Item 1. Business
General Development of Business. Athey Products Corporation ("Registrant" or the "Company") was incorporated in the State of Illinois on September 29, 1922. In May, 1988, the Registrant's corporate domicile was changed from Illinois by reincorporating the Registrant in Delaware. The Registrant is a manufacturer of heavy duty equipment and parts. Its principal products include street sweepers and force-feed loaders. The Registrant also manufactures other equipment and replacement parts for its products. The principal users of the Registrant's products are municipalities, contractors, other governmental bodies or agencies and others who have need of heavy duty, large capacity equipment.
The following is a brief description of the principal products manufactured by the Registrant.
Mobil Street Sweepers. The Mobil street sweepers are of the four-wheel mechanical bottom dump and high-lift type and of the three-wheel mechanical high-lift type which offers flexibility in the street cleaning operation. The four-wheel type may be gasoline, diesel, or compressed natural gas powered with an automatic transmission. The three-wheel type is diesel powered with hydrostatic drive. All units have variable speed, hydraulically driven brooms and elevators for cleaner pickup of hard-to-sweep material.
Conveyors and Systems. The Registrant manufactures a broad range of different types and sizes of conveyors, vibrating screens and pug mill mixing plants. Types of conveyors include portable belt loader conveyors, stationary and portable conveyors, folding stacker conveyors, wash plants and rotary stacking conveyors for use in mining, quarries and material processing plants. In December, 1996, the Company sold its Kolman Aggregate Product Line consisting of conveyors, vibrating screens, pugmills, and ash blenders, as well as the Kolman trademark.
Other Products
(a) Force-feed loaders. Force-feed loaders combine the continuous flow capabilities of a belt conveyor with wheel loader mobility, and are produced with either gasoline or diesel engines. They are used to pick up or load dirt, snow or any flowable material from windrow or roadside and drop it into a trailing truck.
Force-feed loaders can also be used for loading sand, coal, salt, top soil and gravel from stockpiles; assisting in cleanup jobs or paving projects; picking up windrows on road shoulders and ditch trimming; or clearing snow-choked roads. Optional attachments include a swivel discharge conveyor and right angle side discharge to either side.
(b) Graders. The grader, called the "Maintenance Master, Model 600", is a small, maneuverable maintenance machine designed to handle jobs where larger, less efficient equipment is not required. This unit can be used for site preparation on small jobs such as parking lots and driveways. Graders are produced with diesel engines, hydrostatic transmission and a wide range of attachments.
(c) Replacement Parts. The Registrant also manufactures and distributes replacement parts for its product lines.
The Registrant's products are distributed through an equipment dealer network that covers the entire United States and certain foreign countries. Agreements with its dealers are terminable, by either party, upon 30 days written notice, except as otherwise limited by applicable law. As is common in the industry, almost all such dealers also sell complementary products produced by other manufacturers, and all of them operate as independent contractors.
Set forth below, for each of the Registrant's last three years, is the percentage of total sales contributed by each class of similar products which contributed 10% or more of total sales during any of the last three years:
Year Ended December, 31 Class of Product 1996 1995 1994 ---------------- ---- ---- ---- Mobil Street Sweepers 93% 84% 89%
Raw Materials and Component Parts. The principal materials and components used by the Registrant in its manufacturing operations are steel, paint, castings, axles, tires, hydraulic parts, engines, transmissions, small parts and welding supplies. These materials and components are available from and are purchased from many suppliers, none of whom the Registrant is substantially dependent upon and none of whom receive a disproportionate amount of the Registrant's business. In the experience of the Registrant, it has been generally able to receive its supplies as required, though delays in deliveries have occurred.
Patents, Trademarks, Licenses. Although the Registrant owns certain patents, trademarks and licenses, none is of material importance to its business, with the exception of the trademark "Mobil Sweeper" owned by the Registrant and used in connection with its mobil street sweepers.
Seasonality. With respect to sales of products manufactured by the Registrant, it has been the experience of the Registrant that its heavy shipping period begins in the spring of the year and continues through the late fall of the year.
Working Capital. The Registrant generates working capital from operations and borrowings under a bank line of credit. The Registrant does not generally provide extended payment terms to its customers, however, the Company may, on occasion, provide certain customers with alternative payment arrangements. The Company's business, as a whole, is not generally subject to seasonal variations in demand, working capital requirements are not subject to material fluctuation.
Customers. In 1996, the Company's largest customer, a dealer selling to a local government entity, accounted for approximately 25% of the Company's net sales. No other customer accounted for more than 10% of the Company's net sales.
The Company believes that the loss of any customer that accounts for 10% or more of the Company's net sales would have a material adverse effect on its business. As is customary in the industry, the Company does not have a significant amount of long term sales agreements with its customers. However, it believes that it enjoys excellent relationships with its customers. The Company follows customary industry practices regarding terms of sale; however, the Company does, on occasion, provide extended payment terms to certain customers.
Backlog. The dollar amount of the backlog of orders believed to be firm as of December 31, 1996 and December 31, 1995 was approximately $4,675,524 and $7,452,000, respectively. Mobil street sweepers accounted for 92% and 100%, respectively, of the backlogs as of such dates. The Registrant expects to complete all orders related to the December 31, 1996 backlog during the current year.
Government Contracts. The Registrant has no material contracts with the Federal Government.
Competition. The Registrant competes in the street sweeper, force-feed loader and grader markets with a number of other companies which are larger and have greater financial resources than the Registrant.
To the knowledge of the Registrant, it is one of the largest manufacturers of four-wheel street sweepers; however, there is substantial competition from other manufacturers in the functional sweeper market, which includes three wheel and vacuum type sweepers.
To the knowledge of the Registrant, it is one of the primary manufacturers of force-feed loaders. However, front-end loaders, which are manufactured by many other companies, provide substantial functional competition. The Registrant is not a significant manufacturer of graders.
Research and Development. The Registrant spent approximately $110,000 in 1996, $418,000 in 1995, and $485,000 in 1994, to improve existing products and to consider new product lines.
Environment. Compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, have had no material effects upon the capital expenditures, results of operations, and competitive position of the Registrant. Due to the nature of its business, the Registrant does not anticipate any material capital expenditures for environmental control facilities for the next fiscal year.
Employees. As of December 31, 1996, the Registrant employed 254 persons, of which 175 employees are subject to a collective bargaining agreement. The Registrant considers its relationship with its employees to be excellent.
Export Sales. Sales to customers in foreign countries approximated $1,355,199 in 1996, $984,500 in 1995 and $1,393,800 in 1994. During 1996, such customers were located in North America, the Middle East and the Pacific Rim.
Item 2.
Item 2. Properties.
The Registrant owns one manufacturing plant which, in the Registrant's opinion, is suitable and adequate for the manufacture of its products.
The Registrant's plant is located in Wake Forest, North Carolina. The plant, which was completed in 1965, is situated on approximately 39 acres, and is of prestressed concrete construction with steel crane ways and supports. The plant is believed to be one of the finest heavy duty plants of its type in the southeastern part of the United States. During 1985, the Company completed an addition of approximately 29,000 square feet to the assembly area of the plant. During 1989, the Company completed an additional building as its new paint shop. This paint shop is 4,800 square feet, and is designed to be environmentally state-of-the-art. It uses filtered air both in and out of the paint room, and substantially reduces the possibility of contaminants in the painting process. During 1995, the Company added a 1,755 square foot Inspection Building. Of the approximately 206,935 square feet in the plant, approximately 186,415 square feet is devoted to manufacturing and assembly facilities, and to stockroom, shipping, and receiving facilities; approximately 16,360 square feet is used for general and executive offices; and approximately 4,160 square feet is an engineering department balcony area.
The equipment in the plant includes various boring, drilling and milling machines, lathes, grinders, punches, shears, press brakes and other presses, hydraulic testing equipment, saws, machine shop equipment, layout equipment, heavy duty metal working and robotic welding equipment and appropriately large material handling cranes.
Item 3.
Item 3. Legal Proceedings.
Certain proceedings are pending against the Company, involving ordinary and routine claims incidental to the business of the Company. The ultimate legal and financial liability of the Company with respect to these proceedings cannot be estimated with certainty. However, the Company believes, based on its examination of these matters and its experience to date, that the ultimate disposition of these matters will not materially affect the financial position or results of operations of the Company.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of shareholders, through the solicitation of proxies or otherwise, during the fourth quarter of the year ended December 31, 1996.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The stock price and trading data on page 7 of the Registrant's 1996 Annual Report to Shareholders are hereby incorporated by reference as Item 5 of this report on Form 10-K. No cash dividends have been paid to shareholders during the last five years.
Item 6.
Item 6. Selected Financial Data.
The selected financial data for the years 1992 through 1996 on page 6 of the Registrant's 1996 Annual Report to Shareholders is hereby incorporated by reference as Item 6 of this report on Form 10-K.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management's discussion and analysis on pages 4 through 7 of the Registrant's 1996 Annual Report to Shareholders is hereby incorporated by reference as Item 7 of this report on Form 10-K.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The Financial Statements and Supplementary Data on pages 8 through 13 and the Independent Auditor's Report on page 16 of the Registrant's 1996 Annual Report to Shareholders are hereby incorporated by reference as Item 8 of this report on Form 10-K.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
(a) Information required by this item concerning the Registrant's directors and persons to be nominated for election as directors of the Registrant and compliance by the Registrant's directors, executive officers and certain beneficial owners of the Registrant's common stock with Section 16 of the Securities and Exchange Act of 1934 will be set forth in the Registrant's Proxy Statement (the "Proxy Statement") for its annual meeting to be held May 15, 1997, which Proxy Statement will be filed with the Commission no later than April 30, 1997, and is hereby incorporated herein by reference.
(b) Set forth below are the names and ages of all of the executive officers of the Registrant, none of whom has any family relationship with any other executive officer or any director of the Registrant, and all positions and offices with the Registrant presently held by such persons, together with a brief account of business experience during the past 5 years of each person:
Officers are elected annually by the Registrant's Board of Directors at the first meeting of the Board of Directors held after each Annual Meeting of Shareholders. The terms of all of the foregoing officers are from May 16, 1996 to May 15, 1997.
Item 11.
Item 11. Executive Compensation.
Information required by this item concerning executive compensation will be set forth in the Registrant's Proxy Statement for its Annual Meeting to be held May 15, 1997, which Proxy Statement will be filed with the Commission no later than April 30, 1997 and is hereby incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a)-(b) Information required by this item concerning security ownership of certain beneficial owners and management will be set forth in the Registrant's Proxy Statement for its Annual Meeting to be held May 15, 1997, which Proxy Statement will be filed with the Commission no later than April 30, 1997 and is hereby incorporated herein by reference.
(c) The Registrant knows of no arrangements which may at a subsequent date result in a change in control of the Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions.
Information required by this item concerning certain relationships and related transactions will be set forth in the Registrant's Proxy Statement for its Annual Meeting to be held May 15, 1997 which Proxy Statement will be filed no later than April 30, 1997 and is hereby incorporated herein by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) 1. FINANCIAL STATEMENTS
The following Financial Statements of the Registrant are included in its Annual Report to Shareholders for the year ended December 31, 1996, which statements are incorporated herein by reference:
Independent Auditor's Report
Balance Sheets - December 31, 1996 and 1995
Statements of Operations - years ended December 31, 1996, 1995, and 1994
Statements of Shareholders' Equity - years ended December 31, 1996, 1995, and 1994
Statements of Cash Flows - years ended December 31, 1996, 1995, and 1994
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
The following schedules are included in Part IV of this Report:
Independent Auditors' Report, located at sequential page 13 of this report.
Schedule II - Valuation and qualifying accounts located at sequential page 15 of this report.
Schedules not listed above have been omitted because they are either not applicable or the required information has been included in the financial statements or the notes thereto.
(b) REPORTS ON FORM 8-K.
None.
(c) EXHIBITS .
Exhibit Number:
*3.1 Articles of Incorporation of the Registrant (Incorporated by reference to Exhibit 3 to the Registrant's 1980 Form 10-K, File No. 1-2723).
*3.2 By-Laws of the Registrant (Incorporated by reference to Exhibit 3 to the Registrant's 1980 Form 10-K, File No. 1-2723).
*4.1 Specimen certificate of Common Stock of the Registrant (Incorporated by reference to Exhibit 7 to the Registrant's 1970 Form 10-K File No. 1-2723).
13.1 1996 Annual Report to Shareholders of Athey Products Corporation.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
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* Certain of the exhibits in this Annual Report on Form 10-K are indicated by an asterisk, and hereby incorporated by reference to other documents on file with the Commission with which they are physically filed, to be part hereof, as of their respective dates.
SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ATHEY PRODUCTS CORPORATION (Registrant)
By: /s/ James H. Stumpo -------------------------------------- James H. Stumpo President and Chief Executive Officer
By: /s/ Franz M. Ahting -------------------------------------- Franz M. Ahting Vice President Finance and Chief Financial Officer Date: March 28, 1997.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ John F. McCullough /s/ Martin W. McCullough - ------------------------------ --------------------------------- John F. McCullough, Chairman Martin W. McCullough, Director of the Board of Directors March 28, 1997 March 28, 1997
/s/ Henry W. Gron, Jr. /s/Richard A. Rosenthal - ------------------------------ --------------------------------- Henry W. Gron, Jr., Director Richard A. Rosenthal, Director March 28, 1997 March 28, 1997
/s/ James H. Stumpo /s/ Franz M. Ahting James H. Stumpo, Director Franz M. Ahting , Director March 28, 1997 March 28, 1997
(Logo of McGladrey & Pullen, LLP. appears here) McGladrey & Pullen, LLP Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE
Board of Directors Athey Products Corporation
Our audits were made for the purpose of forming an opinion on the basic statements taken as a whole. Supplemental Schedule II - Valuation and Qualifying Accounts, is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ McGladrey & Pullen, LLP
Raleigh, North Carolina February 28, 1997