994 and 1993, respectively. These
obligations average five years in duration and have minimal risk.
Other - The Company is contingently liable for letters of credit of
approximately $2,082,000 issued for bid bonds and performance bonds.
10. Shareholders' Equity
Stock Options - The Company has reserved 300,000 shares of common stock under
the 1986 Stock Option Plan and 500,000 shares of common stock under the 1992
Stock Option Plan for issuance upon exercise of nonqualified options,
incentive options and stock appreciation rights to officers and employees of
the Company and its subsidiaries at prices determined by the Board of
Directors. At December 31, 1994, a total of 328,800 shares of common stock
related to the 1992 Stock Option Plan are available for options to be granted.
Nonqualified options are exercisable at a price not less than 85% of the
Board of Directors' determination of the fair market value of the Company's
common stock on the date of the grant. Nonqualified options are exercisable
starting one year from the date of grant and expire ten years after the date
of grant. Incentive stock options granted by the Board of Directors must be
exercisable at a price not less than 100% of the fair market value of the
Company's common stock on the date of grant. Incentive stock options are
exercisable immediately after the date of grant, except for certain officers
of the Company, and expire ten years after the date of grant. Stock
appreciation rights may be granted by the Board of Directors in conjunction
with the grant of an incentive or nonqualified option. A stock appreciation
right permits a grantee to receive payment in either cash or shares of the
Company's common stock equal to the difference between the fair market value
of the common stock and the exercise price for the related option.
The following is a summary of stock option information:
Number Option Price
of Shares Range Per Share
Outstanding, December 31, 1991 238,800 $ 1.375 - 4.675
Granted 140,000 3.25
Expired (12,800) 4.675
Exercised (109,000) 1.375 - 4.675
Outstanding, December 31, 1992 257,000 1.375 - 4.675
Exercised (87,000) 1.375 - 4.675
Outstanding, December 31, 1993 170,000 1.375 - 4.675
Granted 87,000 14.875 - 16.363
Exercised (13,000) 1.375 - 3.25
Outstanding, December 31, 1994 244,000 $ 1.375 - 16.363
On July 29, 1993, the Company's Board of Directors approved a two-for-one
split of the Company's common stock in the form of a 100% stock dividend for
shareholders of record as of August 12, 1993. A total of 4,893,701 shares of
common stock were issued in connection with the split. The stated par value
of each share was not changed. A total of $978,740 was reclassified from
additional paid-in capital to the Company's common stock account. All share
and per share amounts for 1993 and prior years have been restated to
retroactively reflect the stock split.
11. Related Party Transactions
In September 1991, the Company's Chairman, its Senior Vice President, and the
President of its Telsmith, Inc. subsidiary formed a general partnership which
acquired 25% of the common stock of American Rock Products, Inc., an Ohio
corporation engaged in the business of supplying crushed rock to concrete and
asphalt producers in the southeastern Oklahoma area ("Amrock"). These
individuals own interests in the partnership of 50%, 25% and 25%,
respectively. In December 1992, the rock crushing business of Amrock was
sold to a competitor, exclusive of two used rock crushing machines and certain
other miscellaneous inventory and equipment.
In March 1994, Amrock sold two of these used rock crushing machines to
Telsmith for $50,000 and $70,000, respectively. The purchase price for each
of these machines was determined by the president of Telsmith based on his
opinion of their fair market value at the time of purchase. Telsmith intends
to market both rock crushing machines to its customers for sale in the
ordinary course of business.
12. Restructuring Costs
In the fourth quarter of 1994, the Company developed and implemented a plan
to restructure the operations of Wibau-Astec. In connection with the
restructuring, the Company accrued costs of $1,500,000 $1,250,000, net of
tax, or $0.12 per share. The plan included, among other things, the
cessation of manufacturing operations at Wibau-Astec along with related
personnel reductions as well as personnel reductions in engineering and
administration. Total personnel reductions were approximately 150. The plan
was communicated to employees and severance notices given during the fourth
quarter of 1994.
As of the end of 1994, the restructuring was substantially complete. Total
costs incurred were for the write-down of certain assets to estimated fair
market value, severance payments and lease termination expenses. Severance
costs and exit costs incurred were approximately $1,137,000 and $363,000,
respectively.
Wibau-Astec will sell Astec asphalt plants either manufactured in the United
States or subcontracted in Europe. Wibau-Astec will continue to sell
Wibau-Astec parts and service a large customer base and will utilize
subcontractors as needed for parts and/or manufacturing components in Europe.
ASTEC INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE (VIII)
VALUATION AND QUALIFYING ACCOUNTS FOR
CONTINUING OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
ADDITIONS
CHARGES TO
BEGINNING COSTS & OTHER ENDING
DESCRIPTION BALANCE EXPENSES ADDITIONS DEDUCTIONS BALANCE
December 31, 1994:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $ 1,191,083 $ 362,089 $ 467,607 (3) $ 336,537 $1,684,242
Reserve for
inventory $ 6,494,533 $3,621,218 $ 0 $5,121,716 $4,994,035
Other Reserves:
Product warranty $1,781,733 $2,616,565 $ 0 $927,595 $3,470,703
Reserve for
patent damages $13,250,048 $ 620,290 $ 0 13,870,338 $0
ADDITIONS
CHARGES TO
BEGINNING COSTS & OTHER ENDING
DESCRIPTION BALANCE EXPENSES ADDITIONS DEDUCTIONS BALANCE
December 31, 1993:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $ 1,060,588 $ 742,752 $ 21,609 $ 633,866 (1) $ 1,191,083
Reserve for
inventory $ 5,948,084 $ 2,952,918 $ 0 $ 2,406,469 $ 6,494,533
Other Reserves:
Product warranty $1,551,850 $ 2,689,441 $0 $ 2,459,558 (2) $ 1,781,733
Reserve for
patent damages 12,554,640 $ 695,408 $ 0 $ 0 13,250,048
ADDITIONS
CHARGES TO
BEGINNING COSTS & OTHER ENDING
DESCRIPTION BALANCE EXPENSES ADDITIONS DEDUCTIONS BALANCE
December 31, 1992:
Reserves deducted from assets to which they apply:
Allowance for
doubtful
accounts $ 1,038,155 $ 719,117 $ 152,052 848,736 (1) $ 1,060,588
Reserve for
inventory $ 8,567,872 $ 2,937,459 $ 0 5,557,247 $ 5,948,084
Other Reserves:
Product warranty $ 1,273,824 $ 2,699,657 $ 0 $2,421,631 (2) $ 1,551,850
Reserve for
patent damages $ 11,912,403 $ 642,237 $ 0 0 $12,554,640
[FN]
(1) Uncollectible accounts written off, net of recoveries.
(2) Warranty costs charged to the reserve.
(3) Represents reserve balances of subsidiaries acquired in
1994.
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, 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, 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
/s/ J. Don Brock Chairman of the Board
March 2, 1995
J. Don Brock and President
/s/ Albert E. Guth Senior Vice President, March 2, 1995
Albert E. Guth Secretary, Treasurer
and Director
/s/ W. Norman Smith President - Astec, Inc. March 2, 1995
W. Norman Smith and Director
/s/ Robert G. Stafford President - Telsmith, Inc. March 2, 1995
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, 1995
E.D. Sloan, Jr.
/s/ James R. Spear Director March 2, 1995
James R. Spear
/s/ Joseph Martin, Jr. Director March 2, 1995
Joseph Martin, Jr.
/s/ George C. Dillon Director March ,1995
George C. Dillon
/s/ G.W. Jones Director March 2, 1995
G.W. Jones
/s/ Daniel K. Frierson Director March 2, 1995
Daniel K. Frierson
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, 1994
ASTEC INDUSTRIES, INC.
4101 Jerome Avenue
Chattanooga, Tennessee 37407
ASTEC INDUSTRIES, INC.
FORM 10-K
INDEX TO EXHIBITS
Sequentially
Exhibit Number Description Numbered Page
Exhibit 2.2 Share Purchase and Transfer Agreement by and
between the Company and Gibat Ohl Ingenieurgesellschaft
fur Anlagentechnik mbH, dated as of October 5, 1994.
Exhibit 4.2 Indenture of Trust, dated April 1, 1994, by and
between Grapevine Industrial Development Corporation and
Bank One, Texas, NA, as Trustee.
Exhibit 10.80 Guarantee of Wibau-Astec Maschinenfabrik GmbH in
favor of Dresdner Bank Aktiengensellschaft, dated
as of December 22, 1993.
Exhibit 10.81 Letter of Guarantee of Wibau-Astec Maschinenfabrik GmbH
in favor of Berliner Hondels - und Frankfurter Bank,
dated as of December 22, 1993.
Exhibit 10.82 Guarantee of Wibau-Astec Maschinenfabrik GmbH in
favor of Bayerische Vereinsbank, dated as of
December 22, 1993.
Exhibit 10.83 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.
Exhibit 10.86 Astec Guaranty, dated April 29, 1994, of debit of Trencor,
Inc. in favor of The First National Bank of Chicago.
Exhibit 10.87 Credit Agreement, dated as of July 20, 1994, between
the Company and The First National Bank of Chicago.
Exhibit 10.88 Guarantee of Wibau-Astec Maschinenfabrik GmbH in
favor of Bayerische Vereinsbank, dated as of
January 16, 1995.
Exhibit 10.89 Waiver for December 31, 1994, dated February 24,
1995 with respect to the First National Bank of
Chicago Credit Agreement dated July 29, 1994.
Exhibit 11 Statement Regarding Computation of Per Share Earnings.
Exhibit 22 Subsidiaries of the Registrant.
Exhibit 23 Consent of 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).