<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, 1996
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 Par Value $.10 New York Stock Exchange
Purchase Rights with respect to Voting
Class A Common Stock New York Stock Exchange
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 Voting Class A Common Stock (Class A
Common Stock) and the Voting Common Stock (Common Stock) held by non-affiliates
of the registrant on March 10, 1997 was $52,014,720.
The number of shares of the registrant outstanding on March 10, 1997 was
21,072,383 shares of Class A Common Stock and 621 shares of 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 2, 1997
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1. Business................................................ 3
Item 2. Properties.............................................. 9
Item 3. Legal Proceedings....................................... 10
Item 4. Submission of Matters to a Vote of Security Holders..... 10
Executive Officers of the Registrant.................... 10
PART II
Item 5. Market for the Registrant's Common Stock and
Related Shareholder Matters........................... 12
Item 6. Selected Financial Data................................. 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 13
Item 8. Financial Statements and Supplementary Data............. 21
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure................... 44
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 2, 1997............................. 44
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedule, and
Reports on Form 8-K................................... 44
SIGNATURES.............................................. 47
</TABLE>
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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 1996
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). See consolidated financial statements for
financial information (Item 8).
(c) Narrative Description of Business
---------------------------------
The Company 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. As in fiscal 1996, Federal Highway Trust Fund spending was set at just
over $20 billion for fiscal 1997, continuing a pattern of funding in recent
years, but below the amount authorized by Congress under ISTEA-91.
3
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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
continued 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.
In 1993, the Company completed design work on a new counter-flow hot mix
asphalt production plant. This new plant was introduced under the trade name
"TRIPLE-DRUM." Production tests showed that the plant has superior heat
transfer performance compared to other counter-flow plant designs, especially
for recycle operations. The ease with which TRIPLE-DRUMs are passing tough
exhaust emissions standards with high production rates, even under adverse
production conditions, has been noticed by the industry and is resulting in
stronger sales.
The Company introduced a new line of batch type hot mix asphalt production
plants during 1994, and introduced yet another series of metric sized batch
plants for international markets during the first quarter of 1996.
The new metric sized batch plants were introduced at the ConExpo/ConAgg 1996
trade show ("CONEXPO") which was held in Las Vegas, Nevada, in March 1996.
The Company had one of the largest displays at the 1996 show and used 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, 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.
4
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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 highway class pavers incorporate machine improvements into the
basic machine design, making features like computerized crowning and
automatic placement of dowel bars less costly to add. 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
introduced 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.
Pavement Profiling Equipment:
-----------------------------
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. Current models include, the PR-500C, PR-650, and PR-800-7, all half-
lane width machines; the PR-1050, and PR-1200, full lane width machines; and
two utility rubber tire models, the PRT-225 and PRT-525.
Reclaiming/Stabilizing Equipment:
---------------------------------
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 six
years. Now marketed under the trade name, ROTO-MIXER, the productivity and
versatility of these machines have created new work classifications and
markets for recycling and pavements; and have dramatically increased the
productivity of older methods. Current models include the RS-425, RS-500B and
RS-650.
5
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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. The Company's systems have
been used at military and industrial sites, where they have set new
production records which actually doubled the tons per hour produced on any
previous jobs of similar nature.
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 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 bottom dump trailers at its Oklahoma City manufacturing facility.
During 1996, the newly designed rock hauler trailers were added to production
at the Oklahoma City manufacturing facility. The added production at the
Oklahoma City manufacturing facility has reduced Load King's response time
for filling dealer orders for these products and has permitted the Elk Point
manufacturing facility to concentrate on the production of custom heavy
hauling units.
6
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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 Division 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 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 obtained 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.
7
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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 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 1994 through 1996.
Sales Backlog. The Company has a sales backlog of approximately $44.0 million
- -------------
at February 25, 1997, compared to $30.3 million at February 23, 1996. 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 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 1,230 employees as of December 31,
- ---------
1996.
8
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
(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 (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
North and Central America, other than the
United States 11,904 4,455 13,543
South America 5,177 4,904 2,497
Asia 4,284 4,657 4,940
Australia 5,071 1,206 2,001
Europe 2,607 1,081 499
Other regions 396 356 347
------ ------ ------
Total export sales $29,439 16,659 23,827
====== ====== ======
</TABLE>
See Consolidated Financial Statements (Item 8).
Item 2. Properties
----------
The Company has total plant, office, and warehouse areas of approximately
787,000 square feet, which are located in three 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
187,000 square feet, are located in South Dakota and Iowa. These facilities are
adequate for the current and expected near future operations of the Company.
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.
9
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
Item 3. Legal Proceedings
-----------------
As previously disclosed, 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. On
December 20, 1995 the case was removed to the United States District Court for
the Northern District of Illinois, Eastern Division. The attorneys are 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 filed counterclaims for negligence and legal malpractice whereby the
Company sought an unspecified amount of monetary damages, disgorgement of all
legal fees collected, punitive damages, prejudgment interest and other costs. On
September 24, 1996 the Company's counterclaims for negligence and legal
malpractice were dismissed.
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.
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 2, 1997.
10
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
The following is a list of names, listed alphabetically, 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.
<TABLE>
<CAPTION>
Age as of
Name March 10, 1997 Offices and Positions Held
- ---- -------------- -------------------------------------
<S> <C> <C>
Albert L. Basey 59 President and Chief Operating Officer
since February 1997 (1)
Ralph Cordes 53 Senior Vice President, Operations
since January 1995 (2)
Robert L. Curtis 57 Vice President, Sales and Marketing
since November 1996 (3)
Jim D. Holland 52 Senior Vice President, Treasurer,
and Chief Financial Officer since
August 1984
Bill Swisher 66 Chief Executive Officer since 1964
Thane Swisher 40 Vice President and Secretary since
(Son of Bill Swisher) October 1987
</TABLE>
(1) Mr. Basey has held manufacturing and general management positions with
industrial companies for over 30 years; including the position of president
and chief operating officer for one of AT&T's Business Units.
(2) 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; and vice president, operations of BUS Industries of
America.
(3) Mr. Curtis has held marketing and general management positions with
industrial companies for 30 years; including the positions of vice
president, marketing and sales for Eagle Picher Construction Equipment
Division; and president of Roadtec, a Division of Astec Industries.
11
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters
------------------------------------------------------------------------
Principal Market and Stock Prices:
- ----------------------------------
The Company's Class A Common Stock is traded on the New York Stock Exchange.
The closing market price for the Company's Class A Common Stock on March 10,
1997, was $5.00. The table below presents the high and low market prices for
the Company's common shares for each three month period in 1996 and 1995. The
following information was obtained from the monthly market statistics report
prepared by the New York Stock Exchange.
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ---- -----
Common shares:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High $5.88 6.00 4.13 4.88 $7.13 7.50 8.25 6.50
Low 4.75 4.25 3.75 4.13 6.00 5.88 5.88 4.25
</TABLE>
Approximate Number of Shareholders:
- -----------------------------------
The number of holders of record of the Company's common shares as of
March 10, 1997, was 1,679.
Dividend Information:
- --------------------
The Company's Board of Directors authorized payment of a quarterly cash dividend
of one cent per share during 1996. The 1996 dividend payment was made on
December 3, 1996 to holders of record at the close of business on
November 15, 1996. During the first quarter of 1997 the Company's Board of
Directors authorized payment of a quarterly cash dividend of one cent per share
payable on March 3, 1997 to holders of record at the close of business on
February 21, 1997. It is the Board of Director's present intention to continue
paying regular quarterly cash dividends. Prior to the 1996 cash dividend, 1981
was the last year a cash dividend had been made on the Company's Class A Common
Stock or Common Stock.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations (Item 7) and Notes to Consolidated Financial Statements (Item 8).
12
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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 - (dollars in thousands, except per share
data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net revenues $138,788 130,578 128,005 100,564 81,178
Operating earnings 10,987 11,743 15,032 10,204 4,295
Net earnings 5,461 17,501 22,618 8,032 2,211
Earnings per common share .25 .82 1.07 .37 .08
Total assets 113,454 109,219 89,744 65,362 54,398
Long-term debt and redeemable
preferred stock 34,103 27,628 27,599 27,114 28,574
Cash dividends per common share $ .01 - - - -
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
- -------------
Changes in Financial Condition, Liquidity, and Capital Resources
- ----------------------------------------------------------------
During 1996, the Company significantly improved its liquidity and capital
resources by completing a $30 million private placement of unsecured senior
notes and establishing a $25 million unsecured revolving line of credit with
Bank of Oklahoma, N.A. of Oklahoma City. The $55 million in new financing
replaced the existing $30 million revolving credit loan agreement which had been
in place since 1991. A portion of the proceeds from the $30 million unsecured
senior notes was used to retire higher-interest debt and to redeem the Company's
preferred stock. The Company's management intends to utilize the remaining
financing for general corporate purposes, including acquisitions.
The $30 million unsecured senior notes provide for interest at 7.68% and mature
from September 2000 to September 2006. The $25 million unsecured
13
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
revolving line of credit provides for interest at the LIBOR rate plus 1.5% and
matures three years from the date of initial borrowing. As of December 31, 1996
the Company had not begun to utilize the unsecured revolving line of credit.
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. The fleet financing agreement provides for interest
at the prime rate. At December 31, 1996, the Company had no outstanding
obligations under this agreement.
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%. In connection
with the loan agreements, the lenders 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. The
lenders paid $50,000 for these stock purchase warrants. In July 1995 the $1.97
million was paid in accordance with the loan agreements. In January 1997 the
lenders exercised the stock purchase warrants for 600,000 aggregate shares of
the Company's Class A Common Stock at an exercise price of $3.75 per share. The
additional $2.25 million in working capital will be used for general corporate
purposes.
The Company's new financing 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 financing and various other loan agreements and
arrangements in the near future.
Other Changes in Financial Condition, Liquidity, and Capital Resources
- ----------------------------------------------------------------------
Working capital increased to approximately $75.8 million at December 31, 1996
from $64.2 million at December 31, 1995. The increase in working capital is
primarily the result of increased cash of approximately $5.1 million and a
decrease in current liabilities of approximately $7.4 million related to the
Company's new financing arrangement.
Further changes in working capital included a decrease in inventories of
approximately $4.4 million and an increase in receivables of approximately $6.1
million over the prior year. The decrease in inventories is a result of efforts
by Company Management to reduce inventory levels. During the
14
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
fourth quarter of 1996 the Company began implementing "Focus Factory," a
manufacturing concept which should result in further decreases in inventories at
the Company's Oklahoma City manufacturing facility. The increase in receivables
is the result of increased fourth quarter sales and the increasingly attractive
financing terms being offered by the Company. The current ratio at
December 31, 1996 was 6.10-to-1 compared to 3.89-to-1 at December 31, 1995.
Capital expenditures were $3.4 million in 1996, an increase of $1.1 million from
the prior year. Capital expenditures are made to continue the improvement of the
Company's manufacturing and product support efficiencies. Capital expenditures
for 1997 are budgeted at $5.0 million. None of the budgeted capital expenditures
are fixed commitments.
In connection with a 1985 acquisition, the Company issued 4,800 shares of 7%
Series B Preferred Stock with a $4.8 million redemption value. The preferred
stock accrued dividends at the rate of $70 per share per year. The cumulative
dividends were payable each January and July and had to be fully paid or
declared with funds set aside for payment before any dividend could be declared
or paid on any other class of the Company's stock. The preferred stock carried a
redemption price of $1,000 per share. During the period from 1988 to 1995, 1,350
shares of the preferred stock were redeemed and certain dividends were accrued
and paid. During 1996, the Company paid approximately $4.8 million for the
redemption of 3,450 shares of preferred stock plus accrued dividends. As of
December 31, 1996 the Company had redeemed all outstanding preferred stock
shares.
The Company's Board of Directors authorized payment of a quarterly cash dividend
of one cent per share during 1996. The 1996 dividend payment was made on
December 3, 1996 to holders of record at the close of business on
November 15, 1996. During the first quarter of 1997 the Company's Board of
Directors authorized payment of a quarterly cash dividend of one cent per share
payable on March 3, 1997 to holders of record at the close of business on
February 21, 1997. It is the Board of Director's present intention to continue
paying regular quarterly cash dividends.
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 as income in
the period that includes the enactment date.
15
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
The Company has a net deferred tax asset after consideration of the valuation
allowance as determined under Statement 109, of approximately $15.8 million and
$18.8 million at December 31, 1996 and 1995, 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. 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 $15.8 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 $38 million to
$43 million in future years.
Results of Operations
- ---------------------
1996 Sales and Earnings. The Company's net revenues for the year ended
December 31, 1996 rose to $138.8 million from $130.6 million for the year ended
December 31, 1995. Net earnings for 1996 were $5.5 million versus $17.5 million
in 1995, or 25 cents per share for 1996 versus 82 cents per share for 1995. The
Company's 1995 earnings per share of 82 cents included a tax benefit of 55
cents. The Company's earnings per share on a fully taxed basis would have been
25 cents per share in 1996 versus 27 cents per share in 1995.
The Company's international sales increased to $29.4 million in 1996 from $16.7
million in 1995 and $23.8 million in 1994, resulting in an increase of
approximately 76% over 1995 and an increase of approximately 24% over 1994.
During 1996, the North American Free Trade Agreement ("NAFTA") continued to
favorably impact the Company's sales in international markets. The Company
believes that NAFTA will continue to have a favorable impact on the Company's
business in 1997.
The Company's domestic sales were $109.4 million in 1996 from $113.9 million in
1995 a decrease of approximately 4%. Domestic sales in 1996 were negatively
impacted by developments in Washington, D.C., notably the uncertainty about the
government highway funding. This impact was felt during the first half of 1996
by the Company in the form of customers delaying or canceling purchases of
equipment for the spring or summer construction seasons due to the uncertainty
of business.
Although the Company's 1996 domestic sales were impacted by the uncertainty
surrounding the government highway funding, the development of the domestic
highways and mass transportation system has had and will continue to have a
16
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
positive impact on the Company. The continued funding of the ISTEA-91
legislation and the commitment of the U.S. Congress and federal government to
fund the improvement of the infrastructure has had a significant impact on the
Company's industry the past several years. The Company anticipates continued
success as the government approved funding for ISTEA-91 legislation was set at
approximately $20 billion for fiscal 1997.
The Company's gross margins were 28.9% down from 29.6% in the prior year. This
reduction in margins is primarily the result of increased manufacturing costs as
a percent of net revenues. This was primarily the result of the mix of products
sold in 1996 compared to 1995.
Marketing and administrative expenses increased in 1996 due to increased sales
efforts. As a percentage of net revenues, marketing and administrative expenses
increased to approximately 16.6% in 1996 from approximately 16.3% in 1995. This
increase is largely due to the Company's participation in the 1996 CONEXPO trade
show. The Company had the largest display at the 1996 show held in Las Vegas,
Nevada, in March 1996. Excluding expenses related to CONEXPO, marketing and
administrative expenses as a percentage of net revenues decreased to
approximately 16.0% in 1996.
During 1996, the Company also continued taking steps to increase its market
share in the international market place. This included an increased
international sales force and a more aggressive advertising and marketing
campaign to enlarge the Company's share of potential markets. Efforts by the
Company proved to be effective with a 76% increase in international sales over
the prior year. In addition, the Company continued to provide customer
demonstrations for new and existing products, to participate in other industry
trade shows, and to increase its domestic sales force.
Engineering and product development costs remained level as a percentage of net
revenues at approximately 4%. The Company continues to be committed to setting
standards of quality within the industry. During 1996 the Company hired a
director of quality and a new director of engineering, reflecting the Company's
commitment to product development and product enhancement through the addition
and enhancement of key management positions. Also, the Company introduced
several new products at the 1996 CONEXPO trade show. New products included a
series of metric batch plants, upgraded versions of the AUTO-GRADE pavers, a new
line of curb and gutter pavers and smaller slipform pavers, and a utility-sized
rubber-tired pavement profiler machine. These new products further emphasize the
Company's commitment to product development and product enhancement.
17
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
Interest expense decreased $233,000 from the prior year as a result of more
favorable borrowing rates under the Company's new financing arrangements.
Income tax expense was $3.2 million in 1996 compared to an $8.2 million net
income tax benefit recognized in 1995. The Company's 1996 earnings were fully
taxed whereas, 1995 earnings benefited from previously unrecognized tax benefits
related to Statement 109.
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.
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%. International sales
decreased to $16.7 million or 30% from $23.8 million in 1994. The reduction in
international sales was primarily due to economic conditions experienced in
Mexico related to the devaluation of the Mexican peso 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.
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. During 1995, NAFTA had a favorable
impact on the Company's sales in international markets, excluding Mexico.
The Company's gross margins were 29.6% down from 31.5% in the prior year. The
reduction in margins was primarily the result of pricing competitiveness which
the Company believed was key to maintaining market
18
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
share in 1995. The Company also experienced increases in its labor costs over
the prior year due to increased direct labor rates and benefit costs.
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% in 1995 from
approximately 15.4% in 1994. During 1995, the Company took 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. The Company's marketing and advertising efforts in 1995 were 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%. 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-3503 base and
grade trimmer, which was released during the second half of 1995. 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.
Forward Looking Statements
- --------------------------
Statements of the Company or management's intentions, beliefs, anticipations,
expectations and similar expressions concerning future events contained in this
report constitute "forward looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. As with any future event, there can
be no assurance that the events described in forward looking statements made in
this report will occur or that the results of future events will not vary
materially from those described in the forward looking statements made in this
report. Important factors that could cause the Company's actual performance and
operating results to differ materially from the forward looking statements
include, but are not limited to, highway funding, adverse weather conditions,
general economic conditions and political changes both domestically and
overseas.
19
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
Clean Air Act
- -------------
In 1990, the United States Congress passed certain amendments to the National
Clean Air Act. As required by the National Clean Air Act, the implementation of
the 1990 amendments may take up to seven years. The 1990 amendments have
required certain products manufactured by the Company to be equipped with new
pollution control devices. Additional products manufactured by the Company may
require new pollution control devices.
The Company believes that it will continue to be able to meet the implementation
dates as required by the 1990 amendments. The Company does not anticipate the
need for material capital expenditures to remain in compliance with the Clean
Air Act.
Inflation
- ---------
The Company did not experience any significant inflationary impact on its costs
of materials.
Impact of Recently Issued Accounting Standards Not Yet Adopted - In June, 1996,
- --------------------------------------------------------------
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." SFAS No. 125 is effective
for certain transfers and servicing of financial assets and extinguishment of
liabilities occurring after December 31, 1996. It is effective for other
transfers of financial assets occurring after December 31, 1997. It is to be
applied prospectively. SFAS No. 125 provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishment of
liabilities based on consistent application of a financial-components approach
that focuses on control. It distinguishes transfers of financial assets that
are sales from transfers that are secured borrowings. Management of the Company
does not expect that adoption of SFAS No. 125 will have a material impact on the
Company's financial position or future results of operations.
In October, 1996, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities." SOP
96-1 was adopted by the Company on January 1, 1997. It requires, among other
things, that environmental remediation liabilities be accrued when the criteria
of SFAS No. 5, "Accounting for Contingencies," have been met. SOP 96-1 also
provides guidance with respect to the measurement of the remediation
liabilities. Such accounting is consistent with the Company's current method of
accounting for environmental remediation costs. Therefore, adoption of SOP 96-1
will not have an impact on the Company's financial position or future results of
operations.
20
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report............................................ 22
- ----------------------------
Consolidated Financial Statements
- ---------------------------------
Consolidated Statements of Earnings,
Years ended December 31, 1996, 1995, and 1994........................ 23
Consolidated Balance Sheets, December 31, 1996 and 1995................ 24
Consolidated Statements of Changes in Common Stock and Other Capital,
Years ended December 31, 1996, 1995, and 1994........................ 26
Consolidated Statements of Cash Flows,
Years ended December 31, 1996, 1995, and 1994........................ 27
Notes to Consolidated Financial Statements,
December 31, 1996, 1995, and 1994.................................... 28
</TABLE>
Information required by schedules called for under Regulation S-X is either not
applicable, not material, or is included in the consolidated financial
statements or notes thereto.
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
CMI Corporation:
We have audited the consolidated financial statements of CMI Corporation and
subsidiaries (the Company) as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CMI Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
February 12, 1997
22
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1996, 1995, and 1994
(dollars in thousands, except per share data)
================================================================================
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net revenues $138,788 130,578 128,005
-------- ------- -------
Costs and expenses:
Cost of goods sold 98,694 91,915 87,744
Marketing and administrative 23,098 21,239 19,738
Engineering and product development 6,009 5,681 5,491
-------- ------- -------
127,801 118,835 112,973
-------- ------- -------
Operating earnings 10,987 11,743 15,032
-------- ------- -------
Other expense (income):
Interest expense 2,933 3,166 2,712
Interest income (616) (568) (580)
Other, net 44 (172) (254)
-------- ------- -------
Earnings before income taxes 8,626 9,317 13,154
Income tax expense (benefit) 3,165 (8,184) (9,464)
-------- ------- -------
Net earnings $ 5,461 17,501 22,618
======== ======= =======
Share data:
Net earnings applicable to common shares $ 5,189 17,170 22,429
Average outstanding common shares
and common share equivalents 20,708 20,893 20,966
Net earnings per common share and common
share equivalent $ .25 .82 1.07
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(dollars in thousands)
================================================================================
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,160 2,062
Cash equivalents - restricted - 150
Receivables less allowance for doubtful accounts
of $496 and $591 at December 31, 1996 and 1995,
respectively 17,857 11,731
Inventories:
Finished equipment 31,972 31,717
Work-in-process 6,890 7,629
Raw materials and parts 19,835 23,753
-------- -------
Total inventories 58,697 63,099
Other current assets 187 389
Deferred tax asset 6,700 9,000
-------- -------
Total current assets 90,601 86,431
-------- -------
Property, plant, and equipment:
Land 1,757 1,747
Buildings 11,239 11,238
Machinery and equipment 33,390 32,665
Other 1,209 254
-------- -------
47,595 45,904
Less accumulated depreciation and amortization 35,248 34,671
-------- -------
Net property, plant, and equipment 12,347 11,233
Long-term receivables 352 1,135
Deferred tax asset 9,100 9,800
Other assets 1,054 620
-------- -------
Total assets $113,454 109,219
======== =======
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1996 and 1995
(dollars in thousands)
================================================================================
<TABLE>
<CAPTION>
Liabilities, Common Stock and Other Capital 1996 1995
- ------------------------------------------- ---- ----
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 256 2,340
Accounts payable 6,409 11,417
Accrued liabilities 8,183 8,435
------- -------
Total current liabilities 14,848 22,192
------- -------
Long-term debt 34,103 23,091
Redeemable preferred stock - 4,537
Common stock and other capital:
Common stock:
Par value $.10; shares issued and outstanding
- 621 at December 31, 1996 and 1995 - -
Class A common stock:
Par value $.10; shares issued and outstanding
- 20,467,383 and 20,381,383 at December 31, 1996
and 1995, respectively 2,047 2,038
Additional paid-in capital 46,112 46,001
Retained earnings 16,344 11,360
------- -------
64,503 59,399
Commitments and contingencies (notes 2, 4, 6, 12 and 13)
------- -------
Total liabilities, common stock and other capital $113,454 109,219
======= =======
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Common Stock and Other Capital
Years ended December 31, 1996, 1995, and 1994
(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,
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
Net earnings - - - - - 5,461
Dividends declared
and accretion on
preferred stock - - - - - (272)
Dividends paid,
common stock - - - - - (205)
Exercise of stock
options - - 86,000 9 111 -
------------ ---------- ---------- ------ ------- --------
Balance December 31,
1996 621 $ - 20,467,383 $2,047 $46,112 $ 16,344
============ ========== ========== ====== ======= ========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994
(dollars in thousands)
================================================================================
<TABLE>
<CAPTION>
1996 1995 1994
---------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 5,461 17,501 22,618
Adjustments to reconcile net earnings to net
cash provided by (used in) operating
activities:
Depreciation of property, plant, and
equipment 2,199 1,757 1,492
Amortization of other assets 176 58 192
Loss (gain) on sale of property, plant, and
equipment 59 (190) (274)
Deferred tax expense (benefit) 3,000 (8,800) (10,000)
Decrease (increase) in accounts receivable (6,126) 5,495 (7,761)
Decrease (increase) in long-term receivables 783 (484) (642)
Decrease (increase) in inventories 4,402 (15,535) (4,556)
Decrease (increase) in other current assets 202 (268) 151
Increase (decrease) in accounts payable (5,008) 3,285 (1,431)
Increase (decrease) in accrued liabilities (252) 777 1,180
Other, net (610) 26 123
-------- ------- -------
Net cash and cash equivalents provided by
operating activities 4,286 3,622 1,092
-------- ------- -------
Investing activities:
Sale (purchase) of cash equivalents -
restricted 150 753 (228)
Proceeds from sale of assets 41 676 317
Capital expenditures (3,413) (2,323) (1,919)
-------- ------- -------
Net cash and cash equivalents used in
investing activities (3,222) (894) (1,830)
-------- ------- -------
Financing activities:
Payments on long-term debt (3,449) (5,899) (829)
Borrowings on long-term debt 30,000 3,050 13
Net borrowings (payments) on revolving credit
note (14,526) 2,044 3,233
Net borrowings (payments) on fleet financing
agreement (3,097) 323 (244)
Proceeds from stock options exercised 120 96 -
Payment of common stock dividends (205) - -
Payment of preferred stock dividends (272) (653) (158)
Redemption of preferred stock (4,537) (1,050) -
-------- ------- -------
Net cash and cash equivalents provided by
(used in) financing activities 4,034 (2,089) 2,015
-------- ------- -------
Increase in cash and cash equivalents 5,098 639 1,277
Cash and cash equivalents at beginning of year 2,062 1,423 146
-------- ------- -------
Cash and cash equivalents at end of year $ 7,160 2,062 1,423
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995, and 1994
================================================================================
(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.
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.
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.
28
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
The Company had short-term notes receivable and sales-type lease payments
due from customers included in accounts receivable of approximately
$1,321,000 and $2,538,000 at December 31, 1996 and 1995, respectively.
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.
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," on January 1, 1996. SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value
of the assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell. Adoption of SFAS No. 121
did not have an impact on the Company's consolidated financial position or
results of operations.
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.
29
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
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.
Stock Option Plan
-----------------
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company adopted SFAS
No. 123, "Accounting for Stock-Based Compensation," which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years
as if the fair-value-based method defined in SFAS No. 123 had been applied.
The Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
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 for the period, by the weighted average
outstanding number of common shares and common share equivalents for the
period. Common share equivalents are not considered in the computation of
per share amounts if their effect is anti-dilutive.
30
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of cash and cash equivalents, receivables, 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 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 1996 presentation.
(2) Long-Term Debt and Notes Payable to Related Parties
---------------------------------------------------
Long-term debt and notes payable at December 31 are summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Series A Senior Notes, unsecured, with interest at
7.68%, due from September 2000 to September 2006 $30,000 -
Revolving line of credit, unsecured, at LIBOR
plus 1.5% - -
Prime plus 1.5% (10.0% at December 31, 1995)
revolving credit note, collateralized by a first
security interest in substantially all assets of
the Company - 10,530
Prime plus 1.5% (10.0% at December 31, 1995) term
note, collateralized by a first security interest
in substantially all assets of the Company - 3,996
</TABLE>
31
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
<TABLE>
<S> <C> <C>
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 4,275 4,445
Prime plus 2.0% (10.5% at December 31, 1995)
unsecured note - 3,050
Obligations under a fleet financing agreement due
through 1998, with interest at prime, collateralized
by certain equipment under lease contracts - 3,097
Lease-purchase obligations and notes payable due
through 1998, with interest from 9% to 16%,
collateralized by certain equipment 84 313
------- ------
34,359 25,431
Less current maturities of long-term debt (256) (2,340)
------- ------
$34,103 23,091
======= ======
</TABLE>
In September 1996, the Company completed a $30,000,000 private placement of
unsecured series A senior notes and established a $25,000,000 unsecured
revolving line of credit with Bank of Oklahoma, N.A. of Oklahoma City. The
$55,000,000 in new financing replaced the existing $30,000,000 credit
agreement which had been in place since 1991. A portion of the proceeds
from the $30,000,000 unsecured series A senior notes were used to retire
higher-interest debt and to redeem the Company's preferred stock. The
$30,000,000 unsecured series A senior notes provide for interest at 7.68%
and mature from September 2000 to September 2006. The $25,000,000 unsecured
revolving line of credit provides for interest at the LIBOR rate plus 1.5%
and matures three years from the date of initial borrowing. As of December
31, 1996 the Company had not utilized the unsecured revolving line of
credit.
In 1994, the Company amended the credit agreement which had been in place
since 1991. Terms of the amended credit agreement provided for a maximum
credit line of $30,000,000, which consisted of a $25,200,000 revolving line
of credit and a $4,800,000 term loan. Both the revolving line of credit
and the term loan provided for interest at prime plus 1.5% and were due in
December 1997. Amounts available under the revolving line of credit were
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 at December 31, 1995.
The credit agreement
32
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
was replaced by the $30,000,000 unsecured series A senior notes and the
$25,000,000 unsecured revolving line of credit in September 1996.
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. As of December 31, 1996 the Company had no
borrowings outstanding under the fleet financing agreement.
Certain debt agreements contain restrictions on working capital, net worth,
and other restrictive covenants. At December 31, 1996, 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. 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. In January 1997, REI
and Mr. Hartzog exercised the stock purchase warrants at an exercise price
of $3.75 per share purchasing 600,000 shares of the Company's Class A
Common Stock.
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1996, are as follows (dollars in thousands):
<TABLE>
<S> <C>
1997 $ 256
1998 208
1999 213
2000 4,512
2001 4,532
Thereafter 24,638
------
$34,359
======
</TABLE>
33
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
(3) Redeemable Preferred Stock
--------------------------
In connection with a 1985 acquisition, the Company issued 4,800 shares of
7% Series B Preferred Stock with a $4.8 million redemption value. The
preferred stock accrued dividends at the rate of $70 per share per year.
The cumulative dividends were payable each January and July and had to be
fully paid or declared with funds set aside for payment before any dividend
could be declared or paid on any other class of the Company's stock. The
preferred stock carried a redemption price of $1,000 per share. During the
period from 1988 to 1995, 1,350 shares of the preferred stock were redeemed
and certain dividends were accrued and paid. During 1996, the Company paid
approximately $4.8 million for the redemption of 3,450 shares of preferred
stock plus accrued dividends. As of December 31, 1996 the Company had
redeemed all outstanding preferred stock shares.
(4) Common Stock and Other Capital
------------------------------
In 1991, the Company entered into an Investment Agreement with REI pursuant
to which, 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 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 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, 1996, 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 income tax net operating loss carryforwards (see note 7).
On February 3, 1987, the Company authorized and declared a dividend of
rights to purchase shares of common stock, subsequently Class A Common
Stock, (the Rights) 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
34
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
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
entitled 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.
Under terms of the Rights Agreement, the Rights expired on 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. Generally, the options vest and become exercisable ratably over
a four-year period, commencing six months after the grant date. The
Compensation Committee is entitled in its discretion to grant options with
vesting periods which are different from the standard four year period. In
a limited number of instances, the Compensation Committee has exercised its
discretion and has granted options with both shorter and longer vesting
periods than the standard four year period.
35
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
At December 31, 1996, there were 320,208 additional options available for
grant under the Plan. The per share weighted-average fair value of stock
options granted during 1996 and 1995 was $2.14 and $3.54, respectively, on
the date of grant using the Black Scholes option-pricing model with the
following weighted-average assumptions: 1996 - expected volatility 58%,
expected dividend yield 1%, risk-free interest rate of 5.5%, and an
expected life of 5 years; 1995 - expected volatility 58%, expected dividend
yield 0%, risk-free interest rate of 5.5%, and an expected life of 5 years.
The Company applies APB Opinion No. 25 in accounting for its stock options
and, accordingly, no compensation cost has been recognized for stock
options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net earnings would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C> <C>
Net earnings As reported $5,461 17,501
Pro forma 5,374 17,460
Earnings per share As reported $ 0.25 0.82
Pro forma 0.25 0.82
</TABLE>
Pro forma net earnings reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net earnings
amounts presented above because compensation cost is reflected over the
options' vesting period of 5 years and compensation cost for options
granted prior to January 1, 1995 is not considered.
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, 1996, no
stock appreciation rights had been granted.
36
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
Number of Weighted-Average
Shares Exercise Price
--------- ----------------
<S> <C> <C>
Balance at December 31, 1994 500,000 $3.54
Granted 100,000 6.44
Exercised 29,792 3.25
Forfeited 60,000 5.06
Expired 10,208 6.80
-------
Balance at December 31, 1995 500,000 3.89
Granted 150,000 4.17
Exercised 1,000 3.25
-------
Balance at December 31, 1996 649,000 $3.95
=======
</TABLE>
At December 31, 1996, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $3.25 - $6.75 and 1.7
years, respectively.
At December 31, 1996 and 1995, the number of options exercisable was
374,125 and 250,000, respectively, and the weighted-average exercise price
of those options was $3.46 and $3.25, respectively.
In February 1993, a member of the board of directors received options to
purchase 10,000 shares of Class A Common Stock at the then current market
price of $4.875 per share. The options were immediately exercisable. No
options had been exercised at December 31, 1996.
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, 1996, the 100,000 options had been exercised.
(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 $2,935,000,
$2,096,000, and $1,650,000, for the years ended December 31, 1996, 1995,
and 1994, respectively.
37
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
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 in 1997 are approximately $1,321,000.
(7) Income Taxes
------------
Income tax expense (benefit) consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current tax expense $ 165 616 536
Deferred tax expense (benefit) 3,000 (8,800) (10,000)
------ ------ -------
$3,165 (8,184) (9,464)
====== ====== =======
</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.
Income tax expense (benefit) differed from the amounts computed by applying
the U.S. federal income tax rates to pretax income of 35% in 1996 and 1995,
and 34% in 1994, as a result of the following (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed expected
tax expense $3,019 3,261 4,604
State income taxes 336 380 530
Reduction of valuation allowance (37) (12,479) (14,957)
Other, net (153) 654 359
------ ------- -------
$3,165 (8,184) (9,464)
====== ======= =======
</TABLE>
38
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1996
and 1995, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net operating loss and other carryforwards $14,139 16,932
Other, net 3,559 4,074
------- -------
Deferred tax assets 17,698 21,006
Deferred tax liability (plant and equipment) (1,267) (1,538)
------- ------
16,431 19,468
Less valuation allowance 631 668
------- ------
Net deferred tax asset $15,800 18,800
======= ======
</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 deferred tax asset at December 31, 1996 was $15.8
million. 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 $38 million to $43
million in future years.
The estimated taxable income for 1996 before utilization of income tax net
operating loss carryforwards was approximately $7.6 million. The taxable
loss for 1995 was approximately $10 million. This differs from earnings
before income taxes for 1995 as a result of realizing a loss on the sale of
the assets 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. The taxable income for 1994 before utilization of income
tax 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 $15,800,000 of deferred
tax assets will be realized. The remaining valuation allowance of
approximately $631,000 is maintained against deferred tax assets which the
Company has determined to not be realizable.
At December 31, 1996, the Company has a tax net operating loss carryforward
of approximately $26,445,000 for federal income tax purposes. Such
carryforwards, which may provide future tax benefits, expire as follows:
$3,053,000 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).
39
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
(8) Export Sales
------------
The Company had export sales of approximately $29.4 million, $16.7 million,
and $23.8 million in 1996, 1995, and 1994, respectively. These sales were
made through foreign dealers and representatives. A significant portion of
these sales were made in Asia, Australia, Europe, South America, and North
and Central America, excluding the United States.
(9) 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 $155,000, $128,000, and $104,000 were made
in 1996, 1995, and 1994, respectively.
(10) Supplemental Quarterly Financial Information (unaudited)
--------------------------------------------------------
Following is a summary of the unaudited interim results of operations for
the years ended December 31 (dollars in thousands, except share data):
<TABLE>
<CAPTION>
1996
--------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Net revenues $36,493 38,758 36,636 26,901 138,788
Net earnings(loss) $ 2,095 1,784 2,333 (751) 5,461
Net earnings(loss)
per common and common
equivalent share $ .10 .09 .11 (.05) .25
<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>
40
<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 $ 2,218 18,337 1,758 305 22,618
Net earnings
per common and common
equivalent share $ .11 .87 .08 .01 1.07
</TABLE>
(11) Supplemental Cash Flow Information
----------------------------------
Cash paid for interest amounted to approximately $2,346,000, $3,166,000,
and $2,730,000 in 1996, 1995, and 1994, respectively.
Cash paid for income taxes amounted to approximately $315,000, $277,000 and
$439,000 in 1996, 1995, and 1994, respectively.
Supplemental schedule of noncash investing and financing activities are as
follows:
. During 1994, $149,000 of lease assets and obligations were capitalized.
(12) 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 restrict dividends, debt, or future leasing
arrangements. All leasing arrangements contain normal leasing terms
without unusual purchase options or escalation clauses. Rent expense was
$419,000 in 1996, $460,000 in 1995, and $457,000 in 1994.
Minimum rental commitments under all noncancellable leases for each year
subsequent to December 31, 1996, are approximately as follows: $413,000 in
1997, $292,000 in 1998, $243,000 in 1999 and $18,000 in 2000.
41
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
At December 31, 1996, the Company was contingently liable as guarantor for
certain accounts receivable sold with recourse of approximately $3,638,000
through December 2002.
(13) 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.
As previously disclosed, 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. On December 20, 1995 the case was removed to the United
States District Court for the Northern District of Illinois, Eastern
Division. The attorneys are 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 filed counterclaims for negligence and legal malpractice where
the Company sought an unspecified amount of monetary damages, disgorgement
of all legal fees collected, punitive damages, prejudgment interest and
other costs. On September 24, 1996 the Company's counterclaims for
negligence and legal malpractice were dismissed.
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, liquidity or future results of operations.
42
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
================================================================================
(14) 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 1996, 1995, or
1994.
(15) 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 in
1994. No amounts were paid to the partnership in 1996 or 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, 1996, interest on the loans of approximately $260,000 was
accrued.
43
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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 2, 1997.
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 at Item 8 on Page 21 of this
Form 10-K.
2. Consolidated Financial Statement Schedules:
-------------------------------------------
Information required by schedules called for under regulation S-X is either
not applicable, not material, or is included in the consolidated financial
statements or notes thereto.
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>
44
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------- ---------------------------------- -----------------
(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 Exhibit 1 of the 1992
with 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:
<TABLE>
<CAPTION>
Place of Incorporation
Name or Organization
---- ----------------------
<S> <C>
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
CMI Metro-Pav, Inc. Iowa
Transport Trailer Manufacturing Company Oklahoma
</TABLE>
45
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation by
Number Description Reference to
- ------- ------------------------- -------------------------
<S> <C> <C>
(23) Consent of Independent Auditors Exhibit 23 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 1996.
46
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
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 10, 1997
---------------- -------------------
Bill Swisher
Chairman of the Board and
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.
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Kenneth J. Barker Dated: March 10, 1997
---------------------------- ----------------------
Kenneth J. Barker
Director
By: /s/ Albert L. Basey Dated: March 10, 1997
---------------------------- ----------------------
Albert L. Basey
President and Chief Operating Officer
By: /s/ Ralph P. Cordes Dated: March 10, 1997
---------------------------- ----------------------
Ralph P. Cordes
Senior Vice President,
Operations
By: /s/ Robert L. Curtis Dated: March 10, 1997
---------------------------- ----------------------
Robert L. Curtis
Vice President, Sales and Marketing
By: /s/ Joseph J. Finn-Egan Dated: March 10, 1997
---------------------------- -----------------------
Joseph J. Finn-Egan
Director
By: /s/ Ronald A. Kahn Dated: March 10, 1997
---------------------------- ----------------------
Ronald A. Kahn
Director
</TABLE>
47
<PAGE>
CMI CORPORATION
FORM 10-K
December 31, 1996
================================================================================
SIGNATURES
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Larry D. Hartzog Dated: March 10, 1997
---------------------------- ----------------------
Larry D. Hartzog
Director
By: /s/ Jim D. Holland Dated: March 10, 1997
---------------------------- ----------------------
Jim D. Holland
Senior Vice President, Treasurer
and Chief Financial Officer
By: /s/ Jeffrey A. Lipkin Dated: March 10, 1997
---------------------------- ----------------------
Jeffrey A. Lipkin
Director
By: /s/ J. Larry Nichols Dated: March 10, 1997
---------------------------- ----------------------
J. Larry Nichols
Director
By: /s/ Thomas P. Stafford Dated: March 10, 1997
---------------------------- ----------------------
Thomas P. Stafford
Director
By: /s/ Ken Stephens Dated: March 10, 1997
---------------------------- ----------------------
Ken Stephens
Controller
By: /s/ Bill Swisher Dated: March 10, 1997
---------------------------- ----------------------
Bill Swisher
Chairman of the Board and
Chief Executive Officer
</TABLE>
48
<PAGE>
Exhibit 11
- ----------
CMI CORPORATION AND SUBSIDIARIES
Computation of Earnings Per Share
(dollars in thousands, except per share data)
================================================================================
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
Primary Earnings Per Share
--------------------------
<S> <C> <C> <C>
Net earnings per statement of earnings $ 5,461 17,501 22,618
Deduct dividends on preferred stock 272 321 158
Deduct accretion of preferred stock discount - 10 31
------- ------ ------
Net earnings applicable to common stock $ 5,189 17,170 22,429
======= ====== ======
Weighted average common shares outstanding 20,426 20,367 20,352
Add dilutive effect of outstanding stock
options (as determined using the treasury
stock method) 282 526 614
------- ------ ------
Weighted average common shares outstanding,
as adjusted 20,708 20,893 20,966
======= ====== ======
Primary earnings per share $ .25 .82 1.07
======= ====== ======
<CAPTION>
Fully Diluted Earnings Per Share
--------------------------------
<S> <C> <C> <C>
Net earnings applicable to common stock as
shown in primary computation above $ 5,189 17,170 22,429
======= ====== ======
Weighted average common shares
outstanding 20,426 20,367 20,352
Add fully dilutive effect of outstanding
stock options(as determined using the
treasury stock method) 282 526 614
------- ------ ------
Weighted average common shares
outstanding, as adjusted 20,708 20,893 20,966
======= ====== ======
Fully diluted earnings per share $ .25 .82 1.07
======= ====== ======
</TABLE>
49
<PAGE>
Exhibit 23
----------
================================================================================
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, 1997,
relating to the consolidated balance sheets of CMI Corporation and subsidiaries
as of December 31, 1996 and 1995, and the related consolidated statements of
earnings, changes in common stock and other capital, and cash flows for each of
the years in the three-year period ended December 31, 1996, which report appears
in the December 31, 1996, annual report on Form 10-K of CMI Corporation.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
March 10, 1997
50
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,160
<SECURITIES> 0
<RECEIVABLES> 17,857
<ALLOWANCES> 0
<INVENTORY> 58,697
<CURRENT-ASSETS> 90,601
<PP&E> 47,595
<DEPRECIATION> 35,248
<TOTAL-ASSETS> 113,454
<CURRENT-LIABILITIES> 14,848
<BONDS> 34,103
0
0
<COMMON> 2,047
<OTHER-SE> 62,456
<TOTAL-LIABILITY-AND-EQUITY> 113,454
<SALES> 138,788
<TOTAL-REVENUES> 138,788
<CGS> 98,694
<TOTAL-COSTS> 127,801
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,933
<INCOME-PRETAX> 8,626
<INCOME-TAX> 3,165
<INCOME-CONTINUING> 5,461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,461
<EPS-PRIMARY> $0.25
<EPS-DILUTED> $0.25
</TABLE>
