ITEM 1. BUSINESS
(a) General Development of Business.
Photo Control Corporation (the "Registrant" or the "Company") was organized as a Minnesota corporation in 1959. The Registrant acquired all of the outstanding stock of Norman Enterprises, Inc. ("Norman"), a California corporation, in 1973. In June, 1983 the Registrant acquired all of the outstanding stock of Nord Photo Engineering, Inc. ("Nord"), a Minnesota corporation. In October, 1986 the Registrant acquired all of the outstanding stock of Bardwell & McAlister, Inc. ("Bardwell"), a California corporation. As of December 31, 1987, Bardwell was liquidated and its assets and liabilities were transferred to Norman. Norman discontinued the manufacture and sale of the Bardwell product line during 1994.
The Registrant designs, manufactures, and markets professional cameras, long-roll film magazines, photographic accessories, Norman electronic flash equipment, and Nord photographic package printers. All references to the "Registrant" or the "Company" also include "Norman" and "Nord" unless indicated otherwise.
(b) Financial Information About Industry Segments.
During the years ended December 31, 1995, 1994, and 1993, the Registrant was engaged in one industry which consisted of designing, manufacturing, and marketing professional photographic equipment.
(c) Narrative Description of Business.
(c) (l)(i) Principal Products, Services and Markets. The Registrant designs, manufactures and markets professional cameras, long-roll film magazines, photographic accessories, Norman electronic flash, cine and video lighting equipment, and Nord photographic package printers.
The principal market for the Registrant's long-roll camera equipment is the sub-segment of the professional photography market requiring high-volume equipment, such as elementary and secondary school photographers. The market with respect to the Norman electronic flash equipment is broader, extending to all professional photographers and to experienced amateur photographers. The market for Nord photographic package printers is photographic processing labs which specialize in producing photographic color print packages such as those often produced for weddings and school photography. The geographic market in which the Registrant competes with respect to long-roll camera equipment, flash equipment, printers, and cine and video lights consists of the entire United States and, to a lesser extent, some foreign countries.
The Registrant markets most of its cameras, film magazines, and photographic accessories through its two employee salesmen and one independent sales representative and part-time use of a service employee. Such equipment is marketed primarily under the tradename, "Camerz". Norman markets its electronic flash and lighting equipment through three full-time employee salesmen, and ten independent sales representatives. Nord markets its printers through five employee salesmen, one independent sales representative, and by part-time use of three service employees. The Camerz division and Nord utilize the same independent sales representative to sell both product lines. It is expected that the sales force will remain at the current level during 1996.
(c)(1)(ii) New Products and Services. The Camerz division introduced two tripods, the Auto-Mate which features a gas charged, counter-balanced center column cylinder for holding cameras from twelve to thirty-five pounds and the Adjusto-Mate which has a gear driven column with precision rack and pinion movement to hold up to fifty pounds. Also the Camerz ZII Digital Preview System was placed in four beta sites. The system main components are a ZII Camera with EIS (electronic identification system) an Electronic Camera mounted on the ZII with synchronized zooming, a customized PC with a camera synchronizing board, and a Camerz frame-grabber board, a camera monitor and an optional point-of-sale computer system and monitor. The Camerz software allows up to sixteen frames to be viewed on the screen at one time, and selection can be made by process of elimination with each frame identified on the screen by a Camerz EIS sequential frame number which matches a number exposed on the film. Delivery of the system started in January 1996.
Nord acquired the Bespro product line which features a low cost multi-lens printer. The daylight printer handles all professional color and black and white film sizes, and prints on either eleven, ten or eight inch paper. Nord enhanced its additive lamphouse by making it compatible with Accudata(TM), a printer controller used on a wide variety of photographic printers.
Norman improved its line of battery-portable flash units by introducing the new "Super Battery" and "Delta V Charger." This nickel-cadmium battery provides 25% more flashes per charge with no memory effect and the charger utilizes a micro processor control circuit that substantially increases battery life. These improvements have dramatically revitalized sales of Norman's portables. Also, Norman introduced the new high-power 40/40 power supply. Sales in 1995 were to a single high-volume user, with introduction to the dealers in January 1996.
(c)(1)(iii) Sources and Availability of Raw Materials. Materials required for the Registrant's photographic equipment consist primarily of fabricated parts, lenses, electronic components, and lights, most of which are readily available from numerous sources.
(c)(1)(iv) Patents, Trademarks, Licenses, Franchises and Concessions. The Registrant, on February 16, 1982, obtained United States patent number 4,319,819 for a reflex shutter, which is used in conjunction with a zoom lens. The Registrant has incorporated the shutter into a zoom lens camera which was first introduced in fiscal 1980.
The Registrant on June 7, 1988, obtained a United States Patent number 4,750,012 for a reflex shutter for SLR cameras. The shutter is incorporated into the "Z35" camera which was first introduced in 1987.
In 1991, the Registrant was granted United States Patent number 5,055,863 for a multiple image transfer camera system for the simultaneous transfer of light rays from an object to a pair of separate, discrete mediums to provide for substantially exact image reproduction and capture thereof at either or both of two media.
The Registrant received U.S. Patent No. 5,294,950 on March 15, 1994 for an identification system for automated film and order processing including machine and human readable code.
On July 12, 1994, the U.S. Patent and Trademark Office granted the Registrant patent number 5,329,325 for the Registrant's synchronized zoom electronic camera system.
Nord holds two patents. Patent number 4,213,689 granted July 22, 1980 relates to a camera shutter which is electromagnetically activated and is not currently in production. The Additive Color Lamphouse patent, granted in 1991, United States Patent number 5,032,866, covers a closed loop light intensity feedback control system for regulating the light sources within the lamphouse.
The Registrant believes that it is the owner of two unregistered trademarks, "Camerz" and the logo-type used in connection with the sale of photographic equipment under the name Camerz. Also, the Registrant owns one registered trademark called "Smart System".
Nord is the owner of four registered trademarks; "Portrait Express," "Nord", "ESP", and a logo-type design referred to as the "Micrometer."
Although the Registrant's patents and trademarks are valuable, they are not considered to be essential to the Company's success. Innovative application of existing technology along with providing efficient and quality products are of primary importance.
The Registrant has entered into agreements with employees which agreements grant the Registrant a exclusive right to use, make and sell inventions conceived by employees during their employment with the Registrant. The Registrant believes that the right to use, make and sell such inventions adequately protects the Registrant against any employee who might claim an exclusive proprietary right in an invention developed while the employee was employed by the Registrant.
(c)(1)(v) Seasonal Fluctuations. The photographic equipment business, including that of Norman and Nord, is somewhat seasonal. There is a larger volume of sales from March through October.
(c)(1)(vi) Working Capital Practices. The Registrant believes that its working capital needs are typical to the industry. The nature of the Registrant's business does not require that it maintain a high volume of finished goods inventory or provide extended payment terms to customers. The Registrant maintains an inventory of raw material and finished products and permits customers to return only defective merchandise.
(c)(1)(vii) Single Customer. During the years ended December 31, 1995, 1994 and 1993, the company derived 20.2%, 24.2% and 17.4%, respectively, of its sales from one unaffiliated customer, Lifetouch Inc. and its affiliates.
(c)(1)(viii) Backlog. The dollar amount of backlog believed by the Registrant to be firm as of December 31, is as follows:
1995 1994 1993
Company $1,397,000 $4,994,000 $7,967,000 Nord 426,000 1,109,000 486,000 Norman 1,035,000 83,000 6,000 ---------- ---------- ---------- Total $2,858,000 $6,186,000 $8,459,000 ========== ========== ==========
The Registrant anticipates that it and its subsidiaries will be able to fill all current backlog orders during the fiscal year ending December 31, 1996.
(c)(1)(ix) Government Contracts. No material portion of the Registrant's or its subsidiaries' business is subject to renegotiation of profits or termination of any contract or subcontract at the election of the Government.
(c)(1)(x) Competition. Primary methods of competition for the Company's products are product performance, reliability, service, and delivery. The Registrant's two primary competitors with respect to such equipment are Lucht Engineering, Inc., which sells photographic printers, and Beattie Systems, Inc., which sells long-roll cameras. Because of varying product lines, the Registrant is unable to state accurately its competitive position in relation to such competitors. In the somewhat broader market in which Norman competes in the sale of professional studio electronic flash equipment, there are approximately fourteen significant competitors, several of which are well established. The Registrant is unable to state accurately Norman's overall competitive position in relation to such competitors. Norman's dominant competitors are Broncolor, Dynalite, White Lighting, Photogenic, and Speed-O-Tron.
(c)(1)(xi) Research and Development. The Registrant spent the following amounts on research activities relating to the development of new products, services, and production engineering:
YEAR ENDED DECEMBER 31 ---------------------------------------- 1995 1994 1993 ---- ---- ----
Camerz Division $ 408,000 407,000 396,000 Nord 520,000 730,000 561,000 Norman 382,000 403,000 329,000 ---------- ---------- ---------- Total $1,310,000 $1,540,000 $1,286,000 ========== ========== ==========
The Company intends to maintain its level of spending on research and development.
(c)(1)(xii) Environmental Regulation. Federal, state and local laws and regulations with respect to the environment have had no material effect on the Registrant's or its subsidiaries' capital expenditures, earnings, or respective competitive positions.
(c)(1)(xiii) Employees. As of December 31, 1995, the Registrant had the following employees:
FULL-TIME PART TIME --------- --------- Camerz Division 44 1 Nord 33 1 Norman 62 3 --- --- Total 139 5 === ===
The Registrant utilizes subcontract personnel on a temporary basis to supplement its regular work force which totaled 46 people as of December 31, 1995.
(d) Financial Information About Foreign and Domestic Operations and Export Sales. The Registrant has no operations based outside of the United States. During each of the last three years ended December 31, 1995, slightly more than 5% of the Registrant's consolidated sales were derived from export sales.
ITEM 2.

ITEM 2. PROPERTIES
The Registrant's principal property is located at 4800 Quebec Avenue North, Minneapolis, Minnesota. The building at that location consists of 60,000 square feet and is located on 3 1/2 acres of land. The building was constructed in 1971 and was purchased in 1980. Extensive remodeling has been done to meet the specific needs of the Company. The Registrant first occupied the building during the fall of 1980, and uses the building for camera production, Nord printer manufacturing, and as corporate offices.
Nord owns a 5,000 square foot building in Hinckley, Minnesota, on one acre of land, which houses optical production and was built in 1981. In February 1996, the production was moved to Minneapolis and the building listed for sale.
Norman occupies a 32,000 square foot building in Burbank, California which was constructed in 1977 and expanded in 1984. The facility is located on 50,000 square feet of land and houses all of Norman's operations. The land and building are financed through the issuance of an industrial development bond by the Industrial Development Authority of the County of Los Angeles and are owned by Norman subject to a mortgage in favor of the note holder.
The Registrant believes its present facilities are adequate for its current level of operation and provide for a reasonable increase in production activities.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
Neither the Registrant nor any of its subsidiaries is a party to, and none of their property is the subject of, any material pending legal proceedings.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Registrant's shareholders during the Registrant's quarter ending December 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The term of office for each executive officer is from one annual meeting of directors until the next annual meeting or until a successor is elected. There are no arrangements or understandings between any of the executive officers and any other person (other than arrangements or understandings with directors or officers acting as such) pursuant to which any of the executive officers were selected as an officer of the Registrant.
There are no family relationships between any of the Registrant's directors or executive officers.
PART II
The information required by Items 5, 6, 7 and 8 of Part II is incorporated herein by reference to the sections labeled "Stock Market Information," "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," the Consolidated Financial Statements and Notes and the Independent Auditor's Report which appear in the Registrant's Annual Report to Shareholders for the year ended December 31, 1995. With respect to Item 9, no change of accountants or disagreements on any matter of accounting principles or practices or financial statement disclosure has occurred.
PART III
Items 10, 11, 12 and 13 of Part III, except for certain information relating to Executive Officers included in Part I, are omitted inasmuch as the Company intends to file with the Securities and Exchange Commission within 120 days of the close of the year ended December 31, 1995, a definitive proxy statement containing information pursuant to Regulation l4A of the Securities Exchange Act of 1934 and such information shall be deemed to be incorporated herein by reference from the date of filing such document.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as Part of this Report.
(a)(l) Consolidated Financial Statements. Page
Independent Auditor's Report......................................... *
Consolidated Statements of Opera- tions for the years ended December 31, 1995, 1994 and 1993..................................... *
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993, ........................................................... *
Consolidated Balance Sheets at December 31, 1995 and 1994.................................................... *
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993.................................................. *
Notes to Consolidated Financial Statements .......................................................... *
- -------------------------------
*Incorporated by reference to the Registrant's Annual Report to Shareholders for the year ended December 31, 1995 a copy of which is included in this Form 10-K as Exhibit 13
Page
(a)(2) Consolidated Financial Statement Schedules.
Auditor's Consent and Report on Schedules............................ 10
Schedule VIII - Valuation and Qualifying Accounts for the years ended December 31, 1995, 1994 and 1993............................................ 11
All other schedules have been omitted because they are not applicable or are not required, or because the required information has been given in the Consolidated Financial Statements or notes thereto.
(a)(3) Exhibits. See "Exhibit Index" on page following signatures.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the last fiscal quarter of the Registrant's 1995 fiscal year.
(c) Exhibits. Reference made to item 14 (A)(3)
(d) Schedules. Reference made to item 14 (A)(2)
- --------------------------------
*Incorporated by reference to the Registrant's Annual Report to Shareholders for the year ended December 31, 1995, a copy of which is included in this Form 10-K as Exhibit 13
AUDITOR'S CONSENT AND REPORT ON SCHEDULES
Board of Directors and Stockholders Photo Control Corporation
We hereby consent to the incorporation by reference in this Annual Report on Form 10-K of Photo Control Corporation for the year ended December 31, 1995 of our report, dated January 30, 1996, appearing in the Company's 1995 Annual Report to Shareholders. We also consent to the incorporation by reference of such report in the registration statements on Form S-8 for the Photo Control Stock Option Plan.
In the course of our audit of the financial statements referred to in our report, dated January 30, 1996, included in the Company's 1994 Annual Report to Shareholders, we also audited the supporting schedule listed in Item 14(a)(2) of this Annual Report on Form 10-K. In our opinion, the schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
VIRCHOW KRAUSE, & COMPANY, LLP
January 30, 1996 Minneapolis, Minnesota
PHOTO CONTROL CORPORATION SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(a) Recoveries of amounts written off in prior years.
(b) Uncollectible accounts written off.
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.
PHOTO CONTROL CORPORATION
Date: March 15, 1996 By /s/ Leslie A. Willig Leslie A. Willig, Chairman of the Board of Directors, Chief Executive Officer and President
Pursuant to the requirements of the Securities 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.
Date: March 15, 1996 /s/ Leslie A. Willig Leslie A. Willig, Chief Executive Officer, President and Director (principal executive officer)
Date: March 15, 1996 /s/ Curtis R. Jackels Curtis R. Jackels, Vice President and Treasurer (principal financial and principal accounting officer)
Date: March 15, 1996 /s/ George A. Kiproff George A. Kiproff, Director
Date: March 15, 1996 /s/ James R. Loomis James R. Loomis, Director
Date: March 15, 1996 /s/ William L. Norman William L. Norman, Director
Date: March 17, 1996 /s/ Thomas J. Cassady Thomas J. Cassady, Director
Date: March 17, 1996 /s/ Joe M. Kilgore Joe M. Kilgore, director
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------------------------------------------
PHOTO CONTROL CORPORATION
COMMISSION FILE NO.: 0-7475 ------------------------------------------------------------------------
EXHIBIT INDEX FOR FORM 10-K FOR YEAR ENDED DECEMBER 31, 1995
Page Number in Sequential Numbering of all Form 10-K and Exhibit Pages EXHIBIT
3.1 Registrant's Restated Articles of Incorporation, as amended-incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1988 *
3.2 Registrant's bylaws as amended-incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 *
4.1 Loan Agreement between City of New Hope, Minnesota, and the Registrant, dated May 16, 1980-incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 *
4.2 Mortgage and Security Agreement between the Registrant, Mortgagor, and Washington National Insurance Company, Mortgagee, dated May 16, 1980-incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 *
4.3 Loan Agreement between Industrial Development Authority of the County of Los Angeles and Norman Enterprises, Inc., dated as of December 1, 1983-incorporated by reference to Exhibit 4.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 *
4.4 Trust Deed among Industrial Development Authority of the County of Los Angeles, Norman Enterprises, Inc. and First National Bank of Minneapolis, dated as of December 1, 1983-incorporated by reference to Exhibit 4.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 *
4.5 Guaranty Agreement from Photo Control Corporation as Guarantor to First National Bank of Minneapolis, dated December 1, 1983-incorporated by reference to Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 *
4.6 Supplemental Agreement between Photo Control Corporation and First National Bank of Minneapolis, dated as of December 29, 1983-incorporated by reference to Exhibit 4.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1989 *
10.1 Executive Salary Continuation Plan adopted August 9, 1985 together with Exhibits - incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K * for the year ended June 30, 1986 **
10.2 The Registrant's 1983 Stock Option Plan - incorporated by reference to Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year * ended June 30, 1989 **
10.3 Form of Stock Option Agreement under the Registrant's 1983 Stock Option Plan - incorporated by reference to Exhibit 5 to the Registrant's Registration Statement on * Form S-8, Reg. No. 2-85849 **
10.4 Cash bonus plan for officers - incorporated by reference to the description of such plan contained in the Registrant's definitive Proxy Statement for its 1995 Annual Meeting of * Shareholders **
10.5 Amendment to Stock Option Plan August 29, 1994 - incorporated by reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 *
10.6 Amendment to Stock Option Plan, February 23, 1996 **
11 Statement re computation of per share earnings
13 Report to Shareholders for the year ended December 31, 1995
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
25 Power of Attorney from Messrs. Willig, Jackels, Kiproff, Loomis, Norman and Cassady
- ---------------------------- *Incorporated by reference
** Indicates management contracts or compensation plans or arrangements required to be filed as exhibs.


Item 1. Business
General Development of Business. Athey Products Corporation ("Registrant") was incorporated in the State of Illinois on September 29, 1922. In May, 1988, the Registrant's corporate domicile was changed from Illinois to Delaware by reincorporating the Registrant in the latter state. The Registrant is a manufacturer of heavy duty equipment and parts. Its principal products include street sweepers, conveyors, 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, miners and others who have need of heavy duty, large capacity equipment.
The following is 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 & 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.
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. The newest model includes a swivel discharge conveyor and right angle side discharge to either side.
Other Products
(a) Trailers. The trailers manufactured by the Registrant, also called "wagons", are generally pneumatic tired, and are for large volume, off-highway use. The trailers, which are themselves pulled by tractors manufactured by others, are used for the hauling of earth, sand, stone, coal or any other bulk material. Trailers are manufactured to
handle capacities of from 33 to 100 tons and are classified by the manner in which they discharge materials; for example, rear dump, bottom dump and side dump trailers. Trailers are typically used on projects such as the construction of large dams, road building, mining, land fill, and other specialized uses where the large volume capacities of the trailers are needed. During 1995, the Company phased-out the manufacture of this product in connection with its organizational restructuring.
(b) Graders. This unit, 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) Track Assemblies. Track assemblies are used for the hauling of trailers or other heavy duty equipment, as distinguished from drive track which is used on powered equipment. Track assemblies can haul any load that a track type tractor can pull, and can be especially useful in refuse operations, oil fields, quarries, pipelines and various construction industry functions where the land condition makes use of wheeled vehicles impracticable. During 1995, the Company phased-out the manufacture of this product in connection with its organizational restructuring.
(d) Refuse Collection Products. The Registrant also manufactures refuse collection truck bodies of front and side loading design for manual, semiautomatic and automated collection. The side loader can also be configured as a leaf loader for high compaction pick up of leaves. During 1995, the Company phased-out the manufacture of this product in connection with its organizational restructuring.
(e) 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. Its agreements with its dealers are terminable, by either party, upon 30 days written notice. 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 1995 1994 1993 -------------------------- ---- ---- ----
Mobil Street Sweepers 84% 89% 85%
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 mobile street sweepers.
Seasonality. With respect to conveyors, 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. Sales of other products manufactured by the Registrant are not significantly seasonal.
Working Capital. The Registrant generates working capital from operations and borrowings under a bank line of credit. Because the Registrant does not generally provide extended payment terms to its customers and because its business, as a whole, is not generally subject to seasonal variations in demand, working capital requirements are not subject to material fluctuation.
Customers. In 1995, 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 and does not provide extended payment terms to any significant extent.
Backlog. The dollar amount of the backlog of orders believed to be firm as of December 31, 1995 and December 31, 1994 was approximately $7,452,000 and $8,860,000, respectively. Mobil street sweepers accounted for 100% and 89%, respectively, of the backlogs as of such dates. The Registrant expects to complete all orders related to the December 31, 1995 backlog during the current year.
Government Contracts. The Registrant has no material contracts with the Federal Government; however, the Company has a contract with a dealer for sales to the city of Los Angeles, California, which the Company expects to complete during 1996.
Competition. The Registrant competes in the street sweeper, conveyor, trailer, grader and refuse collection truck 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 sweepers; however, there is substantial competition from other manufacturers in the functional sweeper market, which includes three-wheel and vacuum type sweepers.
Conveyors manufactured by the Registrant are priced similarly to machinery of competitors, with competition being primarily on the basis of quality and service. To the knowledge of the Registrant, no one manufacturer, or small group of manufacturers, has a dominant share of the market.
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 trailers and graders. Trailers face functional competition from heavy duty trucks.
The Registrant commenced the manufacture and sale of refuse collection truck bodies in 1981, and competes with several other established manufacturers in such market.
The Registrant is a manufacturer of track assemblies for hauling purposes. This product also faces functional competition from improved heavy duty rubber tires.
Research and Development. The Registrant spent approximately $418,000 in 1995, $485,000 in 1994, and $286,000 in 1993, 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 and its subsidiaries. Due to the nature of its business, the Registrant does not anticipate any material capital expenditures for environmental control facilities for the remainder of its current fiscal year or for the succeeding fiscal year.
Employees. As of December 31, 1995, the Registrant employed 258 persons, of which 157 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 $984,500 in 1995, $1,393,800 in 1994 and $1,725,400 in 1993. During 1995, such customers were located in North America, the Middle East and the Pacific Rim.
Item 2.

Item 2. Properties.
The Registrant owns two manufacturing plants, both of which, in the Registrant's opinion, are suitable and adequate for the manufacture of its products.
The Registrant's Raleigh Division (where all of the Registrant's products, except its force-feed loader, grader and conveyor lines, are produced) operates from its plant located in Wake Forest (outside of Raleigh), North Carolina (the "Raleigh Plant"). The Raleigh 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 Raleigh Plant
is believed to be one of the finest heavy duty plants of its type in the southeastern part of the United States. During the fourth quarter of 1985, the Company completed an addition of approximately 29,000 square feet to the assembly area of the Raleigh 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 the first quarter of 1995, the Company added a 1,755 square foot Inspection Building. Of the approximately 206,935 square feet in the Raleigh 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 Raleigh 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.
The Registrant's Kolman/Athey Division (where the Registrant's graders, force-feed loader and conveyor product lines are produced) operates from seven separate buildings, of an aggregate of approximately 68,000 square feet, located on approximately 9.6 acres in Sioux Falls, South Dakota (the "Kolman Plant"). The largest of such buildings contains approximately 57,100 square feet, is of cement block construction, and is a single story structure. Approximately 52,700 square feet of this building is used for manufacturing functions, and approximately 4,400 square feet is used for general offices. The Kolman plant was sold subsequent to year-end, in February, 1996, as part of the Company's organizational restructuring.
Item 3.

Item 3. Legal Proceedings.
The Company is involved in litigation regarding several product liability claims. The Company believes that it has substantial meritorious defenses available and intends to defend the cases vigorously. The Company also believes that the ultimate resolution of these proceedings is not likely to have a materially adverse impact on its financial position, as the Company has insurance coverage it deems adequate.
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, 1995.
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 1995 Annual Report to Shareholders are hereby incorporated by reference as Item 5 of this report. 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 1991 through 1995 on page 6 of the Registrant's 1995 Annual Report to Shareholders is hereby incorporated by reference as Item 6 of this report.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management's discussion and analysis on pages 5 through 7 of the Registrant's 1995 Annual Report to Shareholders is hereby incorporated by reference as Item 7 of this report.
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 1995 Annual Report to Shareholders are hereby incorporated by reference as Item 8 of this report.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There were no changes in or disagreements with accountants on accounting or financial disclosures matters.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant.
(a) Information concerning the directors and persons to be nominated for election as directors of the Registrant will be set forth in the Registrant's Proxy Statement in connection with its Annual Meeting to be held May 16, 1996, which Proxy Statement will be filed with the Commission within 120 days after the end of the Registrant's last fiscal year, 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: Positions, Offices Held and Business Experience for the Name Age Past 5 Years
James H. Stumpo 57 In May, 1995, Mr. Stumpo was elected President and Chief Executive Officer and Director of the Company. From May, 1992 to May, 1995 he was Vice President Finance with Benton Harbor Engineering, Benton Harbor, Michigan. From May, 1987 to May, 1992, Mr. Stumpo served as Chief Financial Officer for Koehring Cranes & Excavators, Waverly, Iowa, a Division of Terex Corporation.
Franz M. Ahting 48 In May, 1995, Mr. Ahting was elected Vice President Finance, Chief Financial Officer and Director of the Company. In May, 1994, Mr. Ahting became Treasurer of the Company. From November, 1993 to May, 1995, Mr. Ahting served as Controller and Assistant Secretary. Mr. Ahting was Assistant Treasurer of Carolina Steel Corporation from 1988 to 1990 and practiced public accounting from 1991 to November, 1993.
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 18, 1995 to May 16, 1996.
Item 11.

Item 11. Executive Compensation.
Information concerning executive compensation will be set forth in the Registrant's Proxy Statement in connection with its Annual Meeting to be held May 16, 1996, which Proxy Statement will be filed with the Commission within 120 after the end of the Registrants last fiscal year, and is hereby incorporated herein by reference.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a)-(b) Information concerning security ownership of certain beneficial owners and management will be set forth in the Registrant's Proxy Statement in connection with its Annual Meeting to be held May 16, 1996, which Proxy Statement will be filed with the Commission within 120 days after the end of the last fiscal year, 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 concerning certain relationships and related transactions will be set forth in the Registrant's Proxy Statement in connection with its Annual Meeting to be held May 16, 1996 which Proxy Statement will be filed within 120 days after the end of the last fiscal year, 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, 1995, which statements are incorporated herein by reference:
Independent Auditor's Report
Balance Sheets - December 31, 1995 and 1994
Statements of Operations - years ended December 31, 1995, 1994, and 1993
Statements of Shareholders' Equity - years ended December 31, 1995, 1994, and 1993
Statements of Cash Flows - years ended December 31, 1995, 1994, and 1993
Notes to Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
The following schedules are included in Part IV of this Report:
Independent Auditors' Reports, located at sequential pages 13 and 14 of this report.
Schedule II - Valuation and qualifying accounts located at sequential page 16 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.
On October 9, 1995, the Registrant announced that it would close its Kolman plant located at Sioux Falls, South Dakota.
(c) EXHIBITS.
Exhibit Number: 13.1 1995 Annual Report to Shareholders of Athey Products Corporation. 21.1 Subsidiaries of the Registrant, attached at end of this Report. 27.1 Financial Data Schedule.
SIGNATURES
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, 1996.
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, 1996 March 28, 1996
/s/ Henry W. Gron, Jr. /s/Richard A.Rosenthal Henry W. Gron, Jr., Director Richard A. Rosenthal, Director March 28, 1996 March 28, 1996
/s/ James H. Stumpo /s/ Franz M. Ahting James H. Stumpo, Director Franz M. Ahting , Director March 28, 1996 March 28, 1996
(McGladrey & Pullen, LLP logo appears here)
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
Board of Directors Athey Products Corporation
Our audits were made for the purpose of forming an opinion on the basic 1995 and 1994 financial 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 for 1995 and 1994 have been subjected to the auditing procedures applied in our audit of the basic 1995 and 1994 financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic 1995 and 1994 financial statements taken as a whole.
/s/ McGladrey & Pullen, LLP
Raleigh, North Carolina February 23, 1996
Deloitte & Touche LLP Suite 1800 Telephone: (919) 546-8000 Logo First Union Capitol Center Telex: 4995716 appears 150 Fayetteville Street Mall Facsimile: (919)833-3276 here) P.O. Box 2778 Raleigh, North Carolina 27602-2778
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders Athey Products Corporation Raleigh, North Carolina
We have audited the balance sheet of Athey Products Corporation (the "Company") as of December 31, 1993, and the related statments of operations, shareholders' equity and cash flows for the year then ended; such statements of operations, stockholders' equity and cash flows are included in your 1995 Annual Report to Shareholders and are incorporated herein by reference. Our audit also included the 1993 financial statement schedule listed in Item 14. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstate- ment. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Athey Products Corporation as of December 31, 1993, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Also, in our opinion, such 1993 financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Raleigh, North Carolina March 8, 1994
Deloitte Touche Tohmatsu International
ATHEY PRODUCTS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(a) Deductions for obsolete inventory scrapped and obsolete inventory sold at reduced selling price. (b) Warranty expenses incurred