0000950009-95-000311.txt : 19950816 0000950009-95-000311.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950009-95-000311 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOUGLAS & LOMASON CO CENTRAL INDEX KEY: 0000029854 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC BUILDING AND RELATED FURNITURE [2531] IRS NUMBER: 380495110 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00627 FILM NUMBER: 95564226 BUSINESS ADDRESS: STREET 1: 24600 HALLWOOD CT CITY: FARMINGTON HILLS STATE: MI ZIP: 48335 BUSINESS PHONE: 3134787800 10-Q 1 D&L 2ND QTR FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. FORM 10-Q (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended June 30, 1995 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________ to ________________ Commission file number 0-627 DOUGLAS & LOMASON COMPANY (exact name of registrant as specified in its charter) MICHIGAN 38-0495110 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 24600 Hallwood Court, Farmington Hills, Michigan 48335-1671 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (810) 478-7800 Former name, former address and former fiscal year, if changed since last year: Same Indicate by checkmark 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 and (2) has been subject to such filing requirements for the past 90 days. YES __X__ NO _____ CLASS OUTSTANDING AT AUGUST 15, 1995 Common stock, $2 par value 4,243,720 shares
DOUGLAS & LOMASON COMPANY Consolidated Condensed Balance Sheets June 30 December 31 1995 1994 ------------ ------------ ASSETS Current assets: Notes and accounts receivable $ 95,113,047 $ 99,927,502 Inventories Raw materials 11,204,803 10,823,892 Work in process and finished goods 15,221,180 8,967,433 ------------ ------------ 26,425,983 19,791,325 Cash and other current assets 10,340,941 10,185,455 ------------ ------------ 131,879,971 129,904,282 Property, plant and equipment, net 75,072,645 66,787,613 Other non-current assets 19,904,407 14,871,532 Intangibles 36,133,414 --- ------------ ------------ Total assets $262,990,437 $211,563,427 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 5,370,843 $ 5,938,130 Accounts payable and accrued expenses 65,378,868 71,787,370 Taxes on income 1,892,703 1,865,401 ------------ ------------ Total current liabilities 72,642,414 79,590,901 Postretirement benefits other than pensions 8,026,165 7,533,669 Other liabilities 17,543,780 6,822,429 Long-term debt, less current maturities 77,984,000 31,887,500 Shareholders' equity Preferred stock No par value, authorized 500,000 shares, issued - none Common stock 8,487,440 8,457,440 Par value $2 per share authorized 5,000,000 shares; issued and outstanding 4,243,720 shares in 1995 and 4,228,720 in 1994 Other capital 28,096,631 27,997,976 Retained earnings 54,124,872 52,048,512 Foreign currency translation adjustment (3,914,865) (2,775,000) ------------ ------------ Total shareholders' equity 86,794,078 85,728,928 ------------ ------------ Total liabilities and shareholders' equity $262,990,437 $211,563,427 ============ ============
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DOUGLAS & LOMASON COMPANY Consolidated Condensed Statements of Income Three Months Ended Six Months Ended June 30 June 30 ---------------------------- ---------------------------- 1995 1994 1995 1994 ------------ ------------ ------------ ------------ Net sales $130,601,835 $123,253,404 $285,660,060 $246,719,362 Cost of sales 125,130,449 113,582,619 268,890,184 225,892,785 ------------ ------------ ------------ ------------ Gross profit 5,471,386 9,670,785 16,769,876 20,826,577 Selling, general and administrative expense 5,959,375 5,434,963 12,022,087 10,876,910 ------------ ------------ ------------ ------------ Operating income (loss) (487,989) 4,235,822 4,747,789 9,949,667 Other income (expenses): Interest expense, net (1,053,889) (591,478) (1,749,677) (1,207,887) Interest income and other 46,225 256,725 261,919 459,324 ------------ ------------ ------------ ------------ (1,007,664) (334,753) (1,487,758) (748,563) Earnings (loss) before provision for income taxes (1,495,653) 3,901,069 3,260,031 9,201,104 Income tax expense (benefit) (1,040,000) 1,390,000 335,000 3,375,000 ------------ ------------ ------------ ------------ Net earnings (loss) $ (455,653) $ 2,511,069 $ 2,925,031 $ 5,826,104 ============ ============ ============ ============ Net earnings (loss) per share $ (.11) $ .60 $ .69 $ 1.38 ============ ============ ============ ============ Weighted average number of shares 4,243,580 4,227,970 4,239,365 4,227,858 ============ ============ ============ ============
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DOUGLAS & LOMASON COMPANY Consolidated Condensed Statements of Cash Flows Six Months Ended June 30 --------------------------------- 1995 1994 ------------ ------------ Cash flows from operating activities: Net earnings $ 2,925,031 $ 5,826,104 Depreciation and amortization 6,437,053 6,274,800 Postretirement benefits other than pensions 492,496 --- Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 8,939,624 (6,471,796) (Increase) decrease in inventories 2,847,317 (6,646,375) (Increase) decrease in prepaid expenses and other assets (7,188,151) 1,294,844 Increase (decrease) in accounts payable, and accrued expenses (8,176,033) 10,270,544 Increase (decrease) in other liabilities (6,788) 1,077,299 ------------ ------------ Net cash provided by operating activities 6,270,549 11,625,420 Cash flows from investing activities: Proceeds from the sale of property, plant and equipment 83,811 187,240 Acquisition of property, plant and equipment (9,356,113) (7,182,707) Cost of acquisition, net of cash (43,487,920) --- ------------ ------------ Net cash used by investing activities (52,760,222) (6,995,467) ------------ ------------ Cash flows from financing activities: Proceeds from long-term debt 47,000,000 4,500,000 Repayment of long-term debt --- (3,154,787) Repayment of short-term debt (3,221,455) (7,000,000) Proceeds from exercised stock options, net 128,655 6,125 Dividends paid (848,671) (845,594) ------------ ------------ Net cash provided (used) by financing activities 43,058,529 (6,494,256) ------------ ------------ Effect of translation on cash (718,962) --- Net decrease in cash (4,150,106) (1,864,303) Cash at beginning of year 6,532,415 2,745,818 ------------ ------------ Cash at end of quarter $ 2,382,309 $ 881,515 ============ ============
4 DOUGLAS & LOMASON COMPANY Notes to Consolidated Condensed Financial Statements 1. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of June 30, 1995 and 1994, and the results of operations for the six months then ended, and changes in financial position for the six months then ended, subject to year end audit adjustments. 2. On June 8, 1995, Douglas & Lomason Company (the "Company") acquired the stock of Bestop, Inc. ("Bestop"). Bestop is the leading designer and manufacturer in North America of soft tops and accessories for small sport utility vehicles. Bestop sells its product domestically and internationally to original equipment manufacturer (OEM) companies and in the aftermarket. The purchase agreement required a purchase price of approximately $43,952,000. The acquisition will be accounted for in accordance with the purchase method of accounting. Had the acquisition of Bestop, Inc. occurred as of January 1, 1994, revenues, net income and earnings per share would have been as follows:
Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------ (in 000's except for per share data) 1995 1994 1995 1994 ---- ---- ---- ---- Revenues $143,108 $137,303 $314,025 $271,894 Net Income $ (928) $ 2,680 $ 2,310 $ 5,575 Earnings Per Share $ (.22) $ .63 $ .54 $ 1.32
5 Management's Discussion and Analysis of Financial Conditions and Results of Operations Liquidity and Capital Resources Funds provided from long term debt of $47.0 million and from operations of $6.3 million were the principal source of cash in the first six months of 1995. The investment in Bestop, Inc. of $44.0 million, capital expenditures of $9.4 million and debt repayment of $3.2 million resulted in a negative cash flow of $3.3 million during the period. In June 1995, the Company entered into an amended and restated unsecured revolving credit agreement with two banks in the amount of $60.0 million which matures in June 1998. Borrowings outstanding under this facility totaled $38.0 million at June 30, 1995. In June 1995, the Company executed a new term loan for $25.0 million with two banks with quarterly principal payments commencing July 1, 1999, and a maturity date of June 8, 2003, at a interest rate of 7.8%. Results of Operations Net Sales Net sales for the quarter ended June 30, 1995, were $130.6 million, up 6% from 1994 second quarter sales of $123.3 million. The increase in 1995 second quarter sales over 1994 second quarter sales is directly attributable to the production of the fully trimmed seats for the Ford Contour and Mercury Mystique models. Sales for the 1995 second quarter reflect a 25% decline in the Company's decorative moldings business compared to 1994 second quarter and 35% decrease in seating related sales (exclusive of sales related to the Company's Contour and Mystique programs). For the six months ended June 30, 1995, the Company had sales of $285.7 million or 16% increase over the $246.7 million in 1994 first six months. Again, this increase is directly attributable to the Ford Contour and Mercury Mystique models. Cost of Sales Cost of sales as a percentage of net sales for the second quarter increased 3.6% in 1995 compared to the same period of 1994. This unfavorable relationship resulted from the significantly lower sales than previously planned in our 1995 budget. In addition, raw material increases and continued pressure from customers for price reductions contributed to this increase. For the six months ended June 30, 1995, cost of sales as a percentage of net sales increased 2.5% compared to the same period of 1994. Selling, General and Administrative Expenses Selling, general and administrative expenses in the second quarter of 1995 increased $524,000 or 9.6% in 1995 compared to the second quarter of 1994. Additional staffing, medical insurance and travel expenses are the principal components of this increase. 6 Interest Expense Interest expense in the second quarter of 1995 of $1.1 million increased approximately $462,000 or 78% from the same period of 1994, principally as a result of the $55.0 million higher debt level in 1995 compared to 1994. As mentioned earlier, approximately $44.0 million was borrowed for the acquisition of Bestop, Inc. in June of 1995. Net Earnings (Loss) The net loss of $456,000 or $.11 per share decreased over the net earnings of $2.5 million or $.60 per share in the second quarter of 1994. The unfavorable sales level during the second quarter and inability to absorb overhead resulted in the unfavorable cost of sales and net loss for the period. Financial Condition The balance sheet remains strong at the end of the second quarter of 1995. The current ratio was 1.82 to 1 and the debt to total capitalization was .47 to 1 at June 30, 1995. 7 PART II - OTHER INFORMATION Item 2. Changes in Securities The Registrant entered into an Amended and Restated Credit Agreement ("Agreement") dated as of June 8, 1995, with two banks providing for a new revolving credit facility in the aggregate principal amount of $60,000,000 and an additional term loan facility in the aggregate principal amount of $25,000,000. The Agreement contains provisions providing that the Company will maintain a ratio of consolidated current assets to consolidated current liabilities of not less than 1.5 to 1.0; permit consolidated working capital to be less than $32,000,000; maintain consolidated tangible net worth of not less than the sum of (i) $50,000,000 plus (ii) 50% of cumulative net income since January 1, 1996, plus (iii) 75% of the net cash proceeds of any issuance of capital stock of the Registrant after June 8, 1995; permit the ratio of consolidated funded debt to consolidated capitalization to be greater than 65%; permit the ratio of (i) consolidated earnings from operations before deduction of interest and income taxes to (ii) interest expense paid or accrued for any period of four consecutive fiscal quarters to be less than 2.0:1.0; and during the continuance of any default or event of default or if as a result thereof a default or event of default would exist, declare or pay any dividends (except dividends payable in capital stock of the Registrant) or make any other distribution upon its shares of capital stock, or acquire or retire any of its capital stock. Item 4. Submission of Matters to a Vote of Security Holders The following information is furnished with respect to the Annual Meeting of security holders of the Registrant held during April 1995: (a) A meeting was held on April 28, 1995, and was an Annual Meeting. (b) Not applicable (c) At such meeting the nominees for election as directors, Dale A. Johnson, Harry A. Lomason II and Gary T. Walther, were elected for the term of office to expire at the 1998 Annual Meeting of Shareholders. The votes cast with respect to each nominee for director are as follows:
Votes to Withhold Authority to Vote Votes for for the Nominee Nominee Nominee ------- --------- -------- Dale A. Johnson 3,979,634 23,346 Harry A. Lomason II 3,979,790 23,190 Gary T. Walther 3,979,934 23,046
Further at such meeting the shareholders approved the Directors' Stock Plan. 3,537,352 affirmative votes, 52,930 negative votes and 412,642 abstain votes were cast with respect to such plan. 8 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (1) Directors' Stock Plan (2) Amended and Restated Credit Agreement dated as of June 8, 1995, between Registrant and banks named in Section 2.1 thereof - filed as Exhibit 2 to Form 8-K Report dated June 8, 1995, and incorporated herein by reference. (b) Reports on Form 8-K The Registrant filed a report on Form 8-K during the quarter for which this Report is filed. The report was dated June 8, 1995, and reported the acquisition by the Registrant of Bestop, Inc. 9 SIGNATURES Pursuant to the requirements 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. DOUGLAS & LOMASON COMPANY ------------------------- (Registrant) Date: August 15, 1995 /s/ James J. Hoey ------------------------- James J. Hoey Senior Vice President & Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 10 EX-10 2 DIRECTORS STOCK PLAN Exhibit (1) DOUGLAS & LOMASON COMPANY DIRECTORS STOCK PLAN ___________________ 1. PURPOSE 1.1 The Douglas & Lomason Company Directors Stock Plan (the "Plan") is intended to increase the proprietary interest of non-employee members of the Board of Directors (the "Board") of Douglas & Lomason Company (the "Company") by providing further opportunity for ownership of the Company's Common Stock ("Stock"), and to increase their incentive to contribute to the success of the Company's business. 1.2 The Plan is intended to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such Rule may be further amended from time to time ("Rule 16b-3") and shall be construed to so comply. 2. ADMINISTRATION 2.1 The Plan will be administered by a committee (the "Committee") of not less than two persons consisting of the Chief Executive Officer of the Company and other persons designated by him who are either officers of the Company or members of the Board of Directors, none of whom is eligible to participate in the Plan. 2.2 The Committee may make such rules and establish such procedures for the administration of the Plan as it deems appropriate to carry out the purpose of the Plan. The interpretation and application of the Plan or of any rule or procedure, and any other matter relating to or necessary to the administration of the Plan, shall be determined by the Committee, and any such determination shall be final and binding on all persons. 3. SHARES Of STOCK 3.1 Shares Reserved. Shares of Stock which may be issued under the Plan may either be authorized and unissued shares of the Company, provided that the total amount of Stock which may be issued under the Plan shall not exceed 50,000 shares. 3.2 Capital Adjustments. In the event of a change in the number or class of shares of Stock as a result of reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation or a corporate transaction, the maximum number or class of shares available under the Plan, and the number or class of shares of Stock to be delivered hereunder shall be proportionately adjusted to reflect any such change. 4. DELIVERY Of SHARES OF STOCK 4.1 Mandatory Portion. For each calendar year commencing with the calendar year beginning January 1, 1995, each non-employee member of the Board (an "Eligible Director") shall receive a whole number of shares of Stock equal in value to 25% of his retainer fee payable for services as a director during such calendar year in lieu of payment of such percentage of the retainer fee in cash. Such shares shall be delivered to each Eligible Director on the first day of July of each year (or if such date is not a business day, the next succeeding business day) of such calendar year (the "Normal Stock Payment Date"), except to the extent that a Deferral Election (as defined in Section 4.3 hereof) shall be in effect with respect to such shares. Each such share shall be valued at the closing price per share of Stock as reported on the National Association of Securities Dealers Automated Quotation National Market System, or if not so reported, as reported by any national stock exchange on which the Stock is traded (the "Closing Price") on the last business day preceding the Normal Stock Payment Date (the "Share Value Price"). The value of fractional shares shall be paid to the Eligible Director in cash. 4.2 Elective Portion. For each calendar year commencing with the calendar year beginning January 1, 1995, each Eligible Director may elect to receive a whole number of shares of Stock equal in value (based on the Share Value Price) to up to an additional 25% of his or her retainer fee payable for services as a director during such calendar year in lieu of payment of such percentage of the retainer fee in cash. Such shares shall be delivered to each Eligible Director on the Normal Stock Payment Date, except to the extent that a Deferral Election (as defined in Section 4.3 hereof) shall be in effect with respect to such shares or that Section 4.6 hereof applies. The value of fractional shares shall be paid to the Eligible Director in cash. 4.3 Deferral Election. For fees payable for services as a director during calendar years beginning on or after January 1, 1995, each Eligible Director may elect to defer the receipt (a "Deferral Election") of all or a portion of the shares of Stock otherwise deliverable on a Normal Stock Payment Date ("Deferred Shares"). The director shall elect (a) that Deferred Shares be distributed in a lump sum or in equal annual installments (not - 2 - exceeding 10), and (b) that the lump sum or first installment be distributed on the tenth day of the calendar year immediately following either (i) the year in which the director ceases to be a director of the Company, or (ii) the earlier of the year in which the director ceases to be a director of the Company or a date designated by the director; provided, however, that any such election shall be subject to Section 4.6 hereof. Installments subsequent to the first installment shall be distributed on the tenth day of each succeeding calendar year until all of the director's Deferred Shares shall have been distributed. In the event the director should die before all of the director's Deferred Shares have been distributed, the balance of the Deferred Shares shall be distributed in a lump sum to the beneficiary or beneficiaries designated in writing by the director, or if no designation has been made, to the estate of the director. 4.4 Dividend Equivalents. Deferred Shares shall be credited with an amount equivalent to the dividends which would have been paid on an equal number of outstanding shares of Stock ("Dividend Equivalents"). Dividend Equivalents shall be credited (i) as of the payment date of such dividends, and (ii) only with respect to Deferred Shares which were otherwise deliverable as of a Normal Stock Payment Date, or into which Dividend Equivalents were converted pursuant to the second paragraph of this Section 4.4, prior to the record date of the dividend. Deferred Shares held pending distribution shall continue to be credited with Dividend Equivalents. Dividend Equivalents so credited shall be converted into an additional whole number of Deferred Shares each year on the Normal Stock Payment Date (based on the Closing Price on the last business day preceding the Normal Stock Payment Date). Such Deferred Shares shall thereafter be treated in the same manner as any other Deferred Shares under the Plan. Dividend Equivalents resulting in fractional shares shall be held for the credit of the Eligible Director until the next Normal Stock Payment Date and shall be converted into Deferred Shares on such date. Any Dividend Equivalents not converted into Deferred Shares shall be paid in cash upon the final distribution of the director's Deferred Shares. 4.5 Timing and Form of Elections. Any election described in Sections 4.2 and 4.3 hereof: (a) shall be in the form of a document executed by the director and filed with the Company, (b) for the year 1995, shall be made before June 15, 1995 and thereafter shall be made before the first day of the calendar year in which the applicable retainer fee is - 3 - earned and shall become irrevocable on the last day prior to the beginning of such calendar year, and (c) shall continue until a director ceases to be a director or until he terminates or modifies such election by written notice, any such termination or modification to be effective as of the end of the calendar year in which such notice is given with respect to fees payable in subsequent calendar years. 4.6 Effect of Certain Events. Notwithstanding an election pursuant to Section 4.2 or Section 4.3 hereof, upon the occurrence of a Change in Control (as defined below), (i) all Deferred Shares to the extent credited prior to the Change in Control shall be distributed immediately in the form of shares of Stock, and (ii) all Dividend Equivalents not yet converted into Deferred Shares and all fees earned and not yet converted into shares of Stock or Deferred Shares under the terms of this Plan shall be distributed immediately in cash. A Change in Control shall have occurred if (i) the "beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than 50% of the combined voting power of the Company is acquired by any "person" as defined in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), or (ii) the shareholders of the Company approve a definitive agreement to merge or consolidate the Company with or into another corporation or to sell or otherwise dispose of all or substantially all of its assets, or adopt a plan of liquidation, or (iii) during any period of two consecutive years, individuals who at the beginning of such period were members of the Board cease for any reason to constitute at least a majority thereof (unless the election or the nomination for election by the Company shareholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period). The provisions of this Section 4.6 shall not apply to the extent inconsistent with the requirements of Rule 16b-3, as the same may be interpreted from time to time. 5. TERM OF PLAN 5.1 The Plan, which was adopted by the Board on February 16, 1995, is subject to approval by the shareholders of the Company on April 28, 1995. In no event shall any delivery of shares of Stock - 4 - be made to any director or other person under the Plan until such time as shareholder approval of the Plan is obtained. 5.2 The Plan shall remain in effect until the earlier to occur of a Change in Control or December 31, 2005, unless sooner terminated by the Board; provided, however, that, except as provided in Section 4.6(b) hereof, shares of Stock and Dividend Equivalents may be delivered pursuant to a Deferral Election after such date. 6. AMENDMENT; TERMINATION 6.1 The Board may at any time and from time to time alter, amend, suspend, or terminate the Plan in whole or in part; provided, however, that the provisions of Section 4.1 shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. 6.2 Except as provided in Section 4.6 hereof, in the event the Plan is terminated, Deferred Shares and Dividend Equivalents shall be distributed at such time and in such manner as the Board shall determine, no later than they would have been distributed pursuant to the Deferral Election applicable thereto. 7. MISCELLANEOUS 7.1 The right of a director to Deferred Shares and/or Dividend Equivalents shall be non-assignable and shall not be subject in any manner to the debts or other obligations of the director or any other person. 7.2 The Company shall not be required to reserve or otherwise set aside funds with respect to Deferred Shares or Dividend Equivalents. 7.3 Nothing in the Plan shall be construed as conferring any right upon any director to continuance as a member of the Board. 7.4 This Plan and all rights hereunder shall be construed in accordance with and governed by the laws of the State of Michigan. - 5 - EX-27 3 ART. 5 FDS FOR 2ND QUARTER 10-Q
5 1,000 6-MOS DEC-31-1995 JUN-30-1995 $ 2,382 0 95,113 0 26,426 131,880 169,760 94,688 262,990 72,642 83,355 8,487 0 0 28,097 262,990 285,660 285,660 268,890 268,890 12,022 0 1,750 3,260 335 2,925 0 0 0 2,925 .69 0