<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant To Section 13 or 15 (d)
of the Securities Exchange Act of 1934
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Act of 1934
For the quarterly period ended September 30, 1999 Commission file number 1-5951
CMI CORPORATION
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Oklahoma 73-0519810
------------------------------ --------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
I-40 & Morgan Road, P.O. Box 1985
Oklahoma City, Oklahoma 73101
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 787-6020
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Voting Class A Common Stock Par Value $.10 21,551,243
Voting Common Stock Par Value $.10 602
- ------------------------------------------ ----------------------------------
(Title of each class) (Outstanding at November 15, 1999)
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<PAGE>
CMI CORPORATION
Index to Form 10-Q
Page
----
PART I. Financial Information
Condensed Consolidated Balance Sheets -
September 30, 1999(Unaudited), December 31, 1998
and September 30, 1998(Unaudited) 3
Condensed Consolidated Statements of Operations -
Three Months and Nine Months Ended September 30, 1999
and 1998(Unaudited) 4
Condensed Consolidated Statements of Changes in Common
Stock and Other Capital -
Nine Months Ended September 30, 1999 (Unaudited), and the
Years Ended December 31, 1998 and December 31, 1997 5
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998(Unaudited) 6
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Quantitative and Qualitative Disclosure About Market Risk 17
PART II. Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of 19
Security Holders
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 19
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<PAGE>
PART I - FINANCIAL INFORMATION
CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 30 December 31 September 30
1999 1998 1998
(Unaudited) * (Unaudited)
------------- ----------- -------------
<S> <C> <C> <C>
Current assets:
Cash & cash equivalents $ 13,061 13,559 8,320
Receivables, net 38,491 28,013 26,509
Inventories
Finished equipment 26,692 37,409 31,277
Work-in-process 20,764 14,189 16,515
Raw materials & parts 59,635 51,293 44,253
-------- ------- -------
Total inventories 107,091 102,891 92,045
Other current assets 1,873 923 1,266
Deferred tax assets 2,343 7,200 2,305
-------- ------- -------
Total current assets 162,859 152,586 130,445
Property, plant & equipment 68,255 69,239 68,140
Less accumulated depreciation 38,020 39,692 39,073
-------- ------- -------
Net property, plant & equipment 30,235 29,547 29,067
Long-term receivables 2,095 356 174
Other assets, principally goodwill 4,985 5,322 5,435
Deferred tax assets 1,900 1,900 6,900
-------- ------- -------
$202,074 189,711 172,021
======== ======= =======
Current liabilities:
Current maturities of long-term debt $ 278 268 239
Accounts payable 16,651 21,551 16,667
Accrued liabilities 13,780 14,617 13,255
-------- ------- -------
Total current liabilities 30,709 36,436 30,161
Long-term debt 86,850 77,049 66,083
Common stock & other capital:
Class A common stock & common stock 2,155 2,155 2,155
Other capital 82,360 74,071 73,622
-------- ------- -------
Total common stock & other capital 84,515 76,226 75,777
-------- ------- -------
$202,074 189,711 172,021
======== ======= =======
</TABLE>
* Condensed from audited financial statements.
See notes to condensed consolidated financial statements.
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars and shares in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
1999 1998 1999 1998
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Revenues $54,591 48,860 181,159 158,774
------- ------ ------- -------
Costs and Expenses:
Cost of Goods Sold 37,652 35,002 129,698 117,406
Marketing and Administrative 10,027 7,942 27,159 22,752
Engineering and Product Development 2,362 1,968 6,097 5,674
Product Line Relocation Costs - 68 - 1,419
------- ------ ------- -------
50,041 44,980 162,954 147,251
------- ------ ------- -------
Operating Earnings 4,550 3,880 18,205 11,523
Other Expense (Income):
Interest Expense 1,603 1,284 4,772 3,570
Interest Income (423) (277) (730) (764)
Other, net 57 - 50 (77)
------- ------ ------- -------
Earnings Before Income Taxes 3,313 2,873 14,113 8,794
Income Tax Expense 1,196 1,022 5,187 3,242
------- ------ ------- -------
Net Earnings $ 2,117 1,851 8,926 5,552
======= ====== ======= =======
Share Data:
Weighted average outstanding
common shares:
Basic 21,552 21,536 21,551 21,514
Diluted 21,875 21,685 21,820 21,648
Net earnings per average
outstanding share:
Basic $ 0.10 0.09 0.41 0.26
======= ====== ======= =======
Diluted $ 0.10 0.09 0.41 0.26
======= ====== ======= =======
Dividends per common share $ 0.01 0.01 0.03 0.03
======= ====== ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCK
AND OTHER CAPITAL
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Class A Common Stock Additional
--------------- --------------------- Paid-in Treasury Retained
Shares Amount Shares Amount Capital Stock Earnings
------- ------ ------------ ------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31,
1996 621 $ - 20,467,383 $2,047 $46,112 - $16,344
Net earnings - - - - - - 3,165
Purchase of treasury
stock - - - - - (32) -
Dividends paid,
common stock
($.04 per share) - - - - - - (851)
Common stock issued - - 75,000 8 367 - -
Exercise of stock
warrants - - 600,000 60 2,190 - -
Exercise of stock
options - - 364,000 36 1,147 - -
------ ------ ----------- ------- ---------- -------- --------
Balance December 31,
1997 621 - 21,506,383 2,151 49,816 (32) 18,658
Net earnings - - - - - - 6,217
Retirement of voting
common stock (19) - (20) - - - -
Retirement of treasury
stock - - (6,340) - (32) 32 -
Exercise of stock
options - - 48,860 4 273 - -
Dividends paid,
common stock
($.04 per share) - - - - - - (861)
------ ------ ----------- ------- ---------- -------- --------
Balance December 31,
1998 602 - 21,548,883 2,155 50,057 - 24,014
(The information which
follows is unaudited)
Net earnings - - - - - - 8,926
Retirement of voting
Common stock - - (140) - - - -
Exercise of stock
Options - - 2,500 - 10 - -
Dividends paid,
common stock
($.03 per share) - - - - - - (647)
------ ------ ----------- ------- ---------- -------- --------
Balance September 30,
1999 (unaudited) 602 -$ 21,551,243 $2,155 $50,067 $ - $32,293
====== ====== =========== ======= ========== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-------------------
1999 1998
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 8,926 5,552
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation 3,013 1,912
Amortization 224 224
Loss (Gain) on sale of assets 49 (78)
Change in assets and liabilities:
Receivables (10,478) 408
Inventories (4,200) (23,374)
Other current assets (950) (687)
Accounts payable (4,900) 2,012
Accrued liabilities (837) 3,608
Deferred tax asset 4,857 2,995
Long-term receivables (1,739) 2,335
Other non-current assets, excluding amortization
of goodwill 113 1,311
-------- -------
Net cash and cash equivalents used in operating
activities (5,922) (3,782)
-------- -------
INVESTING ACTIVITIES
Proceeds from sale of assets 49 308
Capital expenditures (3,799) (11,758)
------ -------
Net cash and cash equivalents used in investing
activities (3,750) (11,450)
-------- -------
FINANCING ACTIVITIES
Payments on long-term debt (189) (211)
Net borrowings on revolving credit note 10,000 17,000
Proceeds from stock options exercised 10 276
Payment of common stock dividends (647) (644)
-------- -------
Net cash and cash equivalents provided by
financing activities 9,174 16,421
-------- -------
Change in cash and cash equivalents (498) 1,189
Cash and cash equivalents at beginning of period 13,559 7,131
-------- -------
Cash and cash equivalents at end of period $ 13,061 8,320
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) The interim condensed consolidated financial information has been
prepared in conformity with generally accepted accounting principles
applied, in all material respects, on a basis consistent with the
consolidated financial statements included in the Company's annual report
filed with the Securities and Exchange Commission for the preceding
fiscal year. The financial information as of September 30, 1999 and 1998
and for the interim periods ended September 30, 1999 and 1998 included
herein is unaudited; however, such information reflects all adjustments
consisting of only normal recurring adjustments, which are, in the
opinion of management, necessary to a fair presentation of the results
for the interim periods.
(2) The results of operations for the nine months ended September 30, 1999
are not necessarily indicative of the results to be expected for the full
year as the Company is in a seasonal business.
(3) Related Party Transactions
--------------------------
On August 12, 1999 the Company entered into a 2 year consulting agreement
with Bill Swisher, a former officer of the Company. Mr. Swisher currently
serves as Chairman of the Board.
(4) 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.
At September 30, 1999, the Company was contingently liable as guarantor
for certain accounts receivable sold with recourse of approximately
$6,966,000 through September 2009.
(5) Earnings Per Share
------------------
Basic earnings per share is computed by dividing net earnings applicable
to common stock by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if the Company's outstanding stock
options were exercised (calculated using the treasury stock method).
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
The following table reconciles the weighted average common
shares outstanding used in the calculation of basic earnings per common
share to the number of shares used in the calculation of diluted earnings
per share (dollars in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- --------------
1999 1998 1999 1998
------- ------ ------ ------
<S> <C> <C> <C> <C>
Net earnings -
basic and diluted $ 2,117 1,851 8,926 5,552
======= ====== ====== ======
Weighted average number of
Common shares outstanding-basic 21,552 21,536 21,551 21,514
Dilutive effect of potential
incremental common shares
issuable upon exercise of
employee stock options 323 149 269 134
------- ------ ------ ------
Weighted average number of
common shares outstanding -
diluted 21,875 21,685 21,820 21,648
======= ====== ====== ======
Earnings per share:
Basic $ .10 .09 .41 .26
======= ====== ====== ======
Diluted $ .10 .09 .41 .26
======= ====== ====== ======
</TABLE>
(6) Litigation
----------
As previously disclosed, on November 22, 1995, a Chicago law firm
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 law firm is seeking to recover approximately $1.4
million of legal fees and costs alleged to be owing by the Company,
together with prejudgment and postjudgment interest and other costs.
The Company has denied these allegations and will continue to defend this
lawsuit.
Since 1996, the Company has been involved in litigation in the U.S.
District Court for the Western District of Oklahoma with Cedarapids, Inc.
The Company sued Cedarapids seeking a declaratory judgement that a patent
held by Cedarapids is invalid or, in the alternative, that the Company
was not infringing upon the patent. Cedarapids subsequently filed a
counterclaim against the Company alleging that the Company was
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
infringing Cedarapids' patent and seeking damages in excess of
$10,000,000. In January 1997, the District Court issued an order staying
this lawsuit pending the resolution of litigation between Cedarapids and
Gencor, Industries involving the same patent. This stay was lifted in
December 1997 upon settlement of patent and other non-related litigation
between Cedarapids and Gencor, Industries. In July 1999, the court
granted Cedarapid's motion for partial summary judgement on infringement,
and ruled that the Company's Triple Drum Mixer literally infringes
certain claims of the Cedarapid's patent. The court's judgement is
limited to the issue of infringement and not the issue of validity. The
Company has, at the court's invitation, filed a motion for summary
judgement on the issue of validity. In the opinion of counsel Cedarapids'
claims are highly inflated, and may not be recoverable under various
defenses. The Company anticipates this lawsuit going to trial in the
Spring of 2000.
In September 1998, Cedarapids filed suit against the Company in the U.S.
District Court for the Northern District of Iowa alleging that the
Company has infringed a second patent held by Cedarapids. Cedarapids is
seeking damages in excess of $10,000,000. The Company intends to
vigorously defend both lawsuits involving Cedarapids.
There are 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 cases above, will not have
a materially adverse effect on the Company's consolidated financial
position, liquidity or future results of operations.
(7) Business Segment Information
----------------------------
The Company currently manages its business by operating location. As
such, the Company identifies its segments based on the geographic
locations of its manufacturing facilities. The Company has one reportable
segment, its Oklahoma City manufacturing facility. The manufacturing
facilities manufacture and market products in the mobile and materials
processing equipment categories as well as parts for the products. The
specific products manufactured at the Oklahoma City plant are as follows:
(1) mobile equipment - the Company's primary line of concrete paving
systems, pavement profiling and reclaiming/ stabilizing equipment,
weighing equipment, municipal landfill compactors, and industrial and
waste recycling grinders; and (2) materials processing equipment - hot-
mix asphalt production systems, and thermal systems for remediating
contaminated soils and sanitizing medical waste. The specific products
manufactured at the Company's other geographic locations are as follows:
-9 of 19-
<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(1) mobile equipment - lightweight grading and concrete paving and
finishing machines, and custom heavy hauling trailers; and (2) materials
processing equipment - concrete batching plants.
Following is certain financial information regarding the Company's
segments. The revenues reported below are all from external customers and
all dollar amounts are in thousands. General corporate expenses are not
allocated to the other operating segments, and therefore are included as
a reconciling item to reported operating earnings.
<TABLE>
<CAPTION>
Oklahoma All
City Other Total
-------- ------ --------
<S> <C> <C> <C>
As of September 30, 1999:
Total assets $170,253 31,821 202,074
======== ====== =======
Three months ended
September 30, 1999:
Net revenues $ 42,836 11,755 54,591
Costs and expenses 37,767 10,871 48,638
-------- ------ -------
Segment measure of operating
profit $ 5,069 884 5,953
======== ======
General corporate expenses (1,403)
-------
Operating earnings 4,550
Interest expense (1,603)
Interest income 423
Other, net (57)
-------
Earnings before income taxes 3,313
Income tax expense 1,196
-------
Net earnings $ 2,117
=======
Capital expenditures $ 743 262 1,005
======= ======= =======
Depreciation and amortization $ 876 188 1,064
======= ======= =======
</TABLE>
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>
Oklahoma All
City Other Total
--------- -------- -------
<S> <C> <C> <C>
As of September 30, 1998:
Total assets $141,135 30,886 172,021
======== ======== =======
Three months ended
September 30, 1998:
Net revenues $ 37,771 11,089 48,860
Costs and expenses 34,298 9,679 43,977
-------- -------- -------
Segment measure of operating profit $ 3,473 1,410 4,883
======== ======== =======
General corporate expenses (1,003)
--------
Operating earnings 3,880
Interest expense (1,284)
Interest income 277
Other, net -
--------
Earnings before income taxes 2,873
Income tax expense 1,022
--------
Net earnings $ 1,851
========
Capital expenditures $ 7,707 111 7,818
======== ======== =======
Depreciation and amortization $ 619 174 793
======== ======== =======
Nine months ended
September 30, 1999:
Net revenues $148,279 32,880 181,159
Costs and expenses 127,582 31,158 158,740
-------- -------- -------
Segment measure of operating
profit $ 20,697 1,722 22,419
======== ========
General corporate expenses (4,214)
-------
Operating earnings 18,205
Interest expense (4,772)
Interest income 730
Other, net (50)
--------
Earnings before income taxes 14,113
Income tax expense 5,187
--------
Net earnings $ 8,926
========
Capital expenditures $ 3,204 595 3,799
======== ======== =======
Depreciation and amortization $ 2,707 530 3,237
======== ======== =======
</TABLE>
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<PAGE>
CMI CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>
Oklahoma All
City Other Total
---------------------------
<S> <C> <C> <C>
Nine months ended September 30, 1998:
Net revenues $125,482 33,292 158,774
Costs and expenses 114,247 29,815 144,062
-------- ------ -------
Segment measure of operating profit $ 11,235 3,477 14,712
======== ======
General corporate expenses (3,189)
-------
Operating earnings 11,523
Interest expense (3,570)
Interest income 764
Other, net 77
-------
Earnings before income taxes 8,794
Income tax expense 3,242
-------
Net earnings $ 5,552
=======
Capital expenditures $11,470 288 11,758
======== ====== =======
Depreciation and amortization $ 1,622 514 2,136
======== ====== =======
</TABLE>
The Company has one operating location in the United Kingdom. The location
serves as a sales office and has approximately $502,000 of assets comprised
primarily of inventory, receivables, and property, plant and equipment.
All remaining assets are located in the United States.
Revenues for products were as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1999 1998 1999 1998
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Mobile Equipment $25,460 20,288 72,257 61,810
Material Processing Equipment 19,714 20,055 83,879 72,426
Parts and Used Equipment 9,417 8,517 25,023 24,538
------- ------ ------- -------
$54,591 48,860 181,159 158,774
======= ====== ======= =======
</TABLE>
(8) Supplemental Cash Flow Information
----------------------------------
Cash paid for interest was $4,600,759 for the nine months ended September
30, 1999 compared to $3,929,241 for the nine months ended September 30,
1998. Cash paid for income taxes was $289,000 for the nine months ended
September 30, 1999 compared to $226,000 for the nine months ended September
30, 1998.
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<PAGE>
CMI CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Revenues increased 12 percent to $54,591,000 for the three months ended
September 30, 1999, compared to $48,860,000 for the three months ended September
30, 1998. Revenues for international shipments decreased 28.2 percent to $5.1
million for the three months ended September 30, 1999 compared to $7.1 million
for the three months ended September 30, 1998. Domestic revenues increased 18.5
percent to $49,491,000 for the three months ended September 30, 1999 compared to
$41,760,000 for the three months ended September 30, 1998. Net earnings were
$2,117,000, or 10 cents per share diluted, for the three months ended September
30, 1999, compared to net earnings of $1,851,000, or 9 cents per share diluted,
for the comparable three months ended September 30, 1998.
Revenues increased 14 percent to $181,159,000 for the nine months ended
September 30, 1999, compared to $158,774,000 for the nine months ended September
30, 1998. Revenues for international shipments decreased 42 percent to $12.8
million for the nine months ended September 30, 1999 compared to $22.1 million
for the nine months ended September 30, 1998. Domestic revenues increased 23.2
percent to $168,359,000 for the nine months ended September 30, 1999 compared to
$136,674,000 for the nine months ended September 30, 1998. Net earnings were
$8,926,000, or 41 cents per share diluted, for the nine months ended September
30, 1999, compared to net earnings of $5,552,000, or 26 cents per share diluted,
for the comparable nine months ended September 30, 1998.
During 1999, the Company has experienced increased revenues in most of its major
equipment lines and a decrease in custom heavy-hauling trailers and landfill
compaction equipment. The increases are the direct result of the $217 billion
TEA-21 national highway bill. The decrease in custom heavy-hauling trailers was
primarily due to a union strike, which resulted in lost production at the
Company's South Dakota manufacturing location during the first half of the year.
The strike ended in mid June. These factors impacted the "All Other" segment
measure of operating profit period over period as set forth in note 7. The
decrease in the landfill compaction line was primarily due to external factors
relating to consolidation in the waste management industry. The decrease in
international revenues is due to a significant decline in the road building and
reconstruction program in Canada. The decline in Canada is due to an election
year spending freeze and a generally depressed economy across the country.
Gross margins for the three months ended September 30, 1999 averaged 31.0
percent compared to 28.4 percent for the three months ended September 30, 1998.
Gross margins for the nine months ended September 30, 1999 averaged 28.4 percent
compared to 26.1 percent for the nine months ended September 30, 1998. The
improvement in margins was the result of a favorable product mix, increased
production efficiencies, and the overall production and cost benefits from
recent capital investments.
Marketing and administrative expenses increased $2,085,000 for the three months
ended September 30, 1999, and increased $4,407,000 for the nine months ended
September 30, 1999 compared to the corresponding 1998 periods. As a percentage
of revenues, marketing and administrative expenses were 18.4 percent for the
three months ended September 30, 1999, compared to 16.3 percent for the three
months ended September 30, 1998, and were 15.0 percent for the nine months ended
September 30, 1999
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<PAGE>
compared to 14.3 percent for the nine months ended September 30, 1998. The
primary factors contributing to the increases in Marketing and Administrative
expenses are: (1) nonrecurring costs approximating $350,000 earlier in the year
related to restructuring of its Oklahoma City manufacturing operations, (2) the
Company participated in the triennial CONEXPO-CON/AG tradeshow in Las Vegas, (3)
consulting fees of $350,000 to evaluate and improve the Company's manufacturing
processes and production efficiencies, (4) $251,000 for employee moving and
relocation costs, (5) legal fees incurred in the Cedarapid's patent litigation,
and (6) overall higher business volume.
Engineering and product development expenses increased $394,000 for the three
months ended September 30, 1999, and increased $423,000 for the nine months
ended September 30, 1999 compared to the corresponding 1998 periods. As a
percentage of revenues, engineering and product development expenses were 4.3
percent for the three months ended September 30, 1999, compared to 4.0 percent
for the three months ended September 30, 1998, and were 3.4 percent for the nine
months ended September 30, 1999, compared to 3.6 percent for the nine months
ended September 30, 1998.
Included in the Company's 1998 nine month results was an aggregate of $1,419,000
of product line relocation costs. These costs were incurred moving the
compactor and grinder products acquired from Rexworks, Inc. in December 1997
from Milwaukee to Oklahoma City. These costs are included in the general
corporate expenses included in the business segment data in note 7.
Interest expense increased to $1,603,000 for the three months ended September
30, 1999, compared to $1,284,000 for the three months ended September 30, 1998,
and increased to $4,772,000 for the nine months ended September 30, 1999,
compared to $3,570,000 for the nine months ended September 30, 1998. The
Company's effective interest rate was comparable period-to-period. The increase
in interest expense was due to additional borrowings on the Company's revolving
line of credit, primarily for the increased working capital requirements and
capital spending.
The Company's effective tax rate for the three and nine months ended September
30, 1999 and 1998 was approximately 37 percent. The Company's quarterly tax
rates are estimates of its expected annual effective federal and state income
tax rates. The combined effective income tax rate for 1998 was approximately 37
percent and the Company expects a comparable annual effective rate in 1999.
Liquidity and Capital Resources
- -------------------------------
The current ratio at September 30, 1999 was 5.3-to-1 compared to 4.2-to-1 at
December 31, 1998. Working capital at September 30, 1999 was $132,150,000
compared to $116,150,000 at December 31, 1998, an increase of $16,000,000. The
increase in working capital is primarily due to an increase in receivables of
$10,478,000, and an increase in inventories of $4,200,000.
Cash used in operating activities for the nine months ended September 30, 1999
was $5,922,000 compared to cash used in operating activities of $3,782,000 for
the nine months ended September 30, 1998. The primary use of cash was to
fund
-14 of 19-
<PAGE>
the increase in receivables which resulted from higher business volume.
Financing activities for the nine months ended September 30, 1999 provided
$9,174,000, which included $10,000,000 of borrowings from the Company's
revolving line of credit which was primarily used to fund the increase in trade
and installment receivables and inventories from December 31, 1998.
Capital expenditures for the nine months ended September 30, 1999 were
$3,799,000 compared to $11,758,000 for the comparable nine months ended
September 30, 1998. Capital expenditures were originally budgeted at $6,000,000
for 1999. Remaining expenditures are expected to be financed using internally
generated funds and leasing arrangements. These capital expenditures are being
used to improve the Company's manufacturing and product support efficiencies.
The Company amended its unsecured revolving line of credit agreement on October
13, 1998. The amendment provided for an increase in the Company's borrowing
capacity from $40,000,000 to $60,000,000. On March 12, 1999, the borrowing line
of credit was increased to $70,000,000 for a period of 120 days, but returned to
$60,000,000 as of July 10, 1999. On October 29, 1999 the line of credit, which
matures in September 2001 was increased to $70,000,000. The Company's
$30,000,000 unsecured senior notes mature from September 2000 to September 2006.
As of September 30, 1999, the Company had utilized $53,000,000 of the unsecured
revolving line of credit. Other long-term debts have maturity dates through
September 2010 and are expected to be paid or refinanced when due. As of
September 30, 1999, the Company was in compliance with all debt covenants.
On November 9, 1999 the Company announced a 50 percent increase in its fourth
cash dividend this year from 1 cent to 1.5 cents per share. The dividend will be
paid on December 1, 1999. After this dividend is paid the Company will change to
a semi-annual payment schedule from a quarterly payment schedule. The Company
has paid a quarterly dividend each quarter since December 1996.
Income Taxes
- ------------
The benefits of future tax deductions and credits not utilized by the Company in
the past are reflected as an asset to the extent the Company assesses that
future operations will "more likely than not" be sufficient to realize such
benefits. As of September 30, 1999, 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 $4,243,000 net deferred tax assets will be
realized. The ultimate realization of the deferred tax assets will require
aggregate taxable income of approximately $10 million to $13 million in future
years.
Impact of Recently Issued Accounting Standards Not Yet Adopted
- --------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for fiscal
years beginning after June 15, 2000. SFAS No. 133 establishes standards for
-15 of 19-
<PAGE>
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in fair value of a derivative depends
on the intended use of the derivative and the resulting designation. Adoption
of SFAS No. 133 is not expected to materially impact the Company.
Impact of Year 2000 Issue
- -------------------------
An issue exists for all companies that rely on computers as the Year 2000 (Y2K)
approaches. The Y2K problem is the result of past practices in the computer
industry of using two digits rather than four to identify the applicable year.
The Company is addressing the need to ensure that its operations will not be
adversely impacted by software or other system failures related to Y2K. The
Company formed an oversight committee made up of key management and developed a
plan to coordinate identification, evaluation and implementation of any
necessary changes to internal computer systems, applications, and business
processes.
As of September 30, 1999, the Y2K committee has identified the Company's
information systems (IT) and non-information systems (non IT) that could
potentially be impacted by Y2K. As of September 30, 1999 the Company has
substantially completed all of its Y2K readiness and contingency planning.
The Y2K process began in early 1996 when the Company began the software and
hardware evaluation and selection process for manufacturing and financial
reporting applications. During the third quarter of 1998, the Company replaced
the primary IT systems at its Oklahoma City location. The Company spent
approximately $2 million on this phase of the Y2K project for new computer
software and hardware which was also part of the Company's factory modernization
plan. These costs were capitalized and will be amortized over future periods.
The Company has also obtained vendor readiness statements from 99 percent of the
Company's active vendors. These statements indicate that 95 percent are either
Y2K compliant or will be by the end of 1999. The Company has determined that an
alternative supply source exists for the vendors who do not appear to be
addressing the Y2K problem.
The Company determined its telephone systems require certain upgrades to meet
Y2K requirements. In September 1999, the Company upgraded its telephone system
to meet these requirements at an approximate cost of $70,000.
The Company has been testing its systems using internal programming staff and
outside computer consultants and intends to continue making any necessary
modifications to prevent disruption to its operations. The Company has
determined the most reasonably likely possible worst case scenario. The Company
does not anticipate incurring any material outside costs for future Y2K
activities. All remaining remediation efforts will be performed primarily
utilizing existing employees. The Company does not separately identify internal
costs related to Y2K efforts.
-16 of 19-
<PAGE>
No assurances can be given that the Company will be able to completely identify
or address all Year 2000 compliance issues. Additionally, no assurances can be
given that third parties with whom the Company does business will not experience
system failures as a result of the Year 2000 issue, nor can the Company fully
predict the consequences of noncompliance.
This is a Year 2000 readiness disclosure statement within the meaning of the
Year 2000 Information and Readiness Disclosure Act (P.L. 105-271).
Federal Highway Legislation
- ---------------------------
The Company has assessed the longer-range impact of the $217 billion national
highway bill (TEA-21) which currently has guaranteed appropriations over the
next five to six years. The Company's investment in capital improvements and
plant modernization efforts should have the Company positioned to take advantage
of the anticipated increased business as a result of this new legislation.
Forward-Looking Statements
- --------------------------
Statements of the Company's 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. You can identify these statements by
forward-looking words such as "may," "will," "expect," "anticipate," "believe,"
"estimate," and "continue" or similar words. 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.
Quantitative and Qualitative Disclosure About Market Risk
- ---------------------------------------------------------
The primary objective of the following information is to provide forward-looking
quantitative and qualitative information about the Company's potential exposure
to market risks. The term "market risk" for the Company refers to the risk of
increased interest expense and decreased earnings arising from adverse changes
in interest rates. These disclosures are not meant to be precise indicators of
expected future decreases in earnings, but rather indicators of reasonably
possible decreases in earnings. This forward-looking information provides
indicators of how the Company views and manages its ongoing market risk
exposures.
At September 30, 1999, the Company had long-term debt outstanding of $86.8
million. Of this amount, $30 million bears interest at a fixed rate of 7.68
percent, and $3.8 million bears interest at fixed rates averaging approximately
8.00 percent. The remaining $53 million of borrowings bear interest at variable
rates which averaged approximately 7.32 percent at September 30, 1999. A 10
percent increase in short-term interest rates on the variable rate debt
outstanding at September 30, 1999 would approximate 73 basis points. Such an
increase in interest rates would increase the Company's interest expense by
approximately $97,000 for the remainder of the year ending December 31, 1999
assuming borrowed amounts remain outstanding.
-17 of 19-
<PAGE>
The above sensitivity analysis for interest rate risk excludes accounts
receivable, accounts payable and accrued liabilities because of the short-term
maturity of such instruments. The analysis does not consider the effect this
movement may have on other variables including changes in revenue volumes that
could be indirectly attributed to changes in interest rates. The actions that
management would take in response to such a change are also not considered. If
it were possible to quantify this impact, the results could well be different
than the sensitivity effects shown above.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As previously disclosed, on November 22, 1995, a Chicago law firm 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 law firm is seeking to
recover approximately $1.4 million of legal fees and costs alleged to be owing
by the Company, together with prejudgment and postjudgment interest and other
costs. The Company has denied these allegations and will continue to defend this
lawsuit.
Since 1996, the Company has been involved in litigation in the U.S. District
Court for the Western District of Oklahoma with Cedarapids, Inc. The Company
sued Cedarapids seeking a declaratory judgement that a patent held by Cedarapids
is invalid or, in the alternative, that the Company was not infringing upon the
patent. Cedarapids subsequently filed a counterclaim against the Company
alleging that the Company was infringing Cedarapids' patent and seeking damages
in excess of $10,000,000. In January 1997, the District Court issued an order
staying this lawsuit pending the resolution of litigation between Cedarapids and
Gencor, Industries involving the same patent. This stay was lifted in December
1997 upon settlement of patent and other non-related litigation between
Cedarapids and Gencor, Industries. In July 1999, the court granted Cedarapid's
motion for partial summary judgement on infringement, and ruled that the
Company's Triple Drum Mixer literally infringes certain claims of the
Cedarapid's patent. The court's judgement is limited to the issue of
infringement and not the issue of validity. The Company has, at the court's
invitation, filed a motion for summary judgement on the issue of validity. In
the opinion of counsel Cedarapids' claims are highly inflated, and may not be
recoverable under various defenses. The Company anticipates this lawsuit going
to trial in the Spring of 2000.
In September 1998, Cedarapids filed suit against the Company in the U.S.
District Court for the Northern District of Iowa alleging that the Company has
infringed a second patent held by Cedarapids. Cedarapids is seeking damages in
excess of $10,000,000. The Company intends to vigorously defend both lawsuits
involving Cedarapids.
-18 of 19-
<PAGE>
There are 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 cases above, will not have a materially adverse effect on the
Company's consolidated financial position, liquidity or future results of
operations.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K are as follows:
Exhibit No.
-----------
10.4 Consulting agreement dated August 12, 1999 between the Company and
George William Swisher, Jr.
27 Financial Data Schedule
(b) The Company filed a report on Form 8-K on August 16, 1999 to announce
the retirement of Mr. Bill Swisher as an officer of the Company.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 15, 1999 /s/Jim D. Holland
--------------------- -------------------------------------
Jim D. Holland
Senior Vice President,
Chief Financial Officer & Treasurer
-19 of 19-
<PAGE>
EXHIBIT 10.4
CONSULTING AGREEMENT
--------------------
This Consulting Agreement (the "Agreement") is made and entered into
effective as of the 12th day of August, 1999 (the "Effective Date"), between
George William Swisher, Jr. a/k/a Bill Swisher (the "Consultant"), and CMI
Corporation, an Oklahoma corporation (the "Company").
1. Engagement. As of the Effective Date, the Company shall engage the
----------
Consultant, and the Consultant shall accept the engagement of the Company, upon
the terms and conditions set forth in this Agreement.
2. Term. The term of this Agreement shall begin as of the Effective Date
----
and shall continue for two (2) years, unless sooner terminated as provided for
in Section 9 below.
3. Duties. The Consultant is hereby retained and appointed to assist the
------
Company, at the specific request of either the Board of Directors or the Chief
Executive Officer of the Company, with matters concerning sales of Company
products and/or industry/political committees and associations. The parties
acknowledge that the Consultant is currently involved in the following industry
committees and associations and, during the term hereof, shall continue his
involvement on a non-exclusive basis as a representative of CMI:
(i) American Road & Transportation Builders Association;
(ii) Asphalt Reclaiming & Recycling Association;
(iii) Construction Industry Manufacturing Association;
(iv) Associated General Contractors of America;
(v) The Road Information Program;
(vi) National Asphalt Pavers Association;
(vii) International Road Federation; and
(viii) American Concrete Paving Association.
The parties acknowledge and agree that the Company is entitled to designate
one or more of its representatives to serve on (or to serve as a director or
member of) certain of the industry committees and associations listed above.
The Chief Executive Officer of the Company shall, at his discretion, be entitled
to select the Company's designated representative(s) to serve on (or to serve as
a director or member of) each such industry committee or association.
Notwithstanding the preceding sentence, if the Company is entitled to designate
more than one representative to serve on (or to serve as a director or member
of) any such industry committee or association, the Consultant may, at his
option, continue to be included as one of the Company's designated
representatives for such industry committee or association.
<PAGE>
4. Extent of Services. The Consultant shall devote such time, attention
------------------
and energies to the business of the Company as are reasonably necessary to
fulfill the Consultant's obligations hereunder. However, this Agreement shall
not prohibit the Consultant from engaging in other activities or providing
consulting services to other persons, so long as those activities do not unduly
interfere with the ability of the Consultant to carry out his duties, covenants,
and other obligations hereunder and so long as they are not in any way
inconsistent with the interests of the Company or with this Agreement. In the
event the Consultant proposes to engage in any activity which may be deemed to
be in interference or in competition with the interests of the Company or which
may be construed to interfere with the duties of the Consultant under this
Agreement, the Consultant shall first disclose the same in writing to the Board
of Directors of the Company for its prior approval or disapproval. If the Board
of Directors of the Company determines in good faith that the activity is in
interference or in competition with the interests of the Company or will
otherwise detract from the duties and obligations of the Consultant, then the
Company shall so inform the Consultant in writing, and the Consultant shall not
engage in such activity.
5. Working Facilities. The Consultant shall be furnished with an office
------------------
and secretarial assistance reasonably necessary and suitable for him to carry
out his duties. The location of said office shall be determined by mutual
agreement of the parties. In the event said office is not located at the
Company's principal offices, appropriate arrangements will be made to insure
routine connection of calls to Mr. Swisher from the Company's main phone number.
6. Compensation.
------------
6.1 Base Fee. During the term of this Agreement, the Company shall
--------
pay to the Consultant as compensation for the Consultant's services under this
Agreement a monthly consulting fee of $28,500 (the "Base Fee"), payable in
accordance with the Company's regular payroll schedule. In the event that the
annual base salary of the Chief Executive Officer of the Company is increased
during the term of this Agreement, the Consultant shall receive a proportionate
increase in his Base Fee.
6.2 Bonus Opportunity. In addition to the Base Fee, during the term
-----------------
of this Agreement, the Consultant shall be entitled to participate, on the same
terms and conditions as the Chief Executive Officer of the Company, in any
cash-based incentive bonus plan established for senior management of the
Company. The amount of any bonus payable to the Consultant shall be based on the
Base Fee, and shall be proportionate to the amount of bonus received by the
Chief Executive Officer of the Company as a percentage of his base salary. With
respect to the 1999 fiscal year, the parties acknowledge and agree that the
Consultant shall be entitled to participate in the CMI 1999 Senior Management
Incentive Plan approved by the Board of Directors of the Company on February 25,
1999 as if the Consultant were still an employee of the Company. The parties
further acknowledge and agree that, if this Agreement is not terminated prior to
the expiration of its two-year term, the Consultant shall be entitled to
participate fully in any cash-based incentive bonus plan established for senior
management of the Company for the 2001 fiscal year, and no proration of any
bonus earned thereunder shall occur as a result of the fact that the term of
this Agreement expires on August 11, 2001.
-2-
<PAGE>
6.3 Health and Life Insurance Benefits. During the term of this
----------------------------------
Agreement, the Company shall pay to the Consultant the amount of premium which
the Company would have paid for health benefits for the benefit of the
Consultant and his dependents to the CMI Corporation Employees Health Benefit
Plan or any other group health insurance plan hereafter maintained by the
Company for the benefit of its employees (the "Plan") if the Consultant was an
employee of the Company. At the Consultant's option, Consultant may direct that
such payment in lieu of health premiums be made directly to the Plan to pay the
premiums required in order to continue coverage under the Plan. In addition,
during the term hereof, the Company shall continue to maintain coverage for the
Consultant under the Group Term Life Insurance Policy maintained by the Company
for the benefit of the Consultant immediately prior to the execution of this
Agreement.
6.4 Company Car. During the term of this Agreement, the Consultant
-----------
shall be entitled to use the Company car he currently utilizes or a suitable
replacement.
7. Business Expenses. The Company will reimburse the Consultant for all
-----------------
ordinary and necessary expenses reasonably incurred by the Consultant at the
direction of the Board of Directors or the Chief Executive Officer of the
Company and consistent with the policies established from time to time by the
Company.
8. Duty of Loyalty. The Consultant recognizes that he owes a duty of
---------------
loyalty and good faith to the Company and agrees that, during the term of this
Agreement, he will not in any way, directly or indirectly, by himself or through
one or more other persons or entities, take advantage of any corporate
opportunity of the Company, engage in any act of self-dealing, sell or willfully
disclose any confidential or proprietary information of the Company, or have or
obtain any material economic interest in any entity or arrangement which is in
any way competitive with the interests of the Company, without first disclosing
all material facts and details relating thereto to the Board of Directors of the
Company and obtaining the approval of the Board of Directors.
9. Termination. This Agreement shall terminate as provided for below:
-----------
9.1 By the Company. The Company may terminate this Agreement at
--------------
any time for cause, upon notice to the Consultant setting forth the early
termination date. For purposes of this Section 9.1, the term "cause" shall mean
(i) a material breach by the Consultant of any term or provision of this
Agreement, which breach is not cured within thirty (30) days after notice of
such breach to the Consultant by the Company setting forth the facts upon which
the breach is based, (ii) a material breach by the Consultant of any term or
provision of any other agreement between the Company and the Consultant, which
breach is not cured within thirty (30) days after notice of such breach to the
Consultant by the Company setting forth the facts upon which the breach is
based, (iii) conviction of a felony, (iv) fraud by the Consultant with respect
to the business or affairs of the Company, (v) alcohol or drug abuse by the
Consultant, or (vi) the engaging in conduct by the Consultant after the
Effective Date which, in the good faith opinion of the Board of Directors of the
Company, is materially detrimental to the Company's interests or which causes or
is likely to cause a material adverse effect on the Company, which conduct and
the effects thereof are not cured to the
-3-
<PAGE>
reasonable satisfaction of the Board of Directors within thirty (30) days after
notice thereof to the Consultant by the Company setting forth the facts upon
which the Board's opinion is based.
9.2 By the Consultant. The Consultant may terminate this Agreement
-----------------
at any time for cause, upon notice to the Company setting forth the early
termination date. For purposes of this Section 9.2, the term "cause" shall mean
a material breach by the Company of any term or provision of this Agreement or
any other agreement between the Company and the Consultant, which breach is not
cured within thirty (30) days after notice of such breach to the Company by the
Consultant setting forth the facts upon which the breach is based.
9.3 Death of Consultant. This Agreement shall terminate effective
-------------------
immediately upon the death of the Consultant.
9.4 Change in Control. This Agreement shall terminate effective
-----------------
immediately upon a Change in Control (defined below) of the Company. For
purposes of this Agreement, a "Change in Control" shall be deemed to have
occurred if (i) there shall be consummated (a) any consolidation or merger of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which shares of the Company's capital stock are converted into
cash, securities or other property (other than a merger in which the holders of
the Company's capital stock immediately prior to the merger beneficially own at
least a majority of the voting capital stock of the surviving corporation
immediately after the merger), or (b) any sale, lease, exchange or other
transfer (whether in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Company, or (ii) any person (as
such term is defined in Section 13(d) and Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), shall become the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of the Company's then outstanding capital stock.
10. Rights Upon Termination. Upon termination of this Agreement, all
-----------------------
rights and obligations of the Company and the Consultant (including any personal
or legal representative or successor in interest to the Consultant if deceased
or under a legal disability) shall terminate and cease, except as provided
below:
10.1 Vested Compensation and Benefits. The Consultant shall be
--------------------------------
entitled to receive any compensation or benefits which the Consultant has earned
and which have vested to the Consultant as of the date of termination. Payments
of the Base Fee under Section 6.1 shall be prorated to the date of termination.
In addition, if this Agreement is terminated pursuant to Section 9.2 or 9.4, the
Company shall, within ten (10) business days after the Change in Control occurs
or the date of termination by the Consultant, as the case may be, pay to the
Consultant an amount equal to the product of (i) the then current Base Fee times
(ii) the number of months remaining in the original term of this Agreement. If
this Agreement is terminated pursuant to Section 9.2, the Consultant shall also
be entitled to the bonus opportunity provided in Section 6.2 as if this
Agreement had not been terminated. If this Agreement is terminated pursuant to
Section 9.1, the Consultant shall not be entitled to receive any bonus under
Section 6.2 with respect to the calendar year in which this Agreement is
terminated or any calendar year thereafter. If this Agreement is terminated
pursuant to Section 9.3, the Consultant shall be entitled to receive a prorated
portion of
-4-
<PAGE>
any bonus earned with respect to the calendar year in which this Agreement is
terminated; and the Consultant shall not be entitled to receive any bonus under
Section 6.2 with respect to any subsequent calendar year(s).
10.2 Survival of Remedies. Each party shall have such additional
--------------------
rights and remedies as are provided for elsewhere in this Agreement exercisable
either prior to or subsequent to the termination of this Agreement in the event
of any breach by the other party of any material provision of this Agreement.
11. Breach and Remedies.
-------------------
11.1 General. In the event either party breaches any material
-------
provision of this Agreement, then the aggrieved party shall have all rights and
remedies as provided for in this Agreement or as otherwise available at law or
in equity, without limitation.
11.2 Litigation Expenses. In any action brought by a party to enforce
-------------------
this Agreement against the other party, the prevailing party shall be entitled
to collect from the other party the prevailing party's reasonable attorneys'
fees, court costs, and other expenses reasonably incurred in connection with
such action.
12. Return of Company Property. All products, records, plans, manuals,
--------------------------
memoranda, lists, and other property delivered to or coming into the possession
of the Consultant by or on behalf of or in connection with the Consultant's
consulting relationship with the Company, and all records compiled by the
Consultant which pertain to the business of the Company shall be and remain the
property of the Company and be subject at all times to its discretion and
control. Likewise, all correspondence with customers or representatives,
reports, records, charts, advertising materials, and any data collected by the
Consultant in connection with his engagement by the Company shall be promptly
delivered to the Company without request by it upon termination of the
Consultant's engagement for any reason.
13. Miscellaneous.
-------------
13.1 No Guarantee of Engagement. Except as specifically and expressly
--------------------------
provided in this Agreement, the Company has no obligation, either express or
implied, to engage or continue the engagement of the Consultant.
13.2 Notices. All notices required or permitted under this Agreement
-------
must be in writing and shall be sufficient if delivered personally or mailed by
certified or registered mail, return receipt requested, to the other party at
the addresses set forth below:
Company: CMI Corporation
-------
P. O. Box 1985
Oklahoma City, OK 73101
ATTN: Chief Executive Officer
-5-
<PAGE>
Consultant: Bill Swisher
----------
1500 Dorchester Drive
Oklahoma City, OK 73120
Any notice given by personal delivery shall be deemed made on the first business
day following actual delivery, or if mailed, on the second business day
following date of postmark. Either party may change the notice person and
address set forth above by giving proper notice thereof to the other party.
13.3 Independent Contractor; No Authority to Bind the Company. The
--------------------------------------------------------
Consultant shall act as an independent contractor, not as an employee, and,
except as otherwise expressly provided herein, shall not be eligible to
participate in any of the Company's employee benefit programs. The Consultant
shall be responsible for all taxes arising from the consulting fees and other
amounts paid to the Consultant hereunder. In addition, the parties hereto
understand and agree that the Consultant has no express, implied or apparent
authority to make any commitments on behalf of the Company, and shall not (and
shall not attempt to) bind the Company in any manner whatsoever.
13.4 Integrated Agreement. This Agreement, with any schedules and
--------------------
exhibits attached hereto, contains and constitutes the entire agreement between
the parties hereto and supersedes all prior agreements and understandings
between them relating to the subject matter hereof.
13.5 Construction. This Agreement shall be construed, enforced, and
------------
governed in accordance with the laws of the State of Oklahoma. All pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine, or
neuter gender or to the plurals of each, as the identify of the person or
persons or entities or as the context may require. The descriptive headings
contained in this Agreement are for reference purposes only and are not intended
to describe, interpret, define, or limit the scope, extent or intent of this
Agreement or any provision contained herein.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, to be
effective as of the Effective Date.
CONSULTANT: /s/ George William Swisher, Jr.
- ---------- -------------------------------------------------
George William Swisher, Jr. a/k/a Bill Swisher
COMPANY: CMI CORPORATION
- -------
By: /s/ Tom Engelsman
-------------------------------------------------
Tom Engelsman, Chief Executive
Officer
-7-
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