<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT of 1934
For the fiscal year ended December 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-5951
CMI CORPORATION
(Exact name of registrant as specified in its charter)
Oklahoma 73-0519810
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
I-40 & Morgan Road
P.O. Box 1985
Oklahoma City, OK 73101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 787-6020
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
---------------------------- -----------------------
Voting Class A Common Stock, New York Stock Exchange
$.10 Par Value
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 ( ).
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. [___]
The aggregate market value of the Common Stock and the Voting Class A
Common Stock (Class A Common Stock) held by non-affiliates of the
registrant on March 1, 1996 was $52,671,680.
The number of shares of the registrant outstanding on March 1, 1996
was 20,381,383 shares of Voting Class A Common Stock and 621 shares of
Voting Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
--------- -------------------
Proxy Statement for the Annual Meeting of Shareholders Part III
to be held on May 3, 1996
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
TABLE OF CONTENTS
PART I PAGE
Item 1. Business................................................ 3
Item 2. Properties.............................................. 11
Item 3. Legal Proceedings....................................... 12
Item 4. Submission of Matters to a Vote of Security Holders..... 13
Executive Officers of the Registrant.................... 13
PART II
Item 5. Market for the Registrant's Common Stock and
Related Shareholder Matters........................... 14
Item 6. Selected Financial Data................................. 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 15
Item 8. Financial Statements and Supplementary Data............. 24
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure................... 48
PART III
Items 10.-13.All Items Are Incorporated by Reference to the Company's
Proxy Statement for the Annual Meeting of Shareholders
to be held on May 3, 1996............................. 48
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedule, and
Reports on Form 8-K................................... 48
SIGNATURES................................................. 52
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
PART I
Item 1. Business
--------
(a) General Development of Business
-------------------------------
Unless the context requires otherwise, as used herein, the term "Company"
means CMI Corporation and its consolidated subsidiaries. Information
regarding 1995 business developments is located in Item 1(c).
(b) Financial Information About Industry Segments
---------------------------------------------
The Company currently operates in one industry segment and information
regarding this segment is located in Item 1(c). Information relating to
the Company's waste-to-energy conversion facility is also included in Item
1(c) under CMI Energy Conversion Systems, Inc. See consolidated financial
statements for financial information (Item 8.).
(c) Narrative Description of Business
---------------------------------
CMI was incorporated in Oklahoma in 1926. Since 1964, the Company has
manufactured and marketed automated equipment for the road and heavy
construction industry. The Company is an industry leader in the design and
manufacture of automated equipment for the construction and maintenance of
highways, city streets, airport runways, county roads, bridges, and parking
lots. The Company's products include asphalt plants; asphalt pavement
recycling systems; concrete pavers; machines for concrete placing and
spreading, finishing, texturing, and curing; pavement profiling machines;
pavement reclaimers; a complete line of automated fine grading, materials
spreading and placing equipment; soil stabilizers; and a series of multiple
use machines that can be configured to pave, trim, mill, excavate, or
widen. The Company also produces trailers, used by the construction and
mining industries, industrial scales, bridge and canal paving equipment,
and thermal systems for remediating contaminated soils. The Company has
won market recognition by producing products emphasizing recycling and
energy conservation.
In late 1991, the President signed into law the Intermodal Surface
Transportation Efficiency Act of 1991 (ISTEA-91) providing authorizations
for total funding of more than $155 billion over a six-year period for
highways, highway safety, and mass transportation programs. ISTEA-91 has
had a positive impact on the Company, as well as the road and heavy
construction industry as a whole. Federal Highway Trust Fund spending was
3
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
set at just over $20 billion for fiscal 1996, continuing a pattern of
funding in recent years, but below the amount authorized by Congress under
ISTEA-91.
Positive road building news continues in Canada where in 1993 a new
government was elected which ran on a platform calling for major increases
in infrastructure spending. In 1994, the new government initiated a $6
billion (Canadian dollars), two-year program of new highway construction
which increased construction during 1994 and 1995. The infrastructure
emphasis in Canada is expected to continue in 1996. Additionally, The
North American Free Trade Agreement (NAFTA) and General Agreement on
Tariff and Trade (GATT) should have a positive impact on the heavy
construction industry through increased export sales in North America and
Europe.
Principal product information is as follows:
Hot Mix Asphalt Production Systems:
-----------------------------------
The Company has continued to market and deliver its popular parallel
flow hot mix asphalt production and recycling plants to customers.
The Company has been providing the asphalt plant industry with this
parallel flow technology since approximately 1978.
The Company completed design work, built a prototype, and placed into
production a new counter-flow hot mix asphalt production plant. This
new plant was introduced in 1993, under the trade name "TRIPLE-DRUM."
Production tests run in the first quarter of 1993 showed that the
plant has superior heat transfer performance compared to other
counter-flow plant designs, especially for recycle operations.
TRIPLE-DRUM sales accelerated in December 1993 and grew during 1994.
The ease with which TRIPLE-DRUMs are passing tough exhaust emissions
standards with high production rates, even under adverse production
conditions, is beginning to be noticed by the industry and resulted
in stronger sales during 1995. Recent sales success in the state of
Florida, one of the country's most competitive hot mix plant
markets, clearly demonstrates customer satisfaction with the
production performance of the Company's TRIPLE-DRUM plants. In less
than two years, five new TRIPLE-DRUM plants have been placed into
operation in Florida, with two more scheduled for delivery during the
first quarter of 1996.
4
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
The Company also markets a line of Multi-Drum hot mix asphalt
production plants under the trade name "TRI-STAR." The Company
introduced a new line of batch type hot mix asphalt production plants
during 1994, and will introduce yet another series of metric sized
batch plants for international markets during the first quarter of
1996.
The new plants will be introduced at ConExpo/ConAgg ("CONEXPO")which
will be held in Las Vegas, Nevada, March 20 through 24. CMI will
have one of the largest displays at the 1996 show and will use the
event to introduce several new products. CONEXPO is sponsored by the
Construction Industry Manufacturers Association and is now scheduled
to be held in Las Vegas, Nevada, every three years.
The Company's parallel flow, TRI-STAR, TRIPLE-DRUM, and batch type
hot mix asphalt production and recycling systems provide a wide range
of technologies to serve the needs of the industry.
Concrete Paving Systems:
------------------------
The Company manufactures and markets worldwide a complete line of
street and highway class concrete slipform paving and paving train
support machines. The popularity of these machines relate directly
to job site performance, which often has resulted in contractors
earning performance bonuses for pavement smoothness as recorded by
profileograph measuring. Some contractors have even recovered the
original purchase cost of a machine from the bonuses of a single job.
The Company's newly designed highway class pavers incorporate recent
machine improvements into the basic machine design, making features
like computerized crowning and automatic placement of dowel bars less
costly to add. During 1992, the Company placed into operation a
newly designed mid-mount, automatically controlled dowel bar
inserting system on a four track concrete paver. The mid-mount
design enables paving contractors to insert the dowel bars without
disturbing finished grade which was previously experienced with
older designed rear-mount systems. The new mid-mount system made
producing a smooth riding pavement, while automatically inserting
dowel bars, a more manageable task.
5
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
The Company continued to improve its technology for inserting dowel
bars during the paving process and in 1994 introduced yet another
system that is simpler than the Company's mid-mount system and the
systems of all competitors. The Company's new approach involves a
two stage paving process using two separate tractors. One tractor
meters and consolidates the concrete and inserts the dowel bars, and
the second tractor shapes and finishes the final slab. Early in the
first quarter of 1996, the Company exported its first paver with
dowel bar inserting capabilities to Australia. Given the
international market interest expressed to date, the Company
anticipates continued growth in international sales as a result of
the dowel bar inserting technology.
During 1995, the Company introduced a new 3000 series of AUTO-GRADE
slipform pavers which features a double telescoping mainframe to more
easily accommodate changes in paving width. The series is available
in two and four track models and is ideal for city streets, lane
additions and ramp paving. The Company will introduce upgraded
versions of its remaining AUTO-GRADE pavers at the 1996 CONEXPO.
Additionally, the Company introduced a new line of curb and gutter
pavers and smaller slipform pavers. These new pavers are being
marketed under the trade name, METRO-PAV.
Automated Pavement Profiling:
-----------------------------
The Company introduced the industry's first dedicated pavement
milling machine in 1976. Since that time, the Company's line of
"ROTO-MILL" Pavement Profilers has set the standards for the fast
developing pavement restoration and recycling market. The Company
offers a wide range of models from small utility machines to the PR-
1200, the world's largest pavement profiling machine. The Company's
four most recent ROTO-MILL models, the PR-500B, PR-650, PR-800-7, and
the PR-1050 are more productive versions of the Company's PR-500FL,
which is the popular front loading, half-lane width profiler and the
PR-800 full-lane width profiler. Customer response to these new
machines has been enthusiastic.
The Company introduced two additional ROTO-MILL pavement profilers at
CONEXPO 1993: a 525 horsepower, rubber-tired, half-lane width
profiler, and a utility-sized, rubber-tired machine. Deliveries of
the 525 horsepower machine began in 1994. The utility-sized machine
was redesigned and will be re-introduced to the industry at the 1996
CONEXPO.
6
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
The Company's popular RS-500, a road reclamation and soil
stabilization machine introduced in 1991, has had strong growth in
sales over the past five years. In 1993, the Company introduced and
marketed the RS-400, a lower horsepower reclaimer/stabilizer machine.
During 1994, both machines were upgraded with improvements in
productivity and reliability. They now have model numbers RS-425 and
RS-500B. During 1995, the Company introduced an even more productive
650 horsepower version of its RS-500B, which proved highly successful
in the market place during its first year of availability.
Soil Remediation Equipment:
---------------------------
During 1994, the Company began marketing its newly designed Enviro-
Tech Thermal Soil Remediation System. Soil remediation is a process
whereby nonhazardous contaminates like oil, jet fuel, and other
hydrocarbon-based pollutants are removed from the soil in a thermal
process. Soil remediation systems use similar equipment and
processes as the Company's asphalt production systems.
The Company has engineered and is marketing remediation systems with
production ranges from 80 to 160 tons per hour. During 1994, the
Company's systems were used at major military and industrial sites.
These systems set new production records which actually doubled the
tons per hour produced on any previous job of a similar nature.
The Company's success in setting new production records is the result
of advanced technology brought to this industry. Based on sales
during 1994, the Company has established itself as the industry
leader in both innovation and production for thermal soil remediation
systems. These systems are available in stationary or portable
models to meet the requirements of a very large and diverse market.
No thermal soil remediation systems were sold in 1995; however, sales
are expected during 1996.
Weighing Equipment:
-------------------
The Company manufactures and distributes a broad line of electronic
scales for construction, transportation, material processing, mining,
energy, agricultural, and industrial applications. These systems
permit direct linkage to data processing equipment to speed material
processing, record keeping, and billing. The Company also markets
high technology automatic computer controls for continuous material
7
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
blending, weighing, record keeping, inventory tracking, invoicing,
and report writing. These control systems are marketed with the
Company's hot mix asphalt production plants and soil remediation
systems.
Load King Division:
-------------------
Load King, headquartered in Elk Point, South Dakota, manufactures a
broad line of heavy duty trailers for equipment and material hauling.
Bottom discharge material trailers and a family of redesigned rock
hauler trailers have been added to the broad line of folding
gooseneck and lightweight detachable gooseneck trailers engineered to
meet individual state weight distribution requirements. Load King
also responds to customer requirements for custom heavy haul
trailers. During 1995, the Company began manufacturing its popular
Load King bottom dump trailers at its Oklahoma City manufacturing
facility. This added production reduced Load King's response time for
filling dealer orders for these products and permitted the allotment
of more manufacturing time at Elk Point to the production of custom
heavy hauling units.
Bid-Well Division:
------------------
Bid-Well, headquartered in Canton, South Dakota, is an industry
leader in the development and manufacture of a wide variety of
specialized lightweight grading and concrete paving and finishing
machines for construction markets. This equipment includes bridge
deck pavers and concrete overlay machines, building floor pavers and
finishers, and specialized graders, pavers, and finishers for slope
and canal paving.
MARKETING AND DISTRIBUTION. The Company's construction equipment is sold
directly to end users and through independent dealers. The Company's scale
and trailer products are sold through independent dealers. All products
are sold in the United States and in foreign markets, except for weighing
equipment and products manufactured by the Load King and Bid-Well Divisions
which are sold substantially in the United States.
SOURCES AND AVAILABILITY OF RAW MATERIALS. The principal component parts
used in the Company's manufacturing of its pavement maintenance and
construction equipment that are supplied by others include gas and diesel
8
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
engines, hydraulic cylinders, tires, bearings, and raw steel. The Company
has not experienced any delays in its component parts deliveries or
received inferior component parts that have adversely affected its
business. In addition, the Company purchases many of these components from
a variety of outside suppliers and believes that alternate sources of
supply exist for substantially all items.
IMPORTANCE OF PATENTS. The Company has filed for patent protection on
certain components and features incorporated into its products, which
expire on various dates. The Company's patents, together with licenses
under patents owned by others, are considered by the Company to be adequate
for the conduct of its business. The Company is of the opinion that the
loss of any single patent or group of related patents would not materially
affect the Company's business.
SEASONAL NATURE OF THE BUSINESS. The Company's business is seasonal in
nature and precedes the months in which highway and road construction and
restoration generally occur. A large portion of the Company's orders for
its products are received in the months of November through July, with
heavy shipments occurring in the months of March through August.
PRACTICES RELATING TO WORKING CAPITAL. The Company recognizes revenue when
sales transactions are completed, which is when products are shipped or
title has transferred to the customer. Sales generally require a down
payment or trade allowance and are due within normal trade terms. The
Company also sells certain products under lease purchase agreements and
installment sales contracts. Inventories are carried in proportion to
customer requirements and fluctuate in relation to the seasonal nature of
the Company's business.
DEPENDENCE UPON A SINGLE CUSTOMER OR A FEW CUSTOMERS. The Company was not
dependent on any single customer or group of customers during 1993 through
1995.
SALES BACKLOG. The Company has a sales backlog of approximately $30.3
million at February 23, 1996, compared to $23.8 million at February 24,
1995. Such backlog is based upon sales orders the Company believes to be
firm.
COMPETITIVE CONDITIONS. The Company is one of the largest producers of
pavement maintenance and construction equipment in the United States. The
Company has won substantial market recognition in the pavement maintenance
and construction industry by producing products emphasizing recycling and
9
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
energy conservation. Numerous companies produce equipment with similar
features and the construction equipment market remains competitive.
Competition is based primarily on price, product quality, financing,
productivity, quality of construction, service, and availability of
replacement parts.
COMPANY-SPONSORED RESEARCH AND DEVELOPMENT ACTIVITIES. The Company invests
significant resources in the development, enhancement, refinement, and
production of new technologies for the road and heavy construction
industry. The Company patents new technologies relating to significant
changes and development of finished products. See discussion regarding
current research and development activities under principal product
information and also see Management's Discussion and Analysis of Financial
Conditions and Results of Operations (Item 7.).
ENVIRONMENTAL LAWS AND REGULATIONS. The Company is subject to various
environmental laws and regulations, none of which have a current or
expected future material financial impact on the Company.
EMPLOYEES. The Company had approximately 1,260 employees as of December
31, 1995.
CMI Energy Conversion Systems, Inc.
- -----------------------------------
In 1983, a subsidiary of the Company, CMI Energy Conversions Systems, Inc.
(CMI Energy) indefinitely suspended construction of a solid waste disposal
facility (the Project). In connection with the Project, the Company
contracted with the City of Oklahoma City (the City) to receive municipal
solid waste. In 1995, the Company sold the assets of CMI Energy for cash
and a five year note bearing interest at eight percent. As a result of the
sale, a letter of credit in the amount of $675,000 held by the City,
securing the Company's performance under the solid waste delivery contract,
was released. CMI Energy did not materially affect the Company's results
of operations in 1995, 1994, or 1993.
CMI Limited Partnership, CMI Sales Co., Product Support, Inc., Machinery
Investment Corporation, CMI International (U.K.), Ltd., CMI OIL
Corporation, CMI Dakota Co., and Transport Trailer Manufacturing Company.
These subsidiaries are included in the consolidated financial statements of
the Company.
10
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
----------------------------------------------------------------------
The Company had export sales to unaffiliated customers through foreign
dealers and representatives as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
North and Central America, other than the
United States $ 5,691 13,543 9,804
Europe 1,081 499 2,022
Southeast Asia 4,657 4,940 1,725
Australia 1,206 2,001 1,608
Other regions 4,024 2,844 1,478
------ ------ ------
Total export sales $16,659 23,827 16,637
====== ====== ======
</TABLE>
See Consolidated Financial Statements (Item 8.).
Item 2. Properties
----------
The Company has total plant, office, and warehouse areas of approximately
749,000 square feet, which are located in two states.
The largest manufacturing plant, including the corporate headquarters, has
approximately 600,000 square feet and is located in Oklahoma City,
Oklahoma. Other principal manufacturing plants and offices, aggregating
approximately 149,000 square feet, are located in South Dakota. These
facilities are adequate for the current and expected near future operations
of the Company. The Company has flexibility in the use of its facilities,
an example of which was the addition of a Load King bottom-dump trailer
manufacturing line in the Oklahoma City plant. This line will increase the
Company's capacity for trailer manufacturing, and will allow the South
Dakota plant to focus more manufacturing effort on custom trailers.
In addition, the Company owns 110 acres of land in Tennessee being held for
sale and leases 119 acres at its Oklahoma City plant facility.
11
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
Item 3. Legal Proceedings
-----------------
On November 8, 1994, Yargo, Inc. ("Yargo") filed a complaint against the
Company which sought payment of $1,417,500 of dividends accrued on 4,500
shares of the Company's 7% Series B Preferred Stock, par value $1 per
share, and any dividends accruing after the date of the lawsuit on such
shares. In addition, Yargo sought redemption of 4,250 shares of the 4,500
shares outstanding in the amount of $4,250,000. On March 31, 1995, the
Company entered into a Stock Purchase Agreement (the "Agreement") with
Yargo. In accordance with terms of the Agreement, on April 12, 1995, Yargo
dismissed the complaint without prejudice. See discussion in the Company's
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
On November 22, 1995, certain attorneys, previously engaged by the Company
in connection with prior patent litigation, filed suit against the Company
in the Circuit Court of Cook County, Illinois, seeking to recover
approximately $1.4 million of legal fees and costs alleged to be owing by
the Company, together with prejudgment and postjudgment interest and other
costs. The Company has filed counterclaims against the law firm for
negligence and legal malpractice. The Company seeks an unspecified amount
of monetary damages, disgorgement of all legal fees collected, punitive
damages, prejudgment interest and other costs, and is seeking removal of
the case to the United States District Court for the Northern District of
Illinois, Eastern Division.
There are numerous other claims and pending legal proceedings that
generally involve product liability and employment issues. These cases
are, in the opinion of management, ordinary routine matters incidental to
the normal business conducted by the Company. In the opinion of the
Company's management after consultation with outside legal counsel, the
ultimate disposition of such proceedings, including the case above, will
not have a materially adverse effect on the Company's consolidated
financial position or future results of operations.
12
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Executive Officers of the Registrant
- ------------------------------------
Pursuant to General Instruction G(3) of Form 10-K, the following list is
included as an unnumbered item in Part I of this Form 10-K in lieu of being
included in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 3, 1996.
The following is a list of names and ages of all the executive officers of
the registrant indicating all positions and offices with the registrant
held by each such person and each such person's principal occupations or
employment during the past five years.
Age as of
Name March 1, 1996 Offices and Positions Held
- ---------------------------------------------------------------------------
Ralph Cordes 52 Senior Vice President, Operations
since January 1995 (1)
Jim D. Holland 51 Senior Vice President, Treasurer,
and Chief Financial Officer since
August 1984
Bill Swisher 65 Chief Executive Officer since 1964
Thane Swisher 39 Vice President and Secretary since
(Son of Bill Swisher) October 1987
(1) Mr. Cordes has held manufacturing and general management positions
with industrial companies for 30 years; including the positions of
senior vice president, operations of Harsco Corporation; president of
the BMY Division of Harsco Corporation; vice president, operations of
BUS Industries of America; and various manufacturing positions with
companies such as Clark Equipment Company and Allis Chalmers
Corporation.
13
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
----------------------------------------------------------------
Principal Market and Stock Prices:
- ----------------------------------
The Company's Voting Class A Common Stock is traded on the New York Stock
Exchange. The closing market price for the Company's Voting Class A Common
Stock on March 1, 1996, was $5.13. The table below presents the high and
low market prices for the Company's common shares during 1995 and 1994.
The following information was obtained from the monthly market statistics
report prepared by the New York Stock Exchange.
<TABLE>
<CAPTION>
1995 1994
------------------------ --------------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common shares:
High $7.13 7.50 8.25 6.50 $9.75 8.63 8.25 7.38
Low 6.00 5.88 5.88 4.25 6.75 4.75 5.50 6.50
</TABLE>
Approximate Number of Shareholders:
- -----------------------------------
The number of holders of record of the Company's common shares as of March
1, 1996, was 1,774.
Dividend Information:
- ---------------------
The last dividend payment on the Company's Voting Common Stock or Voting
Class A Common Stock was made in 1981. See Management's Discussion and
Analysis of Financial Condition and Results of Operations (Item 7.) and
notes to the consolidated financial statements (Item 8.).
14
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
Item 6. Selected Financial Data
-----------------------
The following selected financial data should be read in conjunction with
the consolidated financial statements of the Company, including notes and
supplementary information appearing elsewhere herein.
Five-Year Selected Financial Data - in thousands (except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $130,578 128,005 100,564 81,178 66,355
Net income (loss) 17,501 22,618 8,032 2,211 (4,279)
Income (loss) per common share .82 1.07 .37 .08 (.29)
Total assets 109,219 89,744 65,362 54,398 45,709
Long-term debt and redeemable
preferred stock 27,628 27,599 27,114 28,574 19,963
Cash dividends per common share $ - - - - -
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
---------------------------------------------------------------
Changes in Financial Condition, Liquidity, and Capital Resources
- ----------------------------------------------------------------
The Company's revolving credit loan agreement with its primary lender has
been in place since 1991. Terms of the credit loan agreement provide for a
maximum credit line of $30 million, which consists of a $25.2 million
revolving line of credit and a $4.8 million term loan. The term loan is
payable in equal monthly principal payments of $67,000 plus interest with
the balance due in December 1997. The balance of the term loan at December
31, 1995 was approximately $4 million. Both the revolving line of credit
and the term loan provide for interest at the prime rate plus 1.5% and are
due in December 1997. Amounts available under the revolving line of credit
are based upon eligible accounts receivable and inventories as defined by
the credit agreement. Under the credit loan agreement, the unused portion
of the line of credit was approximately $6.9 million at December 31, 1995.
15
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CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
The Company maintains a fleet financing agreement with a third party lender
related to the rental of finished products to customers. Generally, these
financings range from three months to three years and are secured by the
specific finished product. These financing arrangements provide the Company
with additional short-term working capital and the ability to offer more
attractive financing to its customers. Obligations due through 1998 under
the fleet financing agreement with interest at the prime rate were
approximately $3.1 million, at December 31, 1995.
In January 1993, the Company entered into separate loan agreements with
Recovery Equity Investors L.P., a shareholder, and Larry Hartzog, a
shareholder and board member, to borrow $1.97 million at a fixed interest
rate of 9 percent. In connection with the loan agreements, the lenders
also purchased stock purchase warrants from the Company entitling them to
purchase up to 600,000 aggregate shares of the Company's Class A Common
Stock at an exercise price of $3.75 per share, subject to certain
adjustments. The lenders paid $50,000 for these stock purchase warrants.
Exercise of the stock purchase warrants is subject to certain vesting
provisions and the loans were subordinate to the Company's credit
agreement. In July 1995 the $1.97 million was paid in accordance with the
loan agreements.
The Company's credit agreement and various other loan agreements and
arrangements should provide the Company with sufficient working capital to
finance its operations. The Company does not anticipate making any major
changes or amendments to its existing credit agreement or to its other
financing arrangements in the near future.
Other Changes in Financial Condition, Liquidity, and Capital Resources
- ----------------------------------------------------------------------
Overall, working capital improved to approximately $64.2 million at
December 31, 1995 from $56.4 million at December 31, 1994. Inventories
increased approximately $15.5 million over the prior year in anticipation
of increasing sales as evidenced by the Company's sales backlog. Accounts
receivables decreased approximately $5.5 million due primarily to a
decrease in December sales of approximately $3.0 million. The current ratio
at December 31, 1995 was 3.93-to-1 compared to 3.82-to-1 at the same time
last year.
Capital expenditures of $2.3 million in 1995, an increase of $.4 million
from the prior year, were financed primarily by internally generated funds.
Capital expenditures are used to continue improving the Company's
16
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
manufacturing and product support efficiencies. Capital expenditures for
1996 are budgeted at $3.5 million. None of the budgeted capital
expenditures are fixed commitments.
In connection with a 1985 acquisition, the Company issued 4,800 shares of 7
percent Series B Preferred Stock with a $4.8 million redemption value. The
preferred stock accrues dividends at the rate of $70 per share per year.
The cumulative dividends are payable each January and July and must be
fully paid or declared with funds set aside for payment before any dividend
can be declared or paid on any other class of the Company's stock. The
preferred stock carries a redemption price of $1,000 per share. The Company
redeemed 300 shares of its redeemable preferred stock in 1988. The Company
did not redeem 750 shares of its redeemable preferred stock in each of the
years 1990 through 1994 and did not redeem 500 shares in 1989. In 1995, 250
shares of the preferred stock were scheduled for redemption. The Company
made dividend payments of $157,500 in both July 1994 and January 1995.
Accrued cumulative dividends were $1.4 million at December 31, 1994. Terms
on the preferred stock provide that if two consecutive dividend payments or
redemptions are not made, the Company's Board of Directors may be increased
by one and the preferred stockholder shall have the exclusive right to
elect an individual to fill such newly created directorship. These special
voting rights continue until the dividend payments and redemptions are
made. The preferred stockholder did not exercise the rights granted under
the preferred stock agreement relating to electing a member of the
Company's Board of Directors, but filed suit in November 1994 against the
Company seeking payment of the accumulated dividends of $1.4 million and
redemption of the 4,250 shares of preferred stock not redeemed at December
31, 1994 for $4.25 million.
During 1995 as settlement of the suit, the Company and the Preferred
Stockholder entered into a Stock Purchase Agreement (the "Agreement"). The
Agreement provides that the Company will purchase the 4,500 shares of
preferred stock outstanding in a series of installments, with all shares to
be purchased by December 31, 1996. The purchase price to be paid by the
Company to the Preferred Stockholder for each share of preferred stock will
be $1,000, plus all dividends accrued but unpaid on such shares to and
including the business day immediately preceding the applicable purchase
date.
Under terms of the Agreement, the Preferred Stockholder agreed to dismiss
without prejudice all claims asserted in the lawsuit filed against the
Company in November 1994. The Preferred Stockholder also agreed that, so
17
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
long as the Company fulfills its obligations under the Agreement, (i) an
aggregate dividend of not more than $300,000 may, at the Company's
discretion, be declared and paid by the Company in each of 1995 and 1996 to
holders of the Company's Voting Class A Common Stock and Voting Common
Stock, $0.10 par value, and (ii) the Preferred Stockholder will not attempt
to exercise its right to elect a new member to the Company's Board of
Directors.
During 1995, the Company paid $1.4 million for the redemption of 1,050
shares of preferred stock plus accrued dividends. The Company also made
semiannual dividend payments on all remaining preferred stock shares
outstanding of $131,250 and $120,750 in July 1995 and January 1996,
respectively. Accrued cumulative dividends were $1.1 million on the 3,450
preferred stock shares outstanding at December 31, 1995. As of December
31, 1995 the Company was in compliance with terms of the Agreement.
ACCOUNTING FOR INCOME TAXES - Income taxes are accounted for using the
asset and liability method under which deferred income taxes are recognized
for the tax consequences of "temporary differences" by applying enacted
statutory tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing assets
and liabilities. The effect on deferred taxes for a change in tax rates is
recognized in income in the period that includes the enactment date.
The Company has a net deferred tax asset after consideration of the
valuation allowance as determined under Statement 109, of approximately
$18.8 million and $10.0 million at December 31, 1995 and 1994,
respectively. Under the provisions of Statement 109, the benefit of future
tax deductions and credits not utilized by the Company in the past is
reflected as an asset to the extent that the Company assesses that future
operations will "more likely than not" be sufficient to realize such
benefits. During 1995, the Company recorded a previously unrecognized net
deferred tax asset in the amount of $8.8 million. The Company has assessed
its past earnings history and trends, sales backlog, budgeted sales, and
expiration dates of future tax deductions and credits. As a result, the
Company has determined it is "more likely than not" that the $18.8 million
of future tax deductions and credits will be utilized. The ultimate
realization of future tax deductions and credits will require aggregate
taxable income of approximately $45 million to $50 million in future years.
18
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED - Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS
121) establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those
assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS 121, effective for the
Company's 1996 year, will be applied prospectively and is not expected to
have a material impact on the Company's future financial statements.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123) establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS 123
defines a fair-value based method of accounting for an employee stock
option or similar equity instrument and encourages entities to adopt that
method of accounting for all employee stock compensation plans. However,
SFAS 123 allows entities to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees," which
generally does not result in compensation expense for fixed option plans
with option price equal to fair value of the Company's stock on the option
grant date. The accounting requirements of SFAS 123 are effective for
stock-based transactions in 1996. The disclosure requirement of SFAS 123
including proforma disclosures reflecting the difference between
compensation cost determined by the fair value based method and recorded
compensation cost, if any, will be effective for 1996. The Company does
not intend to adopt the fair value based method of determining stock-based
compensation so SFAS 123 is not expected to have an effect on future
financial statements. The disclosure requirements will be adopted in 1996.
LEGAL PROCEEDINGS - The Company is involved in various legal proceedings.
In the opinion of the Company's management and outside legal counsel, the
ultimate disposition of such proceedings will not have a materially adverse
effect on the Company's consolidated financial position or future results
of operations. (See Item 3.)
Results of Operations
- ---------------------
1995 SALES AND EARNINGS. The Company's net revenues for the year ended
December 31, 1995 rose slightly to $130.6 million from $128.0 million for
the year ended December 31, 1994. Net earnings for 1995 were $17.5 million
versus $22.6 million in 1994, or 82 cents per share for 1995 versus $1.07
per share for 1994.
19
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
The Company reported lower tax benefits in 1995 versus 1994 as net earnings
included $8.8 million, or 42 cents per share, and $10 million, or 47 cents
per share, in 1995 and 1994, respectively, for previously unrecognized tax
benefits related to Statement 109.
The Company's core domestic business was stronger in 1995 than in 1994,
despite poor weather during the first half of 1995 and intensely increased
competition. Domestic sales from the Company's core business increased to
$113.6 million compared to $98.3 million in 1994, an increase of 16
percent. International sales decreased to $16.7 million or 30 percent from
$23.8 million in 1994. The reduction in international sales was primarily
due to economic and political conditions experienced in Mexico that became
evident in late 1994 and continued throughout 1995. As a result, the
Company's net revenues from sales into Mexico decreased $6.5 million from
1994 levels.
Net revenues for the Company's stabilizer/reclaimer product line recognized
the most significant growth with an increase of $5.8 million or 37 percent
over 1994. This was offset by reduced sales of the Company's soil
remediation product line.
The increased development of the highways and mass transportation system
has had and will continue to have a positive impact on the Company. The
continued funding of the ISTEA-91 legislation and the commitment of the
U.S. legislature and federal government to fund the improvement of the
infrastructure has had a significant impact on current operations and
should continue to positively impact the Company's operations as additional
funding and matching contributions are made at the federal and state
levels. The North American Free Trade Agreement and the General Agreement
on Tariff and Trade have had a favorable impact on the Company's sales in
international markets, excluding Mexico in 1995, which is expected to
continue.
The Company's gross margins were 29.6% down from 31.5% in the prior year.
This reduction in margins was primarily the result of pricing
competitiveness which the Company believed was key to maintaining market
share in 1995. The Company also experienced increases in its labor costs
over the prior year.
Marketing and administrative expenses increased in 1995 generally due to
increased sales efforts. As a percentage of net revenues, marketing and
administrative expenses increased to approximately 16.3 percent in 1995
from approximately 15.4 percent in 1994. During 1995, the Company took
20
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
steps to increase its market share overseas. This included a more
aggressive advertising and marketing campaign to enlarge the Company's
share of potential markets, particularly in the Pacific Rim, China, and
South America. In addition, the Company continued to provide customer
demonstrations for new and existing products, to participate in industry
trade shows, and to increase its domestic and international sales force.
Currently, the Company's marketing and advertising efforts are directed
towards preparing for the 1996 CONEXPO trade show.
Engineering and product development costs remained level as a percentage of
net revenues at approximately 4 percent. The Company introduced several
new products in 1995. These included the RS-650 stabilizer/reclaimer, which
was released in the first quarter of 1995, as well as the single-lane
autograde TR-325 base and grade trimmer, which was released during the
second half of 1995. Additional products scheduled to be introduced at the
1996 CONEXPO trade show, include two new ROTO-MILL pavement profilers,
several new pavers, a series of metric batch plants and more base and grade
trimmers. The Company continues to be committed to setting standards of
quality within the industry, through both product development and product
enhancement.
Interest expense increased as the Company's borrowings under its primary
credit loan agreement were consistently higher during 1995 as compared to
1994 in order to finance inventories for the Company's primary selling
season. In addition, the weighted average interest rates were higher in
1995 as compared to 1994.
1994 SALES AND EARNINGS. The Company's net revenues for the year ended
December 31, 1994 of $128.0 million is an increase of $27.4 million or 27
percent over net revenues of $100.6 million for the year ended December 31,
1993. Net earnings for 1994 were $22.6 million versus $8.0 million in
1993, or $1.07 per share for 1994 versus 37 cents per share for 1993.
These favorable results and increases are attributable to a combination of
factors, the most significant of which are as follows:
Net revenues of major equipment from the Company's concrete paving,
automated paving profiling, soil remediation, and asphalt product lines
increased approximately $18.4 million in 1994. In addition to increased
domestic sales of major equipment, increased international sales and sales
of soil remediation systems also contributed to the overall sales increase.
International sales increased approximately $7 million in 1994 as compared
to 1993. Most of the increases were in Asia, South America, Canada, and
21
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
Australia, and included virtually all of the Company's major equipment
product lines. The increase was a result of increased international
marketing efforts. Sales of the new soil remediation systems resulted in
approximately $6 million of additional revenue. The product line was first
marketed in 1994.
Net revenues of other product lines increased $2.7 million, primarily
through increases in sales from the Company's trailer division.
The higher sales volume from major equipment helped increase replacement
part sales by $2.3 million. Net revenues of used and rental machines as
well as other sales increased $4.1 million through increased trade-ins and
alternative financing arrangements.
The increased development of the highways and mass transportation system
have had a positive impact on the Company's sales. The funding of the
ISTEA-91 legislation and the commitment of the U.S. legislature and federal
government to fund the improvement of the infrastructure has had a
significant impact on current operations and should continue to positively
impact the Company's operations as additional funding and matching
contributions are made at the federal and state levels. The Company's
sales were also enhanced by continued strong demand from various
international markets. The North American Free Trade Agreement and the
General Agreement on Tariff and Trade also had a favorable impact on the
Company's sales in international markets, which is expected to continue.
The Company's gross margin increased 4.3 percent which was primarily due to
the absorption of fixed costs to more finished products and manufacturing
efficiencies resulting from increased production.
Marketing and administrative expenses increased in 1994 primarily due to
increased sales volumes. As a percentage of net sales, marketing and
administrative expenses decreased to approximately 15.4 percent in 1994
from approximately 15.6 percent in 1993 due to cost efficiencies associated
with higher sales volumes.
Engineering and product development costs increased, but remained level as
a percentage of net revenues at approximately 4 percent. The Company
continues to invest in the design, production, and enhancement of new and
existing equipment.
Interest expense increased as the Company's borrowings under its primary
credit agreement were higher in the first half of 1994 as compared to 1993
22
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
===========================================================================
in order to finance the buildup of inventories for the Company's primary
selling season. Debt under the Company's fleet financing agreement
averaged approximately $1.1 million higher in 1994 as compared to 1993. In
addition, interest rates increased in 1994 over 1993 rates. Interest
income increased through additional sales-type leases under the Company's
fleet financing agreement in 1994 over 1993.
As a result of the positive operations and the favorable prospects for the
near term future, the Company determined it was more likely than not that
$10 million of deferred tax assets would be realized in the future, and
such amount was recognized in 1994.
Clean Air Act
- -------------
In 1990, the United States Congress passed certain amendments to the
National Clean Air Act. These amendments may require certain products
manufactured by the Company to be equipped with new pollution control
devices. As required by the new amendments, the implementation of the
standards may take up to seven years. The Company believes that it will be
able to meet the implementation dates as required by the new amendments.
Inflation
- ---------
The Company did not experience any significant inflationary impact on its
costs of materials.
23
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORTS......................................... 25
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations,
Years ended December 31, 1995, 1994, and 1993...................... 28
Consolidated Balance Sheets, December 31, 1995 and 1994.............. 29
Consolidated Statements of Changes in Common Stock and Other Capital,
Years ended December 31, 1995, 1994, and 1993...................... 31
Consolidated Statements of Cash Flows,
Years ended December 31, 1995, 1994, and 1993...................... 32
Notes to Consolidated Financial Statements,
December 31, 1995, 1994, and 1993.................................. 33
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
Schedule II. Consolidated Valuation and Qualifying Accounts,
Years ended December 31, 1995, 1994, and 1993...................... 51
Information required by other schedules called for under Regulation S-X is
either not applicable or is included in the consolidated financial
statements or notes thereto.
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Shareholders and Board of Directors
CMI Corporation:
We have audited the consolidated financial statements of CMI Corporation
and subsidiaries (the Company) as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we
also have audited the consolidated financial statement schedule as listed
in the accompanying index. These consolidated financial statements and
consolidated financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and consolidated financial statement
schedule based on our audits. We did not audit the 1993 financial
statements of certain divisions, which statements reflect total revenues
constituting 20 percent in 1993, of the related consolidated totals. Those
statements were audited by other auditors whose reports have been furnished
to us, and our opinion, insofar as it relates to the amounts included for
these divisions, is based solely on the reports of the other auditors.
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
and the reports of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the reports of the other auditors
in 1993, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CMI Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also in our opinion, based on our audits and the
reports of the other auditors in 1993, the related consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 12, 1996
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Nichols, Rise & Company
The Board of Directors
CMI Corporation
We have audited the accompanying statements of operations, division
capital and cash flows of Load King, a division of CMI Corporation, for the
year ended December 31, 1993. These financial statements are the
responsibility of the division's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents
fairly, in all material respects, the results of operations and cash flows
of Load King, a division of CMI Corporation, for the year ended December
31, 1993, in conformity with generally accepted accounting principles.
218 South Ridge Plaza
South Sioux City, Nebraska
January 28, 1994
26
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Nichols, Rise & Company
To Board of Directors
CMI Corporation
We have audited the accompanying statements of earnings, division capital
and cash flows of CMI Bid-Well, a division of CMI Corporation, for the year
ended December 31, 1993. These financial statements are the responsibility
of the division's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit 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 audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows
of CMI Bid-Well, a division of CMI Corporation, for the year ended December
31, 1993, in conformity with generally accepted accounting principles.
218 South Ridge Plaza
South Sioux City, Nebraska
January 31, 1994
27
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1995, 1994, and 1993
(in thousands, except per share data)
============================================================================
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net revenues $130,578 128,005 100,564
-------- -------- --------
Costs and expenses:
Cost of revenues 91,915 87,744 70,172
Marketing and administrative 21,239 19,738 15,698
Engineering and product development 5,681 5,491 4,490
Interest expense 3,166 2,712 2,487
Interest income (568) (580) (362)
Other income, net (172) (254) (265)
-------- -------- --------
121,261 114,851 92,220
-------- -------- --------
Earnings before income taxes 9,317 13,154 8,344
Income tax expense (benefit) (8,184) (9,464) 312
-------- -------- --------
Net earnings $ 17,501 22,618 8,032
======== ======== ========
Share data:
Net earnings applicable to common shares $ 17,170 22,429 7,661
Average outstanding common shares
and common share equivalents 20,893 20,966 20,746
Net earnings per common share and common
share equivalent $ .82 1.07 .37
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
(dollars in thousands)
============================================================================
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,062 1,423
Cash equivalents - restricted 150 903
Receivables less allowance for doubtful accounts
of $591 and $602 at December 31, 1995 and 1994,
respectively 11,731 17,226
Inventories:
Finished equipment 31,717 19,520
Work-in-process 7,629 7,942
Raw materials and parts 23,753 20,102
------- ------
Total inventories 63,099 47,564
Other current assets 389 121
Deferred tax asset 9,000 9,200
------- ------
Total current assets 86,431 76,437
------- ------
Property, plant, and equipment:
Land 1,747 1,679
Buildings 11,238 11,189
Machinery and equipment 32,665 30,821
Other 254 672
------- ------
45,904 44,361
Less accumulated depreciation and amortization 34,671 33,208
------- ------
Net property, plant, and equipment 11,233 11,153
Long-term receivables 1,135 651
Deferred tax asset 9,800 800
Other assets 620 703
------- ------
Total assets $109,219 89,744
======= ======
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1995 and 1994
(dollars in thousands)
============================================================================
Liabilities, Common Stock and Other Capital
- -------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 2,340 2,252
Current maturities of notes payable to related parties - 1,970
Accounts payable 11,417 8,132
Accrued liabilities 8,435 7,658
------- -------
Total current liabilities 22,192 20,012
------- -------
Long-term debt 23,091 21,691
Redeemable preferred stock:
Redemption value $4,537 in 1995 and $5,908 in 1994
including cumulative dividends in arrears; shares
outstanding - 3,450 and 4,500 at December 31, 1995
and 1994, respectively 4,537 5,908
Common stock and other capital:
Common stock:
Par value $.10; shares issued and outstanding
- 621 at December 31, 1995 and 1994 - -
Class A common stock:
Par value $.10; shares issued and outstanding
- 20,381,383 and 20,351,591 at December 31, 1995
and 1994, respectively 2,038 2,035
Additional paid-in capital 46,001 46,229
Retained earnings (accumulated deficit) 11,360 (6,131)
------- -------
59,399 42,133
Commitments and contingencies (notes 3, 4, 6, 11 and 12) _______ _______
Total liabilities, common stock and other capital $109,219 89,744
======= =======
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Common Stock and Other Capital
Years ended December 31, 1995, 1994, and 1993
(dollars in thousands)
============================================================================
<TABLE>
<CAPTION>
Retained
Common Stock Class A Common Stock Additional Earnings
------------- -------------------- Paid-in (Accumulated
Shares Amount Shares Amount Capital Deficit)
------ ------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31,
1992 621 $ - 20,336,591 $2,034 $46,719 $(36,781)
Net earnings - - - - - 8,032
Exercise of stock
options - - 15,000 1 20 -
Proceeds from issuance
of common stock
purchase warrants - - - - 50 -
Dividends declared
and accretion on
preferred stock - - - - (371) -
--- -- ---------- ----- ------- --------
Balance December 31,
1993 621 - 20,351,591 2,035 46,418 (28,749)
Net earnings - - - - - 22,618
Dividends declared
and accretion on
preferred stock - - - - (189) -
--- -- ---------- ----- ------- --------
Balance December 31,
1994 621 - 20,351,591 2,035 46,229 (6,131)
Net earnings - - - - - 17,501
Dividends declared
and accretion on
preferred stock - - - - (321) (10)
Exercise of stock
options - - 29,792 3 93 -
--- -- ---------- ----- ------- --------
Balance December 31,
1995 621 $ - 20,381,383 $2,038 $46,001 $ 11,360
=== == ========== ===== ====== ========
</TABLE>
See notes to consolidated financial statements.
31
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994, and 1993
(dollars in thousands)
================================================================================
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Operating activities:
Net earnings $ 17,501 22,618 8,032
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation of property, plant, and
equipment 1,757 1,492 1,649
Amortization of other assets 58 192 213
Gain on sale of property, plant, and
equipment (190) (274) (265)
Deferred tax benefit (8,800) (10,000) -
Decrease (increase) in accounts receivable 5,495 (7,761) (2,146)
Increase in long-term receivables (484) (642) -
Increase in inventories (15,535) (4,556) (11,398)
Decrease (increase) in other current assets (268) 151 (25)
Increase (decrease) in accounts payable 3,285 (1,431) 2,751
Increase in accrued liabilities 777 1,180 1,156
Other, net 26 123 -
-------- -------- --------
Net cash and cash equivalents provided by
(used in) operating activities 3,622 1,092 (33)
-------- -------- --------
Investing activities:
Sale (purchase) of cash equivalents - restricted 753 (228) -
Proceeds from sale of assets 676 317 302
Capital expenditures (2,323) (1,919) (1,087)
-------- -------- --------
Net cash and cash equivalents used in
investing activities (894) (1,830) (785)
-------- -------- --------
Financing activities:
Borrowings (payments) on long-term debt (2,849) (816) 1,080
Net borrowings (payments) on revolving credit note 2,044 3,233 (4,963)
Net borrowings (payments) on fleet financing agreement 323 (244) 2,837
Proceeds from stock options exercised 96 - 21
Proceeds from issuance of common stock
and stock purchase warrants - - 50
Payment of preferred stock dividends (653) (158) -
Redemption of preferred stock (1,050) - -
-------- -------- --------
Net cash and cash equivalents provided by
(used in) financing activities (2,089) 2,015 (975)
-------- -------- --------
Increase (decrease) in cash and cash equivalents 639 1,277 (1,793)
Cash and cash equivalents at beginning of year 1,423 146 1,939
-------- -------- --------
Cash and cash equivalents at end of year $ 2,062 1,423 146
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993
============================================================================
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
-----------------------
Since 1964, CMI Corporation and its subsidiaries (the Company) have
manufactured and marketed automated equipment for the road and heavy
construction industry. The Company's automated construction equipment
has a wide variety of uses in the maintenance, construction, paving,
and resurfacing of highways, city streets, parking lots, airport
runways, tunnels, and bridges. The Company's raw materials are
readily available, and the Company is not dependent on a single
supplier or only a few suppliers.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of CMI
Corporation and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company considers
unrestricted cash and cash equivalents with maturities of less than
three months to be cash equivalents.
Business and Credit Concentrations
----------------------------------
The Company's customers are not concentrated in any specific
geographic region, but are concentrated in the road and heavy
construction business. No single customer accounted for a significant
amount of the Company's sales, and there were no significant accounts
receivable from a single customer. The Company reviews a customer's
credit history before extending credit. The Company establishes an
allowance for doubtful accounts based upon factors surrounding the
credit risk of specific customers, historical trends, and other
information. To reduce credit risk, the Company generally requires a
down payment on large equipment orders, and international sales are
generally secured by letters of credit.
The Company had short-term notes receivable and sales-type lease
payments due from customers included in accounts receivable of
approximately $2,538,000 and $3,001,000 at December 31, 1995 and 1994,
respectively.
33
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
Inventories
-----------
Inventories are stated at the lower of cost or market, cost being
determined using the first in, first out (FIFO) method. Costs
included in inventories consist of materials, labor, and manufacturing
overhead which are related to the purchase and production of
inventories.
Property, Plant, and Equipment
------------------------------
Property, plant, and equipment, stated at cost or the present value of
minimum lease payments for assets under capital leases, are
depreciated over the estimated useful lives of the assets using the
straight-line method. Estimated useful lives for buildings, machinery
and equipment, and other property, plant, and equipment range from 3
to 33, 1 to 30, and 1 to 20 years, respectively. Significant
improvements and betterments are capitalized if they extend the useful
life of the asset. Routine repairs and maintenance are expensed when
incurred.
Other Assets
------------
Other assets include loan acquisition costs and other intangible
assets. Loan acquisition costs are being amortized over the life of
the related loan agreement.
Revenue Recognition
-------------------
Revenue is recognized when sales transactions are completed, which is
when products are shipped or title has transferred to the customer.
Income Taxes
------------
Income taxes are accounted for using the asset and liability method
under which deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing
assets and liabilities. The effect on deferred taxes for a change in
tax rates is recognized in income in the period that includes the
enactment date.
34
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
Earnings Per Common Share
-------------------------
Earnings per common share amounts are computed by dividing net
earnings less redeemable preferred stock dividends and accretion of
the difference between the ultimate redemption value and the initial
carrying value of redeemable preferred stock, by the weighted average
outstanding number of common shares and common share equivalents.
Common share equivalents are not considered in the computation of per
share amounts if their effect is anti-dilutive.
Use of Estimates
----------------
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable, accrued liabilities, and redeemable
preferred stock approximate fair value because of the short maturity
of these instruments. The carrying amounts of long-term receivables,
notes payable, and long-term debt approximates fair value as the
effective rates for these instruments are comparable to market rates
at year-end.
Reclassifications
-----------------
Certain reclassifications have been made to prior years' consolidated
financial statements to conform to the 1995 presentation.
35
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
(2) Long-Term Debt and Notes Payable to Related Parties
---------------------------------------------------
Long-term debt and notes payable at December 31 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Prime plus 1.5% (10.0% at December 31, 1995 and 1994)
revolving credit note, collateralized by a first
security interest in substantially all assets of
the Company, due December 1997 $10,530 7,682
Prime plus 1.5% (10.0% at December 31, 1995 and 1994)
term note, collateralized by a first security interest
in substantially all assets of the Company, due
December 1997 3,996 4,800
4.4% to 8.25% (8.1% weighted average rate) fixed
rate bonds, collateralized by a first security interest
in certain real property, due September 2010 4,445 4,600
Prime plus 2.0% (10.5% at December 31, 1995 and 1994)
unsecured note, due July 2006 3,050 3,335
Obligations under a fleet financing agreement due
through 1998, with interest at prime, collateralized
by certain equipment under lease contracts 3,097 2,831
Notes payable to related parties - 1,970
Lease-purchase obligations and notes payable due
through 1999, with interest from 8% to 16%,
collateralized by certain equipment 313 695
------- -------
25,431 25,913
Less current maturities of long-term debt (2,340) (2,252)
Less current maturities of notes payable to related
parties - (1,970)
------- -------
$23,091 21,691
======= =======
</TABLE>
36
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
In 1994, the Company amended its credit agreement with its primary
lender. Terms of the amended credit agreement provide for a maximum
credit line of $30,000,000, which consists of a $25,200,000 revolving
line of credit and a $4,800,000 term loan. The term loan is payable
in 34 equal monthly principal payments of $67,000 plus interest with
the balance due in December 1997. Both the revolving line of credit
and the term loan provide for interest at prime plus 1.5% and are due
in December 1997. The agreement may be extended from year-to-year.
Amounts available under the revolving line of credit are based upon
and collateralized by eligible accounts receivable and inventories as
defined by the credit agreement. The unused portion of the revolving
line of credit was approximately $6,910,000 and $13,273,000 at
December 31, 1995 and 1994, respectively.
The Company's fleet financing agreement allows the Company to borrow
100 percent of the net sales price of specific equipment under lease
contracts. The terms of the individual borrowings under the financing
agreement are consistent with the lease contracts and generally range
from three months to three years. Borrowings under the fleet
financing agreement are secured by the specific equipment.
Certain debt agreements contain restrictions on working capital, net
worth, and other restrictive covenants. At December 31, 1995, the
Company was in compliance with these covenants.
In January 1993, the Company entered into separate loan agreements
with Recovery Equity Investors, L.P. (REI), a shareholder, and Mr.
Larry Hartzog, a shareholder and member of the Company's board of
directors, to borrow $1,970,000 at a fixed interest rate of 9 percent,
due in July 1995. In July 1995, the $1,970,000 was paid in accordance
with the loan agreements. The loan agreements also included the
issuance of stock purchase warrants entitling REI and Mr. Hartzog to
purchase up to 600,000 aggregate shares of the Company's Class A
Common Stock at an exercise price of $3.75 per share, subject to
certain adjustments. At the date of the loan agreement, the closing
price of the Company's Class A Common Stock was $3.50. The lenders
paid $50,000 for the stock purchase warrants. The Company allocated
the total proceeds from the debt and the stock purchase warrants based
on their book values which were determined to be their respective fair
values. Exercise of the stock purchase warrants is subject to certain
vesting provisions.
37
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1995, are as follows (in thousands):
1996 $ 2,340
1997 15,445
1998 1,212
1999 424
2000 460
Thereafter 5,550
------
$25,431
======
(3) Redeemable Preferred Stock
--------------------------
In connection with a 1985 acquisition, the Company issued 4,800 shares
of 7% Series B Preferred Stock with a $4,800,000 redemption value.
The preferred stock accrues dividends at the rate of $70 per share per
year. The cumulative dividends are payable each January and July and
must be fully paid or declared with funds set aside for payment before
any dividend can be declared or paid on any other class of the
Company's stock. The preferred stock carries a redemption price of
$1,000 per share. The Company redeemed 300 shares of its redeemable
preferred stock in 1988. The Company did not redeem 750 shares in
each of the years 1990 through 1994 and did not redeem 500 shares in
1989 for a total of $4,250,000. The Company made dividend payments of
$157,500 in July 1994 and January 1995. Accrued cumulative dividends
were $1,417,500 ($315 per share) at December 31, 1994. In 1995, 250
shares of the preferred stock were scheduled for redemption. Terms of
the preferred stock agreement provide that if two consecutive dividend
payments or redemptions are not made, the Company's Board of Directors
may be increased by one and the preferred stockholder shall have the
exclusive right to elect an individual to fill such newly created
directorship. These special voting rights will continue until the
dividend payments and redemptions are made. The preferred stockholder
did not exercise the special voting rights granted under the preferred
stock agreement, but filed suit in November 1994 against the Company
seeking (i) payment of the accumulated dividends and (ii) redemption
of 4,250 shares of the preferred stock not redeemed at December 31,
1994.
38
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
During 1995, the Company and the Preferred Stockholder entered into a
Stock Purchase Agreement (the "Agreement"). The Agreement provides
that the Company will purchase the 4,500 shares of preferred stock
outstanding in a series of installments, with all shares to be
purchased by December 31, 1996. The purchase price to be paid by the
Company to the Preferred Stockholder for each share of preferred stock
will be $1,000, plus all dividends accrued but unpaid on such share to
and including the business day immediately preceding the applicable
purchase date.
Under terms of the Agreement, the Preferred Stockholder agreed to
dismiss without prejudice all claims asserted in the lawsuit filed
against the Company in November 1994. The Preferred Stockholder also
agreed that, so long as the Company fulfills its obligations under the
Agreement, (i) an aggregate dividend of not more than $300,000 may, at
the Company's discretion, be declared and paid by the Company in each
of 1995 and 1996 to holders of the Company's Voting Class A Common
Stock and Voting Common Stock, $0.10 par value, and (ii) the Preferred
Stockholder will not attempt to exercise its right to elect a new
member to the Company's Board of Directors.
During 1995, the Company paid $1.4 million for the redemption of 1,050
shares of preferred stock, plus accrued dividends. The Company also
made semiannual dividend payments on all remaining preferred stock
shares outstanding of $131,250 and $120,750 in July 1995 and January
1996, respectively. Accrued cumulative dividends were $1,087,000 on
the 3,450 preferred stock shares outstanding at December 31, 1995. As
of December 31, 1995 the Company was in compliance with terms of the
Agreement.
(4) Common Stock and Other Capital
------------------------------
In 1991, the Company entered into an Investment Agreement with REI.
Pursuant to the Investment Agreement, the Company sold REI 6,666,667
shares of common stock (subsequently Class A Common Stock) at $.75 per
share. The Investment Agreement contains various covenants and
restricts the Company from taking certain actions without the prior
written consent of REI.
On February 14, 1992, the Company filed an amended and restated
certificate of incorporation, which authorizes 20,000 shares of common
stock and 45,000,000 shares of Voting Class A Common Stock (Class A
Common Stock). Additionally, the Company effected a 1-for-2,000
reverse split of the common stock and declared a stock dividend of
1,999 shares of Class A Common Stock for each whole share of common
39
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
stock outstanding following the reverse split. Owners of the
remaining common stock could exchange each share of common stock for
one share of Class A Common Stock. The exchange offer expired on
April 30, 1992. At December 31, 1995, 621 shares of common stock had
not been exchanged. The Class A Common Stock has certain transfer
restrictions in order to prevent a change in ownership, which could
limit or eliminate the Company's net operating loss carryforwards (see
note 7).
On February 3, 1987, the Company authorized and declared a dividend
distribution of rights to purchase shares of common stock (the
Rights), subsequently Class A Common Stock, at the rate of one Right
for each share of Class A Common Stock outstanding to shareholders of
record as of February 4, 1987. The Rights Agreement was amended to
exclude REI and the chairman of the board and chief executive officer
from the definition of an acquiring person. The Rights are
exercisable upon the occurrence of certain events. In the event the
Company is acquired in a merger or other business combination
transaction (including one in which the Company is a surviving
corporation), excluding REI and the chairman of the board and chief
executive officer, it is provided that each of the Rights will entitle
its holder to purchase, at the then current exercise price of the
Rights, that number of shares of Class A Common Stock of the surviving
company, which at the time of such transaction would have a market
value of two times the exercise price of the Rights. Therefore, each
of the Rights entitles the holder, until February 4, 1997, to buy one
share of Class A Common Stock at an exercise price of one-half of its
market value at the time of exercise. The Rights are evidenced by the
Class A Common Stock certificate and are not exercisable or
transferable apart from the Class A Common Stock until fifteen days
after a person, excluding REI and the chairman of the board and chief
executive officer, acquires 20 percent or more, or makes a tender
offer for 30 percent or more, of the Class A Common Stock. The
exercise price and the number of shares of Class A Common Stock
issuable upon the exercise of the Rights are subject to adjustment in
certain cases to prevent dilution. The Rights do not have any voting
rights and are redeemable, at the option of the Company, at a price of
$.01 per Right until fifteen days subsequent to any person or entity
acquiring beneficial ownership, excluding REI and the chairman of the
board and chief executive officer, of at least 20 percent of the
Class A Common Stock.
40
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
In addition, for as long as REI beneficially owns at least 1,700,000
shares of Class A Common Stock, the Company may not, without REI's
consent, recommend or adopt any change to the Rights Agreement or make
any declaration with respect to the Rights. The Rights expire
February 4, 1997.
(5) Stock Option Plans
------------------
The Company has established the 1992 Incentive Stock Option Plan (the
Plan) for its employees, as approved by the shareholders. The Plan
has two features: (1) stock options and (2) stock appreciation
rights. The Plan is administered by the Compensation Committee of the
Board of Directors. The granting of stock options and/or appreciation
rights is at the sole discretion of the Compensation Committee. Board
members are not allowed to participate in the Plan. A maximum of
1,000,000 stock options and/or appreciation rights may be granted
under the Plan.
The exercise price of the stock options is the market value of Class A
Common Stock at the date of grant. The options vest and become
exercisable ratably over a four-year period, commencing one year after
the grant date. At December 31, 1995, 500,000 options for the
purchase of Class A Common Stock had been granted for which 400,000
options have an exercise price of $3.25 per share, 50,000 options have
an exercise price of $6.125 per share and 50,000 options have an
exercise price of $6.75 per share. At December 31, 1995, 250,000
options were exercisable.
Stock appreciation rights may be issued with stock options or
separately, at the sole discretion of the Compensation Committee.
Stock appreciation rights, if granted, would be payable in shares of
Class A Common Stock over the same vesting period as the stock
options. At December 31, 1995, no stock appreciation rights had been
granted.
In February 1993, a member of the board of directors received options
to purchase 10,000 shares of Class A Common Stock at the current
market price of $4.875 per share. The options were immediately
exercisable. No options had been exercised at December 31, 1995.
In 1992, a consulting firm, of which a former board member is a
director, received options for the purchase of up to 100,000 shares of
Class A Common Stock for past services rendered. These options were
immediately exercisable at an exercise price of $1.38 per share. The
Company recorded approximately $125,000 in expense in 1992 for these
options. At December 31, 1995, 15,000 options had been exercised.
41
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
(6) Leases
------
The Company leases equipment to customers under short-term and long-
term contracts. Short-term contracts generally range from three to
six months. Rental income from short-term leases was approximately
$2,096,000, $1,650,000, and $2,225,000, for the years ended December
31, 1995, 1994, and 1993, respectively.
The Company's long-term leases generally qualify as sales-type leases.
The net investment in such leases is included in receivables. Future
minimum lease payments to be received are approximately $1,776,000 and
$762,000 in 1996 and 1997, respectively.
(7) Income Taxes
------------
Income tax expense (benefit) consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current tax expense $ 616 536 312
Deferred tax benefit (8,800) (10,000) -
------- -------- ---
$(8,184) (9,464) 312
======= ======== ===
</TABLE>
The deferred tax benefit in 1995 and 1994 consisted of a reduction of
the beginning-of-the-year valuation allowance of $12,479,000 and
$14,957,000, respectively, offset by a deferred tax expense of
$3,679,000 and $4,957,000, respectively.
42
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
Income tax expense (benefit) differed from the amounts computed by
applying the U.S. federal income tax rates of 35% and 34% to pretax
income from continuing operations in 1995, 1994, and 1993,
respectively, as a result of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computed expected tax expense $ 3,261 4,604 2,837
State income taxes 380 530 -
Reduction of valuation allowance (12,479) (14,957) -
Use of net operating loss carryforwards - - (3,197)
Other, net 654 359 672
-------- -------- -------
$ (8,184) (9,464) 312
======== ======== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31,
1995 and 1994, are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net operating loss and other carryforwards $16,932 12,782
Income tax basis in excess of financial basis
of solid waste disposal facility - 7,422
Other, net 4,074 4,678
------- -------
Deferred tax assets 21,006 24,882
Deferred tax liability (plant and equipment) (1,538) (1,735)
------- -------
19,468 23,147
Less valuation allowance 668 13,147
------- -------
Net deferred tax asset $18,800 10,000
======= =======
</TABLE>
During 1994, the Company reduced the valuation allowance to reflect
the deferred tax assets utilized in 1994 to reduce current income
taxes (approximately $5 million) and to recognize a deferred tax asset
of $10 million at December 31, 1994. During 1995, the Company reduced
the valuation allowance to recognize a deferred tax asset of $18.8
million at December 31, 1995. The recognized deferred tax asset is
based upon expected utilization of net operating loss carryforwards
and reversal of certain temporary differences. The ultimate
realization of the deferred tax asset will require aggregate taxable
income of approximately $45 million to $50 million in future years.
The estimated taxable loss for 1995 was approximately $10 million.
This differs from earnings before income taxes as a result of
43
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
realizing a loss on the sale of CMI Energy Conversion Systems, Inc.
(CMI Energy) for tax purposes. The loss was recognized for financial
reporting purposes in prior years when the assets of CMI Energy were
reduced to estimated realizable value. Estimated taxable income for
1994 before utilization of net operating loss carryforwards was
approximately $13 million.
The Company has assessed its past earnings history and trends, sales
backlog, budgeted sales, and expiration dates of carryforwards and has
determined that it is more likely than not that the $18,800,000 of
deferred tax assets will be realized. The remaining valuation
allowance of approximately $700,000 is maintained against deferred tax
assets which the Company has not determined to be more likely than not
realizable at this time.
At December 31, 1995, the Company has a tax net operating loss
carryforward of approximately $34,237,000 for federal income tax
purposes. Such carryforwards, which may provide future tax benefits,
expire as follows: $5,727,000 in 1999, $186,000 in 2001, $4,932,000
in 2004, $8,272,000 in 2005, $4,810,000 in 2006, and $10,310,000 in
2010. Future changes in ownership, as defined by section 382 of the
Internal Revenue Code, could limit the amount of net operating loss
carryforwards used in any one year (see note 4).
(8) Export Sales
------------
The Company had export sales of approximately $16.7 million, $23.8
million, and $16.6 million in 1995, 1994, and 1993, respectively.
These sales were made through foreign dealers and representatives. A
significant portion of these sales were made in Asia, Australia,
Europe, and North and Central America, excluding the United States.
(9) Supplemental Quarterly Financial Information (unaudited)
--------------------------------------------------------
Following is a summary of the unaudited interim results of operations
for the year ended December 31, 1995 (in thousands, except share
data):
<TABLE>
<CAPTION>
1995
-----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Net revenues $32,671 43,604 30,923 23,380 130,578
Net earnings(loss) $ 2,372 14,804 878 (553) 17,501
Net earnings(loss)
per common and common
equivalent share $ .11 .71 .04 (.04) .82
</TABLE>
44
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
<TABLE>
<CAPTION>
1994
-----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Net revenues $27,863 48,165 27,291 24,686 128,005
Net earnings(loss) $ 2,218 18,337 1,758 305 22,618
Net earnings(loss)
per common and common
equivalent share $ .11 .87 .08 .01 1.07
</TABLE>
(10) Supplemental Cash Flow Information
----------------------------------
Cash paid for interest amounted to approximately: $3,166,000,
$2,730,000, and $2,503,000 in 1995, 1994, and 1993, respectively.
Cash paid for income taxes amounted to approximately: $277,000 and
$439,000 in 1995 and 1994, respectively.
Supplemental schedule of noncash investing and financing activities
are as follows:
- Accretion of discount on preferred stock was $10,000, $31,000, and
$56,000 in 1995, 1994, and 1993, respectively. In 1993, dividends
on preferred stock of $315,000 were accrued but not paid.
Dividends of $321,000 and $158,000 were accrued and paid in 1995
and 1994, respectively.
- During 1994, $149,000 of lease assets and obligations were
capitalized.
(11) Commitments and Contingencies
-----------------------------
The Company and its subsidiaries are parties to various leases
relating to plants, warehouses, office facilities, transportation
vehicles, and certain other equipment. Real estate taxes, insurance,
and maintenance expenses are normally obligations of the Company. It
is expected that in the normal course of business, the majority of the
leases will be renewed or replaced by other leases. Leases do not
provide for dividend restrictions, debt, or future leasing
arrangements. All leasing arrangements contain normal leasing terms
without unusual purchase options or escalation clauses. Rent expense
was $460,000 in 1995, $457,000 in 1994, and $438,000 in 1993.
45
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
Minimum rental commitments under all noncancellable leases for each
year subsequent to December 31, 1995, are approximately as follows:
$263,000 in 1996, $207,000 in 1997, $38,000 in 1998, and $29,000 in
1999.
At December 31, 1995, the Company was contingently liable for
outstanding letters of credit in the amount of approximately $82,000.
The Company is also contingently liable as guarantor for certain
accounts receivable sold with recourse of approximately $3,615,000
through December 2002.
(12) Litigation
----------
In prior years, the Company was party to certain patent litigation.
During 1994, the judgments granted to the Company by United States
District Courts were reversed by the United States Court of Appeals
(Appeals Court). The Company petitioned the United States Supreme
Court to hear the cases and was denied a hearing. Additionally,
during 1994, the Appeals Court upheld a judgment against the Company
and required the Company to pay approximately $1.3 million to the
plaintiff.
On November 22, 1995, certain attorneys, previously engaged by the
Company in connection with prior patent litigation, filed suit against
the Company in the Circuit Court of Cook County, Illinois, seeking to
recover approximately $1.4 million of legal fees and costs alleged to
be owing by the Company, together with prejudgment and postjudgment
interest and other costs. The Company has filed counterclaims against
the law firm for negligence and legal malpractice. The Company seeks
an unspecified amount of monetary damages, disgorgement of all legal
fees collected, punitive damages, prejudgment interest and other
costs, and is seeking removal of the case to the United States
District Court for the Northern District of Illinois, Eastern
Division.
There are numerous other claims and pending legal proceedings that
generally involve product liability and employment issues. These
cases are, in the opinion of management, ordinary routine matters
incidental to the normal business conducted by the Company. In the
opinion of the Company's management after consultation with outside
legal counsel, the ultimate disposition of such proceedings, including
the case above, will not have a materially adverse effect on the
Company's consolidated financial position or future results of
operations.
46
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
============================================================================
(13) CMI Energy Conversion Systems, Inc.
-----------------------------------
In 1983, a subsidiary of the Company, CMI Energy, indefinitely
suspended construction of a solid waste disposal facility (the
Project). In connection with the Project, the Company contracted with
the City of Oklahoma City (the City) to receive municipal solid waste.
In 1995, the Company sold the assets of CMI Energy for cash and a five
year note bearing interest at eight percent. As a result of the sale,
a letter of credit in the amount of $675,000 held by the City,
securing the Company's performance under the solid waste delivery
contract, was released. CMI Energy did not materially affect the
Company's results of operations in 1995, 1994, or 1993.
(14) Related Party Transactions
--------------------------
In prior years, the Company leased certain equipment and real property
from a partnership, 80% of which was owned by the chairman of the
board and chief executive officer of the Company, and 20% of which was
owned by his father. Total payments made on the lease were
approximately $94,000 and $279,000 in 1994 and 1993, respectively. No
amounts were paid to the partnership in 1995.
From time to time during 1983 to 1985, the chairman of the board and
chief executive officer of the Company loaned CMI Energy approximately
$651,000. CMI Energy has repaid the principal amount of the loans.
However, at December 31, 1995, interest on the loans of approximately
$260,000 was accrued.
(15) Employee Benefit Plan
---------------------
The Company has a defined contribution plan whereby eligible employees
may contribute pretax wages in accordance with the provisions of the
plan. At the discretion of the Board of Directors, the Company
matches certain contributions made by eligible employees.
Discretionary matching contributions of approximately $128,000,
$104,000, and $78,000 were made in 1995, 1994, and 1993, respectively.
47
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
============================================================================
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
----------------------------------------------------------------
None.
PART III
In accordance with the provisions of General Instruction G(3), Items 10,
11, 12, and 13 are incorporated herein by reference to the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on May 3, 1996.
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedule, and Reports
on Form 8-K
----------------------------------------------------------------
(a) Consolidated Financial Statements and Consolidated Financial Statement
Schedule
----------------------------------------------------------------------
1. Consolidated Financial Statements:
----------------------------------
See Index to Consolidated Financial Statements and Consolidated
Financial Statement Schedule at Item 8 on Page 24 of this Form 10-K.
2. Consolidated Financial Statement Schedule:
------------------------------------------
See Index to Consolidated Financial Statements and Consolidated
Financial Statement Schedule at Item 8 on Page 24 of this Form 10-K.
3. Exhibits
--------
(Numbered in accordance with Regulation S-K Item 601)
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------- --------------------------------------- ----------------------
<S> <C> <C>
(3i) Amended and Restated Certificate Exhibit 2 on Form 8-K,
of Incorporation dated February 18,
1992; and Exhibit (3i)
on Form 10-Q dated
August 14, 1995
</TABLE>
48
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
============================================================================
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------- --------------------------------------- ----------------------
<S> <C> <C>
(3ii) Amended and Restated By-Laws Exhibit 6 on Form 8-K,
dated August 26, 1991
(4) The registrant, by signing this report,
agrees to furnish the Securities and
Exchange Commission, upon its request,
a copy of any instrument which defines
the right of holders of long-term debt of
the registrant and all of its subsidiaries
for which consolidated or unconsolidated
financial statements are required to be
filed, and which authorizes a total amount
of securities not in excess of 10 percent
of the total assets of the registrant and
its subsidiaries on a consolidated basis.
(10) Separate loan and warrant agreements with Exhibit 1 of the 1992
REI and Larry Hartzog. Form 10-K dated March
8, 1993
(10) Stock Purchase Agreement Exhibit 10 on Form
10-Q dated May 2,
1995.
(11) Computation of earnings per share Exhibit 11 of this
Form 10-K
(21) Subsidiaries of the Registrant:
Place of Incorporation
Name or Organization
---- ----------------------
CMI Limited Partnership Oklahoma
CMI Sales Co. Oklahoma
Product Support, Inc. Oklahoma
Machinery Investment Corporation Oklahoma
CMI International (U.K.), Ltd. England
CMI Energy Conversion Systems, Inc. Oklahoma
CMI OIL Corporation Oklahoma
CMI Dakota Co. South Dakota
Transport Trailer Manufacturing Company Oklahoma
</TABLE>
49
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
============================================================================
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------- --------------------------------------- ----------------------
<S> <C> <C>
(23) Consents of Independent Auditors Exhibits 23.1,23.2,and
23.3 of this Form 10-K
(27) Financial Data Schedule Exhibit 27 on this
Form 10-K
</TABLE>
(b) Reports on Form 8-K
-------------------
No report on Form 8-K was filed during the fourth quarter of 1995.
50
<PAGE>
Schedule II
-----------
CMI CORPORATION AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994, and 1993
============================================================================
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance at
Beginning Cost and Deductions End
Description of Year Expenses (1) of Year
----------- ---------- ---------- ---------- ----------
Allowance for doubtful accounts:
<S> <C> <C> <C> <C>
December 31, 1995 $602 134 145 591
=== === === ===
December 31, 1994 $483 289 170 602
=== === === ===
December 31, 1993 $382 434 333 483
=== === === ===
</TABLE>
(1) Write-off of uncollected accounts and other deductions.
51
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1995
============================================================================
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized:
(Registrant)
CMI CORPORATION
By: /s/ Bill Swisher Dated: March 4, 1996
------------------------------ --------------------
Bill Swisher
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By: /s/ David I. Anderson Dated: March 4, 1996
------------------------------ --------------------
David I. Anderson
Director
By: /s/ Ralph P. Cordes Dated: March 4, 1996
------------------------------ --------------------
Ralph P. Cordes
Senior Vice President, Operations
By: /s/ Joseph J. Finn-Egan Dated: March 4, 1996
------------------------------ --------------------
Joseph J. Finn-Egan
Director
By: /s/ Larry D. Hartzog Dated: March 4, 1996
------------------------------ --------------------
Larry D. Hartzog
Director
By: /s/ Jim D. Holland Dated: March 4, 1996
------------------------------ --------------------
Jim D. Holland
Senior Vice President, Treasurer
and Chief Financial Officer
By: /s/ Jeffrey A. Lipkin Dated: March 4, 1996
------------------------------ --------------------
Jeffrey A. Lipkin
Director
By: /s/ Thomas P. Stafford Dated: March 4, 1996
------------------------------ --------------------
Thomas P. Stafford
Director
By: /s/ Ken Stephens Dated: March 4, 1996
------------------------------ --------------------
Ken Stephens
Controller
By: /s/ Bill Swisher Dated: March 4, 1996
------------------------------ --------------------
Bill Swisher
Chairman of the Board
52
<PAGE>
Exhibit 11
----------
CMI CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Share
(in thousands, except per share data)
============================================================================
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1995 1994 1993
---- ---- ----
Primary Earnings Per Share
--------------------------
<S> <C> <C> <C>
Net earnings per statement of operations $17,501 22,618 8,032
Deduct dividends on preferred stock 321 158 315
Deduct accretion of preferred stock discount 10 31 56
------ ------ ------
Net earnings applicable to common stock $17,170 22,429 7,661
====== ====== ======
Weighted average common shares outstanding 20,367 20,352 20,343
Add dilutive effect of outstanding stock options
(as determined using the treasury stock method) 526 614 403
------ ------ ------
Weighted average common shares outstanding,
as adjusted 20,893 20,966 20,746
====== ====== ======
Primary earnings per share $ .82 1.07 .37
====== ====== ======
Fully Diluted Earnings Per Share
--------------------------------
Net earnings applicable to common stock as shown
in primary computation above $17,170 22,429 7,661
====== ====== ======
Weighted average common shares outstanding 20,367 20,352 20,343
Add fully dilutive effect of outstanding stock
options(as determined using the treasury stock
method) 526 614 597
------ ------ ------
Weighted average common shares outstanding,
as adjusted 20,893 20,966 20,940
====== ====== ======
Fully diluted earnings per share $ .82 1.07 .37
====== ====== ======
</TABLE>
<PAGE>
Exhibit 23.1
------------
INDEPENDENT AUDITORS' CONSENT
=================================================================
The Board of Directors
CMI Corporation:
We consent to incorporation by reference in the registration
statement on Form S-8 (No. 33-66274) of CMI Corporation of our
report dated February 12, 1996, relating to the consolidated
balance sheets of CMI Corporation and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of
operations, changes in common stock and other capital, and cash
flows and related schedule for each of the years in the three-
year period ended December 31, 1995, which report appears in the
December 31, 1995, annual report on Form 10-K of CMI Corporation.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
March 4, 1996
<PAGE>
Exhibit 23.2
------------
INDEPENDENT AUDITORS' CONSENT
=================================================================
Nichols, Rise & Company
The Board of Directors
CMI Corporation
We consent to incorporation by reference in the registration
statement on Form S-8 of CMI Corporation filed on July 12, 1993,
of our report dated January 28, 1994, relating to the statements
of operations, division capital and cash flows of Load King, a
division of CMI Corporation, for the year ended December 31,
1993, which report appears in the December 31, 1995, annual
report on Form 10-K of CMI Corporation.
218 South Ridge Plaza
South Sioux City, Nebraska
February 3, 1996
<PAGE>
Exhibit 23.3
------------
INDEPENDENT AUDITORS' CONSENT
=================================================================
Nichols, Rise & Company
The Board of Directors
CMI Corporation
We consent to incorporation by reference in the registration
statement on Form S-8 of CMI Corporation filed on July 12, 1993,
of our report dated January 31, 1994, relating to the statements
of earnings, division capital and cash flows of CMI Bid-Well, a
division of CMI Corporation, for the year ended December 31,
1993, which report appears in the December 31, 1995, annual
report on Form 10-K of CMI Corporation.
218 South Ridge Plaza
South Sioux City, Nebraska
February 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,212
<SECURITIES> 0
<RECEIVABLES> 11,731
<ALLOWANCES> 0
<INVENTORY> 63,099
<CURRENT-ASSETS> 86,431
<PP&E> 45,904
<DEPRECIATION> 34,671
<TOTAL-ASSETS> 109,219
<CURRENT-LIABILITIES> 22,192
<BONDS> 23,091
4,537
0
<COMMON> 2,038
<OTHER-SE> 57,361
<TOTAL-LIABILITY-AND-EQUITY> 109,219
<SALES> 130,578
<TOTAL-REVENUES> 130,578
<CGS> 91,915
<TOTAL-COSTS> 118,835
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,166
<INCOME-PRETAX> 9,317
<INCOME-TAX> (8,184)
<INCOME-CONTINUING> 17,501
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,501
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
