-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qApo5IImSuNV9YLpnOQDohlzfKn5kfCoeWlSDuTUKfn3VuaZR6uRmUVy41X3CflB lk//+FYXuDIIIgTLp4VvRg== 0000740868-94-000014.txt : 19940404 0000740868-94-000014.hdr.sgml : 19940404 ACCESSION NUMBER: 0000740868-94-000014 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXCEL INDUSTRIES INC CENTRAL INDEX KEY: 0000740868 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 351551685 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-08684 FILM NUMBER: 94519283 BUSINESS ADDRESS: STREET 1: 1120 N MAIN ST STREET 2: P O BOX 3118 CITY: ELKHART STATE: IN ZIP: 46515-3118 BUSINESS PHONE: 2192642131 10-K 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the fiscal year ended December 31, 1993 Commission File Number: 1-8684 EXCEL INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) Indiana 35-1551685 (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification Number) 1120 North Main Street, P.O. Box 3118, Elkhart, Indiana 46515-3118 (Address of principal executive offices) (Zip Code) Registrant's telephone number (219) 264-2131 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered Common Shares, without par value American Stock Exchange Securities registered under Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) The number of shares of the Registrant's Common Shares, no par value, outstanding on March 4, 1994 was 10,577,936. The aggregate market value of the Registrant's Common Shares held by nonaffiliates on March 4, 1994 was $148,365,553. DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the Excel Industries, Inc. proxy statement for the 1994 annual meeting of shareholders are incorporated by reference into Part III of this report. PART I. ITEM 1. BUSINESS GENERAL The registrant, an Indiana corporation (hereinafter, the "Company"), is the leading independent designer, manufacturer and supplier of window systems to the combined automobile, light truck and van, bus, heavy truck and recreational vehicle markets in North America. The Company's window systems include various types of automotive windshields; rear, vent, quarter, push out and sliding windows; and window regulator systems, latches, door frames and related components. The Company also manufactures door systems for military and recreational vehicles and injection molded thermoplastic products and other products primarily for sale to the automotive industry. The Company's products are sold to major North American transportation original equipment manufacturers ("OEMs") including Ford, Chrysler, General Motors, AutoAlliance International, Inc. (a joint venture between Ford and Mazda), Mitsubishi, Nissan, Fleetwood, Winnebago, Navistar, Paccar (Peterbilt and Kenworth trucks) and the manufacturers of virtually all of the intra and intercity buses in the United States and Canada. BUSINESS STRATEGY The Company's business objective is to expand profitably its position as the leading independent supplier of window systems to the combined automotive, light truck and van, bus, heavy truck and recreational vehicle markets in North America. It also intends to broaden its product offerings to these markets, as well as expand its capabilities to complementary markets. Continued focus on achieving recognition as a world class manufacturer is a key component of this strategy. The Company continually strives for world class status through technical innovation, quality excellence, cost competitiveness and strategic alliances and acquisitions. Technical Innovation. The Company's most significant innovative achievement has been the development of reaction injection molded ("RIM") modular windows in the mid-1980's. This value-added product resulted from a long internal development effort and accounted for 35% of net sales in 1993. In recent years, as automotive OEMs increasingly shifted design, innovation, quality and product improvement responsibility to their suppliers, the Company increased its research, engineering and development expenditures (from $2.7 million in 1989 to $7.9 million in 1993), including the addition of an advanced design group and Company-wide computer-aided design capability. The Company has also added more sophisticated program management and complex manufacturing information systems. The Company's capabilities now include prototype and product development, specification testing and manufacturing engineering assistance. This has resulted in increased opportunities for the Company to participate earlier in the product planning process and to add value by furnishing engineering and design services and providing a broader range of parts required for vehicle assembly. Quality Excellence. The Company emphasizes a continuous improvement philosophy to its employees on all facets of operations including product quality. As a result of its commitment to quality, the Company has achieved Q1 and Pentastar quality ratings at its key manufacturing plants from Ford and Chrysler, respectively, and has received quality awards from Fleetwood (a recreational vehicle OEM), Nissan and other OEMs. At the corporate technical center, engineers examine the Company's and its competitors' products to evaluate alternative designs, suggest marketing opportunities and solve potential production problems, all of which serve to improve and maintain the Company's stringent quality standards. Competitive Cost. The Company strives to achieve a competitive cost to its customers through its emphasis on quality excellence and its involvement in the early stages of product development. The Company is a highly reliable and timely supplier able to meet its customers' demanding delivery requirements, while constantly focusing on reducing OEM inventory levels. Strategic Alliances. In 1986, Ford entered into a supply agreement (the "Supply Agreement") with the Company. Pursuant to the Supply Agreement, Ford agreed to purchase from the Company at least 70% of the requirements by dollar volume of Ford and Ford Canada for modular framed glass parts using RIM and polyvinyl chloride ("PVC") technology, commencing with the 1990 model year. Ford's purchase obligations are contingent upon the Company being competitive as to technology, quality, service, price and delivery. The Supply Agreement, which is currently scheduled to expire at the end of the 1998 model year, has been complemented by a supply agreement between Ford and the Company dated January 31, 1994 (the "1994 Supply Agreement"), which extends through the 1998 calendar year and which provides for Ford to purchase 100% of its requirements for those parts currently supplied by the Company (including parts other than modular windows), subject to specified annual price reductions. Since 1990, the Company has and is continuing to supply at least 70% of Ford's requirements for modular framed glass, which have predominately been modular windows using RIM technology. The Company works closely with Ford during the development and production by Ford of new products utilizing parts supplied by the Company, and net sales to Ford have increased from $26.7 million in 1985 to $373.1 million in 1993. The Company also benefits from an exclusive purchase and supply agreement with H.S. Die & Engineering of Grand Rapids, Michigan. H.S. Die supplies the molds (i.e., tooling) to the Company necessary to manufacture modular windows. Working closely with OEMs and H.S. Die, the Company is able to move rapidly from design to finished tooling for modular windows. As a result of this alliance, preproduction lead-times on new programs have been decreased by more than a year, which was demonstrated in Ford's development of the recently introduced Mustang model. Another strategic alliance links the Company with Schade KG, a modular and conventional window and door systems supplier located in Plettenberg, Germany. Pursuant to a Reciprocal Technology License and Cooperative Venture Agreement, both companies have cooperated in developing new business proposals. Schade helped the Company develop technical capabilities in PVC modular windows. The Company produces PVC windows for the Chrysler New Yorker at its Kentucky manufacturing facility and has been sourced to supply PVC windows for certain 1995 Mitsubishi and Nissan models. In addition, technology acquired from the Company's alliance with Schade has enabled the Company to supply door frames for General Motors's 1994 Saturn Coupe. In 1992, the Company formed a joint venture with Pollone S.A., a Brazilian automotive parts supplier, for the purpose of supplying encapsulated window assemblies to South American automakers. Located near Sao Paulo, Brazil, the joint venture, Pollexco, is owned 49% by the Company and 51% by Pollone, S.A. Production of products for Autolatina, a joint venture between Ford and Volkswagen, began in late 1993. Strategic Acquisitions. In acquisitions, the Company seeks processes, products or markets which complement the Company's existing businesses. The Company added high volume conventional window capacity to its product line as a result of a 1986 acquisition from Irvin Industries. In the mid-1980's, Ford--initially the Company's only RIM window customer--started its own subsidiary to manufacture RIM windows in Fulton, Kentucky. In 1986, the Company acquired Ford's RIM window subsidiary and manufacturing facility. In 1988, the Company acquired Nyloncraft, Inc., which manufactures injection molded thermoplastic products primarily for the automotive industry. Nyloncraft also supplies plastic components to six of the Company's manufacturing facilities. In 1990, the Company acquired the window regulator business operated by Hoover Universal, Inc., a subsidiary of Johnson Controls, Inc. The Company's technical capabilities, in particular the corporate technical center, have enabled it to redesign several products, reduce operating expenses and improve overall operations in the newly-acquired window regulator business. MARKET DESCRIPTION AND INDUSTRY FACTORS Automotive Market General. The overall market for new cars and light trucks in North America is large and cyclical, with average annual growth of 1% to 2%. However, considerable growth or decline routinely occurs within specific product segments or model lines. In particular, light truck sales have grown rapidly over the last 15 years as compared to the demand for cars. This growth in light truck demand primarily reflects the increased use of mini-vans and sport utility vehicles. The Company believes it will continue to be well-positioned as a supplier of window systems to OEMs in this higher growth market segment. Changing Supplier Policies. Several developments have substantially altered the competitive environment for automotive suppliers, including consolidation among suppliers and increased outsourcing of key components by OEMs. During the 1980s, Ford, Chrysler and General Motors began to reduce their supplier base, focusing on long-term sole-source contracts with more capable suppliers. Increasingly, the criteria for selection include not only cost, quality and responsiveness, but also certain full-service capabilities including design, engineering and project management support. OEMs now have rigorous programs for evaluating and rating suppliers which encompass quality, cost control, reliability of delivery, new technology implementation, engineering competence, continuous improvement programs and overall management. Under these programs, each facility operated by a supplier is evaluated independently. The suppliers who obtain superior ratings are favorably considered for new business; those who do not may continue their existing contracts, but normally do not receive additional business. As a result, these new supplier policies have sharply reduced the number of component suppliers. In the 1990's, OEM supply agreements have incorporated productivity provisions which specify annual price reductions which may be offset by product improvements, manufacturing improvements and/or various other mutually agreed upon methods. Transplants. Over the last ten years, Japanese manufactured vehicles have gained an increasing share of the North American market. In addition, a growing percentage of such vehicles are being made at North American operations of Japanese manufacturers ("Transplants"). Transplants receive component parts from a variety of sources including suppliers in Japan, Japanese suppliers who establish U.S. facilities and existing U.S. component suppliers. Because of the current market share of the Transplants, supplying them is an attractive opportunity. To date, the Company has been selected to supply window systems for certain Nissan, Mazda and Mitsubishi models manufactured in North America. The Company has also been selected to supply fixed vent windows for the new BMW model scheduled to be built in South Carolina in 1995. Non-Automotive Market The market for heavy trucks in North America is cyclical, and the Company believes it is well positioned to take advantage of supply opportunities which arise as aging fleets are replaced with new models. The availability of federally funded programs and the price of gasoline and diesel fuel are factors which affect the demand for intracity buses purchased for municipal mass transit systems. The market for recreational vehicles is influenced significantly by the strength of the economy and the level of consumer discretionary spending. Recent growth trends in the sale of recreational vehicles have been positive. PRODUCTS The Company designs, engineers, manufactures and supplies plastic and metal framed window assemblies, manual and power glass regulator systems and injection molded thermoplastic products principally for North American car, light truck and van, heavy truck, bus, military and recreational vehicle OEMs. The Company does not manufacture or sell primary glass. Modular Window Systems. The Company's modular, plastic framed windows are value-added parts because clips, weatherstripping and bright trim are attached during the molding process. The module-manufacturing processes used by the Company give the OEM designers great flexibility in window shape, sealing and aerodynamics. The module supplied to the OEM also lowers its parts inventory, reduces part weight and reduces assembly efforts. The Company produces modular windshields and rear windows, as well as fixed quarter, sliding and push out modular windows. The Company utilizes RIM technology and also PVC injection molding technology to manufacture modular windows. In RIM technology, liquids are mixed and fed into a mold that holds glass, framing and fastening components. The mixture polymerizes, and the completed module is removed, trimmed, cleaned, inspected and packed for shipment. In PVC injection molding, solid plastic subjected to high temperature and pressure flows in liquid form into the mold where it reverts without chemical reaction to a solid. Conventional Windows. The Company also produces conventionally framed window assemblies utilizing painted cold-rolled steel, stainless steel, rubber and/or aluminum. The glass or plastic glazed window assemblies supplied for mass transit systems have durable aluminum frames and non-leak weatherstripping. The Company supplies a wide variety of conventional windows to car, light truck and heavy truck OEMs, including pivoting wing ventilator windows, fixed and movable quarter windows and swing-out and sliding windows. The Company's flush-mount recreational vehicle windows seal tightly and feature independent sliding screens, removable storm windows and an anti-theft locking mechanism. Window Regulator Systems. The Company supplies manual and electrically powered versions of regulators (the mechanisms for lifting and lowering windows) for front and rear side windows and tailgate windows. The Company stresses safety, weight, glass stability, window system integration, parts reduction and enhanced vehicle design flexibility in its window regulators. Injection Molded Thermoplastic Products. The Company's Nyloncraft division manufactures injection molded inside and outside door handles, door latch components, fan shrouds, airspring pistons, window crank handles and a variety of other custom engineered products. The Company molds parts from nylons, polyesters, acetal and other engineered thermoplastic materials. Door Systems. The Company designs and manufactures preassembled doors for Class A motorhomes and ballistic door/window systems for the Hummer tactical military vehicle. The Company's preassembled door systems improve the OEMs' installation productivity and assist in design flexibility. CUSTOMERS AND MARKETING The Company supplies its products primarily to Ford, Chrysler and General Motors. Historical sales of the Company by customer group are set forth below. The loss of Ford, Chrysler or General Motors as a customer would have a material adverse effect on the Company. Year Ended December 31,
1991 1992 1993 Net Net Net Sales Percent Sales Percent Sales Percent (Amounts in thousands) Ford $243,577 69% $310,579 73% $373,116 72% Chrysler 27,279 8 36,944 9 56,445 11 General Motors 26,254 8 18,973 4 20,109 4 Other 55,158 15 60,377 14 66,011 13 Total $352,268 100% $426,873 100% $515,681 100%
Sales of the Company's products to OEMs are made directly by the Company's sales and engineering personnel located at the Company's offices in the Detroit area and Elkhart, Indiana. Through these sales and engineering offices, the Company services its OEM customers and manages its continuing programs of product design improvement and development. The Company's customers award contracts that normally cover parts to be supplied for a particular vehicle model. Such contracts typically extend over the life of the model, which is generally four to seven years. The primary risk to the Company is that an OEM will produce fewer units of a model than anticipated. In addition, the Company competes for new business to supply parts for successor models and therefore runs the risk that the OEM will not select the Company to produce parts on a successor model. In order to reduce its reliance on any one model, the Company produces parts for a broad cross- section of both new and more mature models. The Company has been chosen as a supplier on a variety of generally successful car, light truck and van models. The following table presents a summary of the 1994 and 1995 models for which the Company is producing or will produce component parts. COMPANY 1994/1995 MODELS Ford Escort, Explorer, Taurus, Sable, Aerostar, Windstar, Ranger, Continental, Cougar, Mark VIII, Bronco, Thunderbird, Town Car, Econoline, Crown Victoria, Grand Marquis, Mustang, Probe, Villager, F-Series Truck Chrysler LHS, LeBaron, Fifth Avenue, Imperial, Cherokee, Wrangler, Comanche, Voyager, Avenger, Sebring, Concorde, Intrepid, Vision, New Yorker, Dakota, Ram Truck, Ram Van/Wagon, Talon General Motors Cavalier, Sunbird, Vandura Van, APV Mini-Van, S-10 Truck, Saturn Coupe, Saturn Station Wagon Nissan Quest, Sentra GS, Nissan Truck Mazda MX6 Mitsubishi Eclipse Based on its ability to service its OEM customers' needs effectively, the Company believes it will be able to maintain its position on most existing models, while also expanding into new models as further consolidation in the OEM supplier base occurs. The Company believes that the presence of Transplants represents an attractive growth opportunity over the next decade. The Company is currently supplying products for Mazda, Nissan and Mitsubishi models. The Company believes that it is favorably positioned to increase its business with the Transplants because of the Company's reputation for technical innovation, quality excellence, reliability and competitive cost. In the non-automotive markets, the Company sells various types of conventional window systems to North American OEMs of medium and heavy trucks, recreational vehicles and buses. The Company is the dominant supplier of wing ventilator windows for medium and heavy trucks manufactured in the United States and Canada. The Company's customers include Navistar, Freightliner, Volvo GM Heavy Truck Corp., Mack Truck, Paccar (Kenworth and Peterbilt models) and Ford. The Company supplies aluminum framed window systems to Fleetwood and Winnebago, the leading recreational vehicle OEMs in North America, as well as a number of other recreational vehicle manufacturers. The Company is the dominant supplier of metal framed window systems to intra and intercity bus OEMs. The Company also manufactures preassembled doors for certain recreational vehicle OEMs and door systems for the Hummer tactical military vehicle. The Company maintains separate sales and engineering groups at its corporate offices in Elkhart, Indiana to service these non-automotive markets. The Company has received "Supplier of the Year" and "Master of Quality" awards from Fleetwood and Freightliner, respectively, as well as recognition for quality and delivery accomplishments from other non-automotive OEMs. The Company believes that its cost competitiveness, quality excellence and design and engineering capabilities obtained in the automotive supply markets enable it to compete effectively in non-automotive markets as well. COMPETITION The Company operates in a highly competitive environment in each of its markets. The number of the Company's competitors in the automotive markets is expected to decrease due to the supplier consolidation resulting from changing OEM policies. The Company's major competitors include Donnelly Corporation, Libbey-Owens-Ford Co., Guardian Industries, Dura, Inc., Rockwell International, Hehr International, OEM internal operations and a large number of smaller operations. The Company principally competes for new business both at the beginning of the development of new models and upon the redesign of existing models by its major customers. New model development generally begins two to four years prior to the marketing of such models to the public. Once a producer has been designated to supply parts to a new program, an OEM will generally continue to purchase those parts from the designated producer for the life of the program. Competitive factors in the market for the Company's products include product quality, design and engineering competence, customer service, product mix, new product innovation, cost and timely delivery. The Company believes that its business strategy allows it to compete effectively in the markets for its products. The Company believes that it is well-positioned to succeed in this highly competitive supplier environment. The Company's size, emphasis on quality, customer service orientation, manufacturing expertise and technological leadership all contribute to the Company's success in the transportation supply industry. RESEARCH, ENGINEERING AND DEVELOPMENT The Company expended approximately $5.2 million, $5.5 million and $7.9 million on research, engineering and development during 1991, 1992 and 1993, respectively. These increased expenditures have improved significantly the Company's capacity to provide complete engineering and design services to support its product lines. The Company also has a corporate technical center in Elkhart, Indiana for basic research and development, as well as a large engineering and design staff in the Detroit area which works closely with automotive OEMs during all phases of new product development and production. FOREIGN OPERATIONS In addition to its domestic facilities described below, the Company owns a manufacturing facility in Aurora, Ontario, Canada and leases a manufacturing facility in Juarez, Mexico. The financial information concerning the Canadian operations of the Company is set forth in Notes 10 and 11 to the Company's Consolidated Financial Statements included elsewhere herein. EMPLOYEES The Company employs a total of approximately 3,500 persons, of whom approximately 20% are covered by collective bargaining agreements. The Company believes its relationship with its employees is good. ENVIRONMENTAL MATTERS The Company believes it is in substantial compliance with federal, state, local and foreign laws regarding discharge of materials into the environment and does not anticipate any material adverse effect on its future earnings, capital expenditures or competitive position as a result of compliance with such laws. For a discussion of potential environmental liabilities, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources" and Note 8 to the Company's Consolidated Financial Statements included elsewhere herein. ITEM 2. PROPERTIES The Company operates 11 manufacturing facilities, all of which are in good condition. The Company manufactures framed window assemblies at its Elkhart, Jacksonville, LaGrange, Aurora, Lawrenceburg, Fulton and Toledo manufacturing facilities. Injection molded thermoplastic parts are manufactured at the Bowling Green and Mishawaka facilities. Window regulator systems, latches and related components are manufactured at the Jacksonville, Pikeville and Juarez, Mexico facilities. Except as noted below, the Company owns all of these facilities. Approximate Building Size Location (in square feet) Elkhart 270,000 (1) Jacksonville, Florida 260,000 LaGrange, Indiana 140,000 Aurora, Ontario (Canada) 120,000 Lawrenceburg, Tennessee 150,000 Fulton, Kentucky 80,000 (2) Bowling Green, Kentucky 32,000 Mishawaka, Indiana 120,000 (3) Toledo, Ohio 61,000 (4) Pikeville, Tennessee 101,900 (5) Juarez, Mexico 15,000 (6) _________________________________ (1) Approximately 35,000 square feet of this facility houses the Company's executive offices and approximately 140,000 square feet of the facility are used in manufacturing. (2) The Company leases the Fulton, Kentucky facility pursuant to a lease which expires in 1994. The Company is entitled to extend the term of the lease for six (6) additional terms of three (3) years each and may, at its option, purchase the facility at any time during the lease. (3) The Company leases the Mishawaka, Indiana facility pursuant to a lease which expires in 1998. The Company is entitled to extend the term of such lease until 2003 and may, at its option, purchase such facility at any time during the term of the lease. (4) The Company leases the Toledo, Ohio facility pursuant to a lease which expires on May 31, 1998. (5) The Company leases the Pikeville, Tennessee facility pursuant to a Lease Purchase Contract entered into as part of agreements for the issuance of two series of industrial development bonds. Title to the facility will be transferred to the Company for Ten Dollars ($10.00) on completion of payment on the bond issues on July 1, 1999. Rent is payable semi- annually with respect to the Series A bonds and is equal to the principal and interest due on the bonds. Semi-annual principal payments on the Series A bonds currently are $75,000. Interest on the outstanding principal balance of the Series B bonds is payable quarterly, with an annual payment of principal in the amount of $200,000. (6) The Company leases the Juarez, Mexico facility pursuant to a month-to- month lease. ITEM 3. LEGAL PROCEEDINGS On February 22, 1993, the United States filed a lawsuit in the United States District Court for the Northern District of Indiana against the Company and certain other parties. On July 20, 1993, the Indiana Department of Environmental Management ("IDEM") joined the lawsuit. The lawsuit seeks recovery of the costs of enforcement, prejudgment interest and an amount in excess of $6.8 million, which represents costs incurred to date by the United States Environmental Protection Agency ("EPA") and IDEM in connection with the contamination of soil and groundwater on the Company's property in Elkhart, Indiana, and a well field of the City of Elkhart in close proximity to the Company's facility. The lawsuit also seeks a declaration that the Company and the other defendants are liable for any future costs incurred by the EPA and IDEM in connection with the site. For further information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 8 to the Company's Consolidated Financial Statements included elsewhere herein. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None Executive Officers of the Company The names and ages of all executive officers of the Company, all positions and offices held by each of them and the period during which each such person has served in these offices and positions is set forth below: Name Age Position and Offices James J. Lohman 52 Chairman of the Board and Chief Executive Officer James O. Futterknecht, Jr.47 President and Chief Operating Officer Joseph A. Robinson 55 Secretary, Treasurer and Chief Financial Officer James E. Crawford 47 Vice President-Product Development and Value Engineering Louis R. Csokasy 46 Vice President-Engineering and Quality Terrance L. Lindberg 51 Vice President-Specialty Products and General Manager-Nyloncraft Mr. Lohman has been the Chairman of the Board of Directors since 1985 and Chief Executive Officer since 1983. He joined the Company in 1964 and was Group Vice President from 1978 to 1981 and was President from 1981 to 1992. He has been a director of the Company since 1978. Mr. Futterknecht joined the Company in 1970, was Vice President - Corporate Sales from 1976 until 1984, was Vice President - Automotive Products from 1986 until 1987, was Vice President - Automotive Sales and engineering from 1987 to 1990, and was Executive Vice President from 1990 to 1992. He was elected as President and Chief Operating Officer and was appointed as a director in 1992. Mr. Robinson joined the Company as Secretary, Treasurer and Chief Financial Officer in December 1991 and was appointed as a director in 1992. Prior to that time, he was employed by the Standard Products Co., a manufacturer of automotive parts as Vice President from 1990 to 1991 and as Vice President - Finance from 1976 to 1990. Mr. Crawford joined the Company in 1978, was Product Engineering Manager from 1979 until 1984, was Vice President - Engineering/Research from 1984 until 1987, was Vice President - Modular Operations from 1987 to 1988, and was Vice President-Group Operations/Modular Products from 1988 to 1992. Mr. Crawford has been Vice President-Product Development and Value Engineering since 1992. Mr. Csokasy joined the Company in 1972. He was General Manager - Recreational Vehicles from 1985 to 1987, Manager of Corporate Engineering from 1987 to 1990, and was Vice President - Engineering from 1990 to 1992. He has been Vice President - Engineering and Quality since 1992. Mr. Lindberg joined the Company in 1983, was Manager of Mass Transit and Heavy Truck Products from 1984 to 1987, was Manager of Group Operations from 1987 until 1990, was Vice President - Group Operation from 1990 to 1992. Mr. Lindberg has been Vice President - Specialty Products and General Manager - Nyloncraft since 1992. PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS The Common Shares are traded on the American Stock Exchange under the symbol EXC. The following table sets forth for the fiscal periods indicated the high and low sale prices of the Common Shares, as reported by the American Stock Exchange, and dividends declared per share.
Dividends Share Prices Declared High Low Per Share Fiscal Year Ended December 31, 1992: 1st Quarter $12.875 $ 7.250 $.06 2nd Quarter 12.875 10.750 .06 3rd Quarter 14.750 12.125 .06 4th Quarter 17.750 10.750 .06 Fiscal Year Ended December 31, 1993: 1st Quarter 18.250 13.875 .06 2nd Quarter 19.625 15.500 .08 3rd Quarter 21.000 16.375 .08 4th Quarter 19.875 15.750 .08
As of February 15, 1994, there were 502 holders of record of the Common Shares. The Company has paid cash dividends every quarter since becoming a public company in April 1984. The Company intends to continue to pay quarterly cash dividends on its Common Shares, but the payment of dividends and the amount and timing of such dividends will depend upon the Company's earnings, capital requirements, financial condition and other factors deemed relevant by the Company's Board of Directors. ITEM 6. SELECTED FINANCIAL DATA SELECTED CONSOLIDATED FINANCIAL INFORMATION (Amounts in thousands, except per share amounts) The following table presents selected consolidated financial data of the Company as of and for the five fiscal years ended December 31, 1993. The selected consolidated financial data have been derived from audited consolidated financial statements of the Company. Such selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements of the Company and the notes thereto included elsewhere herein. The comparability of the results for the periods presented is significantly affected by certain events, as described in "Management's Discussion and Analysis of Financial Condition and Results of Operations--General."
INCOME STATEMENT DATA: Year Ended December 31, 1989 1990 1991 1992 1993 Net sales $277,114 $281,369 $352,268 $426,873 $515,681 Cost of goods sold 236,014 245,027 321,058 383,258 463,943 Gross profit 41,100 36,342 31,210 43,615 51,738 Selling, admini- strative and engin- eering expenses 22,819 23,336 25,205 28,262 30,054 Restructuring charge (1) --- --- --- 4,500 --- Other income (expense), net 289 1,208 (216) 713 2,015 Interest expense 5,470 5,446 5,516 5,555 3,474 Income before income taxes and cumulative effect of changes in accounting 13,100 8,768 273 6,011 20,225 Income tax provision 5,478 3,560 122 2,434 7,785 Income before cumula- tive effect of changes in accounting 7,622 5,208 151 3,577 12,440 Cumulative effect of adoption of SFAS 106 and 109 --- --- --- 3,195 --- Net income 7,622 5,208 151 382 12,440 Net income (loss) per share: Before cumulative effect of changes in accounting: Primary 1.18 .80 .02 .47 1.23 Fully diluted 1.18 .80 .02 .47 1.15 Cumulative effect of adoption of SFAS 106 and 109: Primary --- --- --- (.42) --- Fully diluted --- --- --- (.42) --- Net income: Primary 1.18 .80 .02 .05 1.23 Fully diluted 1.18 .80 .02 .05 1.15 Cash dividends per share .40 .40 .24 .24 .30 Average shares outstanding 6,439 6,459 6,488 7,553 10,12 BALANCE SHEET DATA: December 31, 1989 1990 1991 1992 1993 Working Capital $ 43,753 44,203 42,517 60,331 94,761 Property, plant and equipment 40,886 50,305 48,445 42,064 49,746 Total assets 125,885 155,724 150,645 182,096 229,316 Short-term debt (includes current portion of long-term debt) 3,607 4,247 4,025 1,561 1,553 Long-term debt (less current portion) 41,196 50,728 46,743 34,592 35,094 Shareholders' equity 46,552 49,326 48,181 67,030 106,436 Book value per share 7.22 7.63 7.41 7.83 10.07 Long-term debt to total capitalization 47% 51% 49% 34% 25% ____________ (1) In 1992, the Company provided a reserve of $4,500 for restructuring costs. See Note 4 to the Company's Consolidated Financial Statements. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIOMS GENERAL The Company was founded in 1928 and became a public company in April 1984. Since 1984, the Company has expanded sales internally and through several strategic acquisitions designed to complement the Company's businesses. In January 1986, the Company acquired Irvin Industries, Inc.'s wing ventilator window business operated in Jacksonville, Florida. Later in 1986, the Company consummated a private placement of Common Shares to Ford in exchange for cash, a long-term supply contract and a Ford subsidiary engaged in the manufacture and sale of modular window systems. In 1988, the Company acquired Nyloncraft, Inc. which manufactures injection molded thermoplastic products primarily for the automotive industry. In 1990, the Company acquired the window regulator business operated by Hoover Universal, Inc., a subsidiary of Johnson Controls, Inc., which the Company now operates under the name "Excel Systems". The comparability of the Company's results on a period-to-period basis is significantly affected by such acquisitions. RESULTS OF OPERATIONS 1993 Compared to 1992 Sales for the year ended December 31, 1993 totaled a record $515.7 million, an increase of $88.8 million, or 21%, over the preceding year. This increase in sales resulted from generally more favorable economic conditions in North America as total light vehicle production increased 12% and light vehicle production of Ford in North America increased 15%. Specifically, sales of new programs, including Ford/Nissan mini-vans, Ford F-Series and Ranger trucks, Chrysler LH sedans and Dodge trucks, helped account for improved sales volume. Gross profit totaled $51.7 million, or 10.0% of sales, as compared with $43.6 million, or 10.2% of sales for the prior year. Gross profit in dollars improved with the improved level of sales. Gross profit as a percent of sales declined due to a change in product mix and start-up costs related to new programs. Selling, administrative and engineering expenses totaled $30.1 million for 1993, an increase of 6%, or $1.8 million, from 1992. The increase reflected, among other items, an increase in engineering personnel costs, amounts for outside consultants and an increase in the provision for incentive compensation. As a percent of sales, selling, administrative and engineering expenses declined to 5.8% in 1993 as compared to 6.6% in 1992. Interest costs of $3.5 million for 1993 compared to the $5.6 million incurred in 1992. The decline in interest expense reflected the reduction in interest and the prepayment penalty incurred in 1992 related to Senior Notes which were retired in 1992. Other income in 1993 totaled $2.0 million, an increase of $1.3 million from 1992. Other income in 1993 included $1.9 million of interest income arising from the investment of proceeds of the Company's Common Share offerings in March 1993 and June 1992. The income tax provision was 38.5% of pre-tax income in 1993, down from 40.5% in the preceding year. The 1993 percentage reflected the impact of certain tax credits and lower effective state tax rates. In 1992, the Company provided a reserve of $4.5 million for restructuring costs. This charge represented estimated costs to downsize its Aurora, Ontario, Canada plant and relocate production of certain light truck and van windows to other manufacturing plants of the Company. During 1993, a total of $1.0 million in costs were incurred to relocate a portion of the production. The remaining production is expected to be relocated during 1994. The remaining reserve will be used to cover the cost of severance, the relocation of production and equipment writedowns expected in the future. 1992 Compared to 1991 Sales for the year ended December 31, 1992 totaled $426.9 million, an increase of $74.6 million, or 21%, over the preceding year. This increase in sales resulted from generally more favorable economic conditions in North America as total light vehicle production increased 9% and light vehicle production of Ford in North America increased 16%. Specifically, sales of new programs, including Ford/Nissan mini-van and Ford Econoline full-size van, and increased production of Ford Taurus/Sable sedans helped account for improved sales volume. Gross profit totaled $43.6 million, or 10.2% of sales, as compared with $31.2 million, or 8.9% of sales, for the prior year. The improved level of profitability, both in dollars and as a percent of sales, resulted from higher sales, better utilization of facilities and continued implementation of cost reduction programs. Selling, administrative and engineering expenses totaled $28.3 million for 1992, an increase of 12%, or $3.1 million, from 1991. The increase reflected, among other items, a provision for incentive compensation of $1.4 million. As a percent of sales, selling, administrative and engineering expenses declined to 6.6% in 1992 as compared to 7.2% in 1991. Interest costs of $5.6 million for 1992 were comparable to the $5.5 million incurred in 1991. The Company completed a public offering of Common Shares in June 1992, raising nearly $21 million, a portion of which was used for the prepayment of its 11.25% Guaranteed Senior Notes. Prepayment of the notes required a premium of $1.3 million, which premium was charged to interest expense and offset, in part, reductions in interest resulting from the decline in the overall levels of borrowings. Other income increased $0.9 million in 1992 due to income on short-term cash investments resulting, in part, from proceeds of the Company's Common Share offering in June 1992. In the fourth quarter of 1992, a reserve of $4.5 million was recorded for restructuring costs. This charge represents estimated costs to downsize the Company's Ontario, Canada facility and relocate production of certain light and heavy truck windows to other manufacturing plants of the Company. The income tax provision was 40.5% of pre-tax income in 1992, down from 44.7% in the preceding year. The 1991 percentage was unusually high due to losses for which no tax benefit was available. The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," effective January 1, 1992. This standard requires the recognition of future tax benefits attributable to temporary differences between the financial reporting basis and tax basis of assets and liabilities to the extent that realization of such benefits is more likely than not. The Company has recognized the future tax benefits of postretirement benefit obligations, the restructuring reserve and other recorded obligations and tax loss carryforwards since management has determined, based on the Company's history of prior operating earnings and future expectations, that operating income of the Company will more than likely be sufficient to fully offset these expenses when deductible for tax purposes. In 1992, the Company recorded $3.2 million as the cumulative effect of the adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109. The Company previously accounted for its postretirement benefit costs other than pensions on a pay-as-you-go basis. The ongoing annual costs resulting from the adoption of SFAS No. 106 will approximate $1.3 million. LIQUIDITY AND CAPITAL RESOURCES Working capital totaled $94.8 million as of December 31, 1993, and the current ratio was 2.40 to 1. Cash and marketable securities totaled $46.6 million as of December 31, 1993. In 1993, cash flow from operations totaled $10.2 million, and a public offering of Common Shares in March 1993 raised an additional $30.3 million. Cash expenditures for capital equipment amounted to $18.1 million, and dividends totaled $3.2 million. In addition, payments of long-term debt totaled $2.0 million. Overall, cash and marketable securities increased $19.0 million in 1993. Long-term debt totaled $35.1 million as of December 31, 1993, or 25% of total capitalization. Included in this amount is $30 million of Convertible Notes issued in January 1990 to affiliates of CIGNA Corporation and Textron, Inc. The principal balance of each Convertible Note is convertible, at the option of the holder, into Common Shares at a current price of $13.214 per share. Capital expenditures for 1994 are budgeted at $17.9 million. The Company's cash balances, operating cash flows and short-term lines of credit are expected to be adequate for anticipated operating requirements in 1994. The Company has entered into the 1994 Supply Agreement with Ford which requires the absorption of the effects of inflation and requires specified price reductions or productivity offsets to price reductions. The Company believes that this type of agreement is typical in the automotive supply business, and the Company's ability to maintain gross margins at or near their present levels will be dependent on its ability to substantially offset the effects of this and other such agreements through productivity improvements, cost reduction programs and implementation of value analysis/value engineering programs, which reduce part weight and system costs to the customer. A chemical cleaning compound, trichloroethylene ("TCE"), has been found in the soil and groundwater on the Company's property in Elkhart, Indiana, and, in 1981, TCE was found in a well field of the City of Elkhart in close proximity to the Company's facility. The Company has been named as one of nine potentially responsible parties ("PRPs") in the contamination of this site. EPA and IDEM have conducted a preliminary investigation and evaluation of the site and have undertaken temporary remedial action in the nature of air- stripping towers. In early 1992, the EPA issued a Unilateral Order under Section 106 of the Comprehensive Environmental Response, Compensation and Liability Act which required the Company and other PRPs to undertake remedial work. The Company and the other PRPs have reached an agreement regarding the funding of groundwater monitoring and the operation of the air-strippers as required by the Unilateral Order. The Company was required to install and operate a soil vapor extraction system to remove TCE from the Company's property. As of February 1, 1994, the Company has installed and is operating the equipment pursuant to the Unilateral Order. In addition, the EPA and IDEM have asserted a claim for reimbursement of their investigatory costs and the costs of installing and operating the air-strippers on the municipal well field (the "EPA Costs"). On February 22, 1993, the United States filed a lawsuit in the United States District Court for the Northern District of Indiana against eight of the PRPs, including the Company. On July 20, 1993, IDEM joined in the lawsuit. The lawsuit seeks recovery of the costs of enforcement, prejudgment interest and an amount in excess of $6.8 million, which represents costs incurred to date by the EPA and IDEM, and a declaration that the eight defendant PRPs are liable for any future costs incurred by the EPA and IDEM in connection with the site. The Company does not believe the annual cost to the Company of monitoring groundwater and operating the soil vapor extraction system and the air- strippers will be material. Each of the PRPs, including the Company, is jointly and severally liable for the entire amount of the EPA Costs. Certain PRPs, including the Company, are currently attempting to negotiate an agreed upon allocation of such liability. The Company believes that adequate provisions have been recorded for its costs and its anticipated share of EPA Cost and that its cash on hand, unused lines of credit or cash from operations are sufficient to fund any required expenditures. The EPA has also named the Company as a PRP for costs at three other disposal sites. It has also asked the Company for information about contamination at other sites. The Company believes it either has no liability as a responsible party or that adequate provisions have been recorded for any costs to be incurred. INFLATION The impact of inflation on operating results for the years 1993, 1992 and 1991 was not significant. Raw material costs during these periods have increased; however, use of LIFO inventory methods by the Company has minimized any impact from inflation. The majority of the Company's property, plant and equipment is of recent purchase, and depreciation charges are based on historical cost. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Following are the consolidated financial statements of the Company and its subsidiaries, the notes thereto, and the auditors' report. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Excel Industries, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Excel Industries, Inc. and its subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in the notes to consolidated financial statements, effective January 1, 1992, the Company changed its method of accounting for postretirement health care benefits by adopting, on an immediate recognition basis, Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Post- retirement Benefits Other Than Pensions." The Company also changed its method of accounting for income taxes, effective January 1, 1992, by adopting Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." PRICE WATERHOUSE South Bend, Indiana February 17, 1994
EXCEL INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET (Amounts in thousands)
DECEMBER 31, 1993 1992 (S) Assets Current assets: Cash and short-term investments $ 6,767 $ 27,510 Marketable securities 39,786 -- Accounts receivable-trade, less allowances of $725 23,485 16,222 -related party 47,168 43,342 Customer tooling to be billed 9,161 5,887 Inventories 29,867 26,746 Prepaid expenses 6,113 4,764 Total current assets 162,347 124,471 Property, plant and equipment: Land 937 939 Buildings and improvements 21,902 21,135 Machinery and equipment 80,680 71,021 Accumulated depreciation (53,773) (51,031) 49,746 42,064 Goodwill, net of accumulated amortization of $2,356 in 1993 and $2,010 in 1992 7,050 7,397 Deferred income taxes and other assets 10,173 8,164 $229,316 $182,096 Liabilities and Shareholders' Equity Current liabilities: Accounts payable-trade $ 37,283 $ 28,460 -related party 9,700 13,601 Accrued liabilities: Salaries and wages 5,712 3,983 Income taxes 1,208 2,132 Other 12,130 14,403 Current installments on long-term debt 1,553 1,561 Total current liabilities 67,586 64,140 Long-term debt 35,094 34,592 Other long-term liabilities, primarily employee benefits 20,200 16,334 Commitments and contingent liabilities -- -- Shareholders' equity: Preferred shares-no par value, 1,000 shares authorized, none issued -- -- Common shares-no par value, 20,000-shares authorized; 10,575 and 8,558 respectively, issued and outstanding 87,537 57,282 Retained earnings 19,615 10,346 Unrecognized pension actuarial losses, net of tax (716) (598) Total shareholders' equity 106,436 67,030 $229,316 $182,096 The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF INCOME (Amounts in thousands, except per share amounts)
YEAR ENDED DECEMBER 31, 1993 1992 1991 Net sales $515,681 $426,873 $352,268 Costs and expenses: Cost of goods sold 463,943 383,258 321,058 Selling, administrative and engineering expenses 30,054 28,262 25,205 Restructuring charge -- 4,500 -- Interest expense 3,474 5,555 5,516 Other (income) expense, net (2,015) (713) 216 Total costs and expenses 495,456 420,862 351,995 Income before income taxes and cumulative effect of changes in accounting 20,225 6,011 273 Income tax provision 7,785 2,434 122 Income before cumulative effect of changes in accounting 12,440 3,577 151 Cumulative effect of adoption of SFAS 106 and 109 -- 3,195 -- Net income $ 12,440 $ 382 $ 151 Net income (loss) per share: Before cumulative effect of changes in accounting Primary $ 1.23 $ .47 $ .02 Fully diluted 1.15 .47 .02 Cumulative effect of adoption of SFAS 106 and 109 Primary -- (.42) -- Fully diluted -- (.42) -- Net income Primary 1.23 .05 .02 Fully diluted 1.15 .05 .02 Cash dividends per share $ .30 $ .24 $ .24 The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Amounts in thousands) - ---------------------------------------------------------------------------------------------------------------------------
Common Unrecognized Shares Pension Cumulative Issued and Common Retained Actuarial Translation Outstanding Shares Earnings Losses Adjustment Total Balance at December 31, 1990 6,466 $ 35,949 $ 13,298 $ (592) $ 671 $ 49,326 Net income 151 151 Dividends (1,558) (1,558) Stock options exercised 17 84 84 Shares issued under employee stock purchase plan 19 160 160 Unrecognized pension actuarial losses, net of tax (12) (12) Effect of exchange rate changes ________ ________ ________ ________ 30 30 Balance at December 31, 1991 6,502 36,193 11,891 (604) 701 48,181 Net income 382 382 Dividends (1,927) (1,927) Share offering 2,013 20,759 20,759 Stock options exercised 29 200 200 Shares issued under employee stock purchase plan 14 130 130 Unrecognized pension actuarial losses, net of tax 6 6 Effect of exchange rate changes ________ ________ ________ ________ (701) (701) Balance at December 31, 1992 8,558 57,282 10,346 (598) -- 67,030 Net income 12,440 12,440 Dividends (3,171) (3,171) Share offering 2,000 30,019 30,019 Stock options exercised 8 51 51 Shares issued under employee stock purchase plan 9 185 185 Unrecognized pension actuarial losses, net of tax ________ ________ ________ (118) ________ (118) Balance at December 31, 1993 10,575 $ 87,537 $ 19,615 $ (716) $ -- $106,436 ======== ======== ======== ======== ======== ======== The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Amounts in thousands) - -------------------------------------------------------------------------------
Year Ended December 31, 1993 1992 1991 Cash flows from operating activities: Net income $ 12,440 $ 382 $ 151 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,145 10,082 10,637 Deferred income taxes 548 (3,837) (2,207) Cumulative effect of changes in accounting -- 3,195 -- Other 3,443 2,661 939 Changes in current assets and liabilities Accounts receivable and prepaid expenses (13,418) (17,169) 1,176 Inventories and customer tooling (6,395) 6,774 4,286 Accounts payable and accrued liabilities 3,454 19,067 849 Total adjustments (2,223) 20,773 15,680 Net cash provided by operating activities 10,217 21,155 15,831 Cash flows from investing activities: Purchase of property, plant and equipment (18,104) (4,687) (9,670) Investment in marketable securities, net (39,786) -- -- Other ( 648) 461 3,810 Net cash used for investing activities (58,538) (4,226) (5,860) Cash flows from financing activities: Issuance of common shares 30,255 21,089 244 Payments of long-term debt (2,001) (14,615) (4,207) Dividends (3,171) (1,927) (1,558) Issuance of long-term debt 2,495 -- -- Net cash provided by (used for) financing activities 27,578 4,547 (5,521) Net change in cash and short-term investments (20,743) 21,476 4,450 Cash and short-term investments at beginning of period 27,510 6,034 1,584 Cash and short-term investments at end of period $ 6,767 $ 27,510 $ 6,034 Supplemental disclosures of cash flow information Cash paid during the year for: Interest $ 3,308 $ 6,081 $ 5,634 Income taxes, net of refunds 7,996 6,602 281 The accompanying notes are an integral part of this statement.
EXCEL INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS Excel Industries, Inc. (Company) is engaged in the manufacture and sale of a broad line of window assemblies, manual and electric window regulators, upper door frames, and injection molded thermoplastic parts. The Company's products are used in the manufacture of automobiles, heavy and light trucks, buses and recreational vehicles. 2. SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions, profits and balances are eliminated. Net income per share Primary net income per share is computed using the weighted average number of shares outstanding during the period. Shares used to compute primary net income per share were 10,122,000 for 1993, 7,553,000 for 1992, and 6,488,000 for 1991. Fully diluted earnings per share assumes, when dilative, the conversion of the 10% convertible subordinated notes which were issued on January 2, 1990. Stock dividends and splits are given retroactive effect in computing the weighted average number of shares outstanding during the period. Short-term investments and marketable securities Short-term investments amounting to $5,771,000 at December 31, 1993 consist of investments generally in money market funds. Marketable securities consist of U.S. Government securities, tax- free municipal securities and municipal fund par value preferred shares with maturities generally longer than 90 days. Such investments are carried at cost which approximates market. Other income includes interest income of $1,916,000 in 1993, $1,010,000 in 1992, and $674,000 in 1991. Inventories Inventories are valued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for domestic inventories and the first-in, first-out (FIFO) method for Canadian inventories. Properties Plant and equipment are carried at cost and include expenditures for new facilities and those which substantially increase the useful lives of existing plant and equipment. Depreciation The Company provides for depreciation of plant and equipment using methods and rates designed to amortize the cost of such equipment over its useful life. Depreciation is computed principally on accelerated methods for new plant and equipment and the straight-line method for used equipment. The estimated useful lives range from 10 to 40 years for buildings and improvements and 2 to 20 years for machinery and equipment. Goodwill The excess of purchase price over the fair value of net assets of acquired businesses (goodwill) is amortized on a straight-line basis over 20 to 40 years. Income taxes Deferred income taxes are provided using the liability method in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". 3. RESEARCH, ENGINEERING AND DEVELOPMENT Research, engineering and development expenditures charged to operations approximated $7,913,000 in 1993, $5,518,000 in 1992, and $5,200,000 in 1991. 4. RESTRUCTURING CHARGE In the fourth quarter of 1992, the Company provided a reserve of $4,500,000 for restructuring costs. The charge was equivalent to $2,900,000 or 34 cents per share after taxes. This charge represented estimated costs to downsize its Aurora, Ontario, Canada plant and relocate production of certain light truck and van windows to other manufacturing plants of the Company. A total of $1,010,000 was incurred in 1993 to transfer a portion of the planned production. 5. INVENTORIES Inventories consist of the following: December 31, 1993 1992 (000 Omitted) Raw materials $17,948 $15,302 Work in process and finished goods 12,378 11,699 LIFO reserve (459) (255) $29,867 $26,746 6. PENSION AND OTHER EMPLOYEE BENEFIT PLANS Pension and profit sharing plans The Company and its subsidiaries provide retirement benefits to substantially all employees through various pension, savings and profit sharing plans. Defined benefit plans provide pension benefits that are based on the employee's final average salary for salaried employees and stated amounts for each year of credited service for hourly employees. Contributions and costs for the Company's various other benefit plans are generally determined based on the employee's annual salary. Total expense relating to the Company's various retirement plans aggregated $2,199,000 in 1993, $2,102,000 in 1992, $1,712,000 in 1991. Components of net pension expense for all defined benefit pension plans are as follows: Year Ended December 31, 1993 1992 1991 (000 Omitted) Service cost $1,319 $1,312 $1,243 Interest cost 1,344 1,245 1,137 Actual return on assets (617) (1,242) (1,139) Net amortization and deferral (582) 190 222 Net defined benefit pension expense $1,464 $1,505 $1,463 The funded status of defined benefit pension plans is as follows: December 31, 1993 1992 (000 Omitted) Plan assets at fair value $15,844 $ 14,868 Projected benefit obligations 20,421 17,869 (4,577) (3,001) Unrecognized costs 1,862 472 Net accrued pension costs $(2,715) $(2,529) Actuarial present value of: Vested benefit obligations $15,644 $13,853 Accumulated benefit obligations $16,655 $14,815 Major assumptions: Discount rate 7.5% 8% Rate of increase in compensation 5% 5% to 8% Expected rate of return on plan assets 8 8% It is generally the Company's policy to fund the ERISA minimum contribution requirement. Plan assets are invested primarily in corporate equity securities and bonds and insurance annuity contracts. Supplemental and other postretirement benefits In addition to providing pension benefits, the Company provides certain health care benefits to substantially all active employees and postretirement health care benefits to management employees. The Company is primarily self-insured for such benefits and prior to 1992 followed the practice of expensing such benefits on a pay-as-you-go basis. In 1992, the Company adopted the provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Company elected to immediately recognize the Accumulated Postretirement Benefit Obligation (APBO) as January 1, 1992 in the amount of $6,447,000 (approximately $4,000,000 after-tax or 61 cents per share). Summary information on the Company's plan is as follows: December 31, 1993 1992 (000 Omitted) Retirees $1,504 $1,060 Retirement-eligible actives 968 1,245 Other active participants 6,077 5,402 Unrecognized gain 407 -- Accrued liability $8,956 $7,707 Accrued postretirement benefit cost The Company plans to continue the policy of funding these benefits on a pay-as-you-go basis. The components of net periodic postretirement benefit cost are as follows: Year Ended December 31, 1993 1992 (000 Omitted) Service costs, benefits attributed to employee service during the year $ 821 $ 750 Interest cost on accumulated postretirement benefit obligation 578 510 Net periodic postretirement benefit cost $1,399 $1,260 The discount rate used in determining the APBO was 7.75% in 1993 and 8% in 1992. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 10.25% declining by 1% per year to a rate of 6.25%. An increase of 1% in health care cost trend rate would increase the accrued postretirement benefit cost at December 31, 1993 by $2,066,000 and the 1993 annual expense by $384,000. 7. LONG-TERM DEBT Following is a summary of long-term debt of the Company: December 31, 1993 1992 (000 Omitted) 10% Convertible subordinated notes $30,000 $30,000 Industrial Revenue Bonds 5,383 4,533 Capital lease obligations 1,264 1,620 36,647 36,153 Current portion (1,553) (1,561) $35,094 $34,592 During 1992, the Company prepaid the balance owing on its guaranteed senior notes and was subject to a prepayment premium of approximately $1.3 million. Such amount is included in the accompanying income statement in interest expense. The convertible notes are due on December 1, 2000 and require aggregate prepayments of $8,000,000 in 1996, $7,000,000 in 1997, $6,000,000 in 1998, $5,000,000 in 1999 and $4,000,000 in 2000. The holders of the notes have the option to convert their notes at any time into common shares of the Company at a current conversion price of $13.214 per share. The Notes are subject to prepayment at the option of the Company if the market value of the Company's common shares equals or exceeds 150% of the conversion price for a specified period. The note agreements provide for maintaining a current ratio of 1.5 to 1, restrict the amount of additional borrowings and limit the amount of dividends that can be paid. Currently the Company has available for payment of dividends $19,615,000 of retained earnings. The Industrial Revenue Bonds bear interest at rates of interest tied to short-term Treasury rates. Certain plant and equipment purchased with the proceeds of the bonds collateralize these obligations. The Company had available unused lines of credit of approximately $6,300,000 at December 31, 1993. Long-term debt maturities are $1,553,000 in 1994, $1,358,000 in 1995, $9,557,000 in 1996, $8,072,000 in 1997, $6,580,000 in 1998, and $9,527,000 thereafter. 8. CONTINGENCIES A chemical cleaning compound, trichlorethylene (TCE), has been found in the soil and groundwater on the Company's property in Elkhart, Indiana, and in 1981, TCE was found in a well field of the City of Elkhart in close proximity to the Company's facility. The Company has been named as one of nine potentially responsible parties (PRPs) in the contamination of this site. The United States Environmental Protection Agency (EPA) and the Indiana Department of Environmental Management (IDEM) have conducted a preliminary investigation and evaluation of the site and have undertaken temporary remedial action in the nature of air-stripping towers. In early 1992, the EPA issued a Unilateral Order under Section 106 of the Comprehensive Environmental Response, Compensation and Liability Act which required the Company and other PRPs to undertake remedial work. The Company and the other PRPs have reached an agreement regarding the funding of groundwater monitoring and the operation of the air-strippers as required by the Unilateral Order. The Company was required to install and operate a soil vapor extraction system to remove TCE from the Company's property. As of February 1, 1994, the Company has installed and is operating the equipment pursuant to the Unilateral Order. In addition, the EPA and IDEM have asserted a claim for reimburesement of their investigatory costs and the costs of installing and operating the air-strippers on the munipal well field (the EPA Costs). On February 22, 1993, the United States filed a lawsuit in the United States District Court for the Northern District of Indiana against eight of the PRPs, including the Company. On July 20, 1993, IDEM joined in the lawsuit. The lawsuit seeks recovery of the costs of enforcement, prejudgment interest and an amount in excess of $6.8 million, which represents costs incurred to date by the EPA and IDEM, and a declaration that the eight defendant PRPs are liable for any future costs incurred by the EPA and IDEM in connection with the site. The Company does not believe the annual cost to the Company of monitoring groundwater and operating the soil vapor extraction system and the air-strippers will be material. Each of the PRPs, including the Company, is jointly and severally liable for the entire amount of the EPA Costs. Certain PRPs, including the Company, are currently attempting to negotiate an agreed upon allocation of such liability. The Company believes that adequate provisions have been recorded for its costs and its anticipated share of EPA Costs and that its cash on hand, unused lines of credit or cash from operations are sufficient to fund any required expenditures. The EPA has also named the Company as a PRP for costs at three other disposal sites. It has also asked the Company for information about contamination at other sites. The Company believes it either has no liability as a responsible party or that adequate provisions have been recorded for any costs to be incurred. There are claims and pending legal proceedings against the Company and its subsidiaries with respect to taxes, workers' compensation, warranties and other matters arising out of the ordinary conduct of the business. The ultimate result of these claims and proceedings at December 31, 1993 is not determinable, but, in the opinion of management, adequate provision for anticipated costs has been made or insurance coverage exists to cover such costs. 9. LEASES The Company leases certain of its manufacturing facilities, sales offices, transportation and other equipment. Total rental expense for all leases was approximately $3,416,000 in 1993, $2,998,000 in 1992, and $2,123,000 in 1991. Future minimum lease payments under noncancellable operating leases are $1,341,000 in 1994, $1,055,000 in 1995, $826,000 in 1996, $753,000 in 1997 and $143,000 in 1998. 10. INCOME TAXES Effective January 1, 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes". This statement mandates the liability approach for computing deferred income taxes similar to SFAS No. 96 previously followed by the Company. The cumulative effect of the change was to increase first quarter 1992 earnings by $800,000 (12 cents per share). The change had no impact on the 1992 income tax provision. Prior year financial statements have not been restated. Pre-tax income (loss) reported by U.S. and foreign subsidiaries was as follows: Year Ended December 31, 1993 1992 1991 (000 Omitted) United States $17,933 $8,688 $1,835 Foreign 2,292 (2,677) (1,562) $20,225 $6,011 $ 273 The provision (benefit) for income taxes is summarized below: Year Ended December 31, 1993 1992 1991 (000 Omitted) Current: US federal $ 6,049 $5,007 $1,615 Foreign 465 38 -- State 645 1,226 714 7,159 6,271 2,329 Deferred: US federal (317) (1,922) (1,388) Foreign 941 (1,256) (685) State 2 (659) (134) 626 (3,837) (2,207) $ 7,785 $2,434 $ 122 Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of the Company's assets and liabilities. At December 31, 1993, current deferred income tax assets of $2,886,000 are classified as prepaid expenses, long-term U.S. deferred income tax assets of $6,094,000 are classified as other assets, and $627,000 of long-term foreign deferred income tax liabilities are classified as other long-term liabilities. Deferred income taxes are comprised of the following at December 31: 1993 1992 (000 Omitted) Gross deferred tax liabilities Property, plant and equipment $ 2,257 $2,571 Inventories 436 308 Other 680 564 3,373 3,443 Gross deferred tax assets Postretirement benefit obligations 6,296 5,046 Restructuring reserve 1,103 1,655 Other accrued liabilities 3,708 4,210 Loss carryforwards 619 1,453 11,726 12,364 Net deferred tax assets $ 8,353 $ 8,921 The provision for income taxes computed by applying the Federal statutory rate to income before income taxes is reconciled to the recorded provision as follows: Year Ended December 31, 1993 1992 1991 (000 Omitted) Tax at United States statutory rate $7,079 $2,044 $ 93 State income taxes, net of federal benefit 421 374 383 Canadian rate differential on income/(losses) 344 (134) (154) Other (59) 150 (200) $7,785 $2,434 $ 122 Provision has been made for U.S. and Canadian taxes on undistributed earnings of the Company's Canadian subsidiary. The Company possesses approximately $10,570,000 of U.S. state income tax loss carryforwards. U.S. state loss carryforwards expire to the extent of $1,002,000 in the year 2005, $4,758,000 in 2006, and $4,810,000 in 2007. 11. SEGMENT INFORMATION AND MAJOR CUSTOMERS The Company operates in predominately one industry segment: the design, engineering and manufacture of certain components sold to manufacturers in the ground transportation industry. The Company, through its subsidiaries, operates primarily in two countries: the United States and Canada. The Company's Canadian subsidiary had net sales of $36,074,000 in 1993, $29,421,000 in 1992, and $21,735,000 in 1991. Total assets of the Canadian subsidiary were approximately $9,416,000 and $12,538,000 at December 31, 1993 and 1992, respectively. Intercompany sales were insignificant. Sales to three major customers, Ford Motor Company, Chrysler Corporation and General Motors Corporation, were approximately 72%, 11% and 4%, respectively, of the Company's net sales in 1993 as compared to 73%, 9% and 4% in 1992 and 69%, 8% and 8% in 1991. Accounts receivable from General Motors Corporation and Chrysler Corporation approximated 68% of trade accounts receivable at December 31, 1993 and 48% at December 31, 1992. Amounts due from Ford Motor Company are classified as "accounts receivable, related party" in the Company's balance sheet at December 31, 1993 and December 31, 1992. Sales to customers outside of the United States and Canada were not significant. 12. COMMON SHARES The Company has an incentive stock option plan covering key employees which was approved by shareholders in 1984. The plan provides that options may be granted at not less than fair market value and if not exercised, expire 10 years from the date of grant. At December 31, 1993, there were reserved 48,590 shares for the granting of options and options outstanding for 19,250 shares at an average exercise price of $6.59. During 1993, options for 7,875 shares were exercised at an average exercise price of $6.44. There were no options granted nor did any options expire during 1993. The Company has an employee stock purchase plan and has reserved 353,717 common shares for this purpose. The plan allows eligible employees to authorize payroll withholdings which are used to purchase common shares from the Company at ninety-percent (90%) of the closing price of the common shares on the date of purchase. Through December 31, 1993, 96,296 shares had been issued under the plan. The Company has reserved 2,270,319 common shares for possible future issuance in connection with its $30,000,000 convertible notes issued on January 2, 1990. 13. RELATED PARTY TRANSACTIONS Ford Motor Company owned 24% of the Company's common shares at December 31, 1993, 30% at December 31, 1992 and 40% at December 31, 1991. On January 11, 1994, Ford Motor Company donated 1,047,201 of the Company's common shares to the Ford Motor Company Fund. On January 13, 1994, Ford Motor Company and the Ford Motor Company Fund announced their intention to dispose of their combined 24% ownership in the Company through a secondary public offering. Ford officials stated that the disposition of common shares would not impact the customer-supplier relationship between Ford and the Company. Significant related party transactions are as follows: Year Ended December 31, 1993 1992 1991 (000 Omitted) Product sales $373,000 $311,000 $244,000 Product purchases 124,000 77,000 58,000 14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following table sets forth in summary form the quarterly results of operations for the years ended December 31, 1993 and 1992.
1993 ------------------------------------------------- (000's except per share amounts) First Second Third Fourth Quarter Quarter Quarter Quarter Net sales $127,340 $138,875 $114,888 $134,578 Gross profit 14,295 16,044 10,015 11,384 Net income 3,422 4,491 1,650 2,877 Net income per share Primary $ .39 $ .43 $ .16 $ .27 Fully diluted .35 .38 .16 .26 ======== ======== ======== ======== 1992 ------------------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter Net sales $ 98,432 $113,038 $102,516 $112,887 Gross profit 10,258 12,603 9,635 11,119 Income (loss) before changes in accounting 1,295 2,445 657 (820) Cumulative effect of adoption of SFAS Nos. 106 and 109 (3,195) -- -- -- Net income (loss) (1,900) 2,445 657 (820) Net income (loss) per share before changes in accounting Primary $ .20 $ .37 $ .08 $(.10) Fully diluted .20 .33 .08 (.10) Cumulative effect of changes in accounting Primary (.49) -- -- -- Fully diluted (.49) -- -- -- Net income (loss) Primary (.29) .37 .08 (.10) Fully diluted (.29) .33 .08 (.10) ======== ======== ======== ========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth under the caption "ELECTION OF DIRECTORS" in the Company's proxy statement for the 1994 annual meeting of shareholders (the "Proxy Statement") is incorporated herein by reference. The Proxy Statement has previously been filed with the Securities and Exchange Commission. ITEM 11. EXECUTIVE COMPENSATION The information set forth under the captions "Compensation of Directors," "Compensation Committee Interlocks and Insider Participation," "Compensation of Executive Officers," "Summary Compensation Table," "Pension Plan," and "Deferred Compensation Plans" in the Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the captions "Outstanding Shares," "Principal Shareholders," and "Security Ownership of Management" in the Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the caption "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Financial Statements The following consolidated financial statements of the Company and its subsidiaries are included in Item 8 of this report. Report of Independent Accountants Consolidated Balance Sheet - December 31, 1993 and 1992 Consolidated Statement of Income - Years ended December 31, 1993, 1992 and 1991 Consolidated Statement of Shareholders' Equity - Years ended December 31, 1993, 1992 and 1991 Consolidated Statement of Cash Flows - Years ended December 31, 1993, 1992 and 1991 Notes to Consolidated Financial Statements (a) (2) Financial Statement Schedules The following financial statement schedules are included with this report: Report of Independent Accountants on Financial Statement Schedules i - Marketable Securities v - Property, Plant and Equipment vi - Accumulated Depreciation and Amortization of Property, Plant and Equipment viii - Valuation and Qualifying Accounts ix - Short-Term Borrowings x - Supplementary Income Statement Information All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (a) (3) Exhibits The list of exhibits contained in the Exhibit Index immediately following the signature page of this Form 10-K is incorporated herein by reference. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1993. 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. EXCEL INDUSTRIES, INC. MarcH 25, 1994 By: /s/ James J. Lohman James J. Lohman, Chairman of the Board and Chief Executive Officer 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. March 25, 1994 /s/ James J. Lohman James J. Lohman, Chairman of the Board and Chief Executive Officer March 25, 1994 /s/ Joseph A. Robinson Joseph A. Robinson, Secretary-Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) March 25, 1994 /s/ James O. Futterknecht, Jr. James O. Futterknecht, Jr., Director March 25, 1994 /s/ John G. Keane John G. Keane, Director March 25, 1994 /s/ James K. Sommer James K. Sommer, Director March 25, 1994 /s/ Ralph R. Whitney Ralph R. Whitney, Jr., Director REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Excel Industries, Inc. Our audits of the consolidated financial statements referred to in our report dated February 17, 1994 appearing on page 19 of the 1993 Annual Report to Shareholders of Excel Industries, Inc. also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE South Bend, Indiana February 17, 1994 MARKETABLE SECURITIES SCHEDULE I
Number of shares Name of issuer and or units or principal Cost of Market Value at Carrying Value at title of each issue amount of bonds and notesEach Issue December 31, 1993 December 31, 1993 United States Government Securities $18,000,000 $17,011,000 $17,011,000 $17,011,000 State tax free municipal securities 5,100,000 5,612,000 5,612,000 5,612,000 City tax free municipal securities 4,210,000 4,533,000 4,533,000 4,533,000 Nuveen Virginia Premium Income par value securities 40 2,000,000 2,000,000 2,000,000 Nuveen municipal fund par value securities 60 3,000,000 3,000,000 3,000,000 Nuveen Performance Plus par value securities 40 2,000,000 2,000,000 2,000,000 Nuveen Select Quality Municipal Fund par value securities 40 2,000,000 2,000,000 2,000,000 Puerto Rico securities 1,450,000 1,561,000 1,556,000 1,556,000 Other tax free securities 1,027,000 1,074,000 1,074,000 1,074,000 $38,791,000 $38,786,000 $38,786,000
PROPERTY, PLANT AND EQUIPMENT SCHEDULE V
Balance at Balance at beginning Additions end of Classification of period at cost Retirements Other* Period Year ended December 31, 1991: Land $ 971,000 $ -- $ (40,000) $ -- $ 931,000 Buildings and improvements 18,923,000 2,368,000 (228,000) 10,000 21,073,000 Machinery and equipment 60,949,000 7,277,000 (1,764,000) 15,000 66,477,000 $80,843,000 $ 9,645,000 $(2,032,000) $ 25,000 $ 88,481,000 Year ended December 31, 1992: Land $ 931,000 $ 14,000 $ -- $ (6,000) $ 939,000 Buildings and improvements 21,073,000 443,000 (141,000) (240,000) 21,135,000 Machinery and equipment 66,477,000 4,230,000 923,000** (609,000) 71,021,000 $88,481,000 $ 4,687,000 $ 782,000 $ (855,000) $ 93,095,000 Year ended December 31, 1993: Land $ 939,000 $ -- $ -- $ (2,000) $ 937,000 Buildings and improvements 21,135,000 868,000 -- (101,000) 21,902,000 Machinery and equipment 71,021,000 17,236,000 (7,342,000) (235,000) 80,680,000 $93,095,000 $18,104,000 $(7,342,000) $ (338,000) $103,519,000 * Represents effect of foreign currency translation. ** Includes write-off of fully depreciated assets, the basis of which were written down at date of acquisition.
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT SCHEDULE VI
Balance at Balance at beginning end of Classification of period Depreciation Retirements Other* Period Year ended December 31, 1991: Buildings and improvements$ 4,343,000 $ 1,269,000 $ (100,000) $ 2,000 $ 5,514,000 Machinery and equipment 26,195,000 8,903,000 (587,000) 11,000 34,522,000 $30,538,000 $10,172,000 $ (687,000) $ 13,000 $40,036,000 Year ended December 31, 1992: Buildings and improvements$ 5,514,000 $ 1,205,000 $ (118,000) $ (72,000) $ 6,529,000 Machinery and equipment 34,522,000 8,363,000 1,992,000** (375,000) 44,502,000 $40,036,000 $ 9,568,000 $ 1,874,000 $ (447,000) $51,031,000 Year ended December 31, 1993: Buildings and improvements$ 6,529,000 $ 1,069,000 $ -- $ (33,000) $ 7,565,000 Machinery and equipment 44,502,000 8,645,000 (6,578,000) (361,000) 46,208,000 $51,031,000 $ 9,714,000 $(6,578,000) $ (394,000) $53,773,000 * Represents effect of foreign currency translation. ** Includes write-off of fully depreciated assets, the basis of which were written down at date of acquisition.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES SCHEDULE VIII
Balance at Additions Balance at beginning charged to end of Classification of period expense Deductions* Period Year ended December 31, 1991: Allowance for uncollectible accounts receivable $521,000 $856,000 $(639,000) $738,000 Year ended December 31, 1992: Allowance for uncollectible accounts receivable $738,000 $200,000 $(213,000) $725,000 Year ended December 31, 1993: Allowance for uncollectible accounts receivable $725,000 $167,000 $(167,000) $725,000 * Primarily reflects write-offs of uncollectible accounts, net of recoveries of amounts previously written off.
SHORT-TERM BORROWINGS SCHEDULE IX
Maximum Average Weighted Category of Weighted amount amount average aggregate Balance average outstanding outstanding interest rate short-term at end interest during the during the during the borrowings of period rate* period period period Year ended December 31, 1991 Amounts payable to banks for borrowings under Excel Industries and Canadian lines-of-credit $22,000 9.4% $5,433,000 $1,200,000 9.7% Year ended December 31, 1992 Amounts payable to banks for borrowings under Canadian lines- of-credit -- 8.1% $ 22,000 $ 1,833 8.1% Year ended December 31, 1993 Amounts payable to banks for borrowings under Excel Industries line-of-credit -- -- $ -- $ -- N/A * The weighted average interest rate during the period is computed on the interest expense during the period divided by the average short-term borrowings outstanding during such period.
SUPPLEMENTARY INCOME STATEMENT INFORMATION SCHEDULE X
Charged to Costs and Expenses For the year ended December 31, Item 1993 1992 1991 Maintenance and repairs $12,801,000 $9,863,000 $ 9,368,000 Depreciation 9,714,000 9,568,000 10,172,000 Goodwill amortization 347,000 347,000 347,000 Taxes, other than payroll and income taxes 1,339,000 1,561,000 1,432,000 Advertising costs 66,000 43,000 32,000 Royalties 649,000 621,000 ---
EXHIBIT INDEX Page No. Exhibit In Manually Number Description of Exhibit Signed Copy (3.1) The Amended Articles of Incorporation of the Company were filed as Exhibit 3.1 to the Registration Statement on Form S-1 filed on February 27, 1987 (Reg. No. 33-12282) and are incorporated herein by reference (3.2) The Code of By-Laws of the Company as amended effective April 29, 1992 was filed as Exhibit 4.3 to the Company's Registration Statement on Form S-2 (Reg. No. 33-47706) filed on May 6, 1992 and is incorporated herein by reference (4.1) A specimen of the certificate representing the Common Stock of the Company was filed as Exhibit 4.1 to the Company's Amendment No. 1 to the Registration Statement on Form S-1 filed on April 3, 1984 (Reg. No. 2-89521) and is incorporated herein by reference (4.2) Article VI, Section 3-5, Article VII and Article XII, Section 1 of the Articles of Incorporation of the Company are included as part of Exhibit 3.1 above (4.3) Articles X, XI, XV, XVI, XXIV of the Code of By-Laws of the Company are included as part of Exhibit 3.2 above (9) Not Applicable (10.1)* The Supplemental Major Medical Expense Insurance Plan of the Company was filed as Exhibit 10.7 to the Company's Registration Statement on Form S-1 filed on February 17, 1984 (Reg. No. 2-89521) and is incorporated herein by reference (10.2) Purchase and Supply Contract between the Company and Ford Motor Company dated October 7, 1986, was filed as part of Exhibit (e) (2) of the Company's Schedule 13E-4 filed on August 27, 1986, and is incorporated herein by reference (10.3) Lease Agreement between Modular Concepts, Inc. and Fulton Industrial Development Authority was filed as Exhibit 10.12 to the Registration Statement on Form S-1 filed on February 27, 1987 (Reg. No. 33-12282) and is incorporated herein by reference (10.4)* The Excel Industries, Inc. Stock Purchase Plan and Trust was filed as Exhibit 4.4 to Amendment No. 1 to the Company's Registration Statement on Form S-8 filed on June 9, 1987 (Reg. No. 33-14508) and is incorporated herein by reference (10.5) Commercial Lease and Option to Purchase dated February 5, 1988, between the Company and P-F-P Partnership, and Indiana general partnership (for the Mishawaka facility) was filed as Exhibit 10.16 to the Company's Annual Report on Form 10-K filed on March 24, 1988, and is incorporated herein by reference (10.6) Lease Agreement dated May 4, 1988 between the Company and Willis Day Properties, Inc. (for the Toledo, Ohio facility) was filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K filed March 20, 1989, and is incorporated herein by reference (10.7)* The 1989 Deferred Compensation Plan of the Company as amended effective October 1, 1991 was filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K filed March 26, 1992 and is incorporated herein by reference (10.8) Lease Purchase Contract dated July 1, 1979 between The Industrial Development Board for the City of Pikeville (the "Pikeville Board") and Ferro Manufacturing Corporation ("Ferro") was filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K filed March 27, 1991, and is incorporated herein by reference (10.9) First Amendment to Lease Purchase Contract, dated January 1, 1983, between the Pikeville Board and Ferro was filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K filed March 27, 1991, and is incorporated herein by reference (10.10)* Supplemental Deferred Compensation Agreement between the Company and James J. Lohman was filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K filed March 26, 1992 and is incorporated herein by reference (10.11)* Excel Industries, Inc. and Subsidiaries Incentive Compensation Plan was filed on Exhibit 10.14 to the Company's Annual Report on Form 10-K filed March 26, 1993, and is incorporated herein by reference. (10.12) Lease Extension Agreement dated September 17, 1992 between the Company and Willis Day Properties, Inc. (for the Toledo facility) was filed on Exhibit 10.15 to the Company's Annual Report on Form 10-K filed March 26, 1993, and is incorporated herein by reference. (10.13) Purchase Agreement between the Company and Ford Motor Company dated January 31, 1994........... (11) Not Applicable EX-10.13 2 PURCH AGMT EXHIBIT 10.13 FORD MOTOR COMPANY (BUYER) AND EXCEL INDUSTRIES, INC. (SELLER) PURCHASE AGREEMENT PURCHASE AND SUPPLY (a) FORD MOTOR COMPANY (Buyer) will purchase and EXCEL INDUSTRIES, INC. (Seller) will manufacture and supply 100 percent of Buyer's requirements of the parts shown on Attachment I beginning with the 1994 calendar year and extending through the 1998 calendar year. This agreement applies to the current design level of these parts, to versions as modified by normal engineering changes, and, at the Buyer's option, to similar new parts sourced by the Buyer and supplied by the Seller during the life of this agreement. (b) This agreement includes the provisions of Ford's standard purchase order. (c) Incremental business will be reconciled in accordance with the commercial proposal utilizing activity based costing as developed by Ford Cost Estimating, and the pricing formula agreed to on April 14, 1993. PART CONTENT For reference, Seller's average part cost content breakdown is as follows: Encapsulated Conventional JIT/Hardware Regulators Raw Material CONFIDENTIAL TREATMENT HAS BEEN REQUESTED Purchased Parts WITH RESPECT TO OMITTED INFORMATION Labor WHICH HAS BEEN FILED SEPARATELY Overhead/MRO WITH THE COMMISSION Profit/Depreciation Total ECONOMICS Prices are based on Seller's cost as of January 1, 1994. Prices will not be adjusted for economics (e.g., raw material, purchased parts, labor and overhead/MRO) during the term of this agreement. (Barring extraordinary price increases). PRODUCTIVITY (a) Prices will be reduced during the agreement as follows: Each January 1, all current production parts and new parts launched prior to July 1 of the preceding year will be reduced per the following schedule. All parts launched July 1 or later will be subject to productivity reductions on January 1 following the first full year of production. Date Encapsulated Conventional JIT/Hardware Regulators (Less Glass) (Less Glass) (Less Glass) January 1, 1994 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED January 1, 1995 WITH RESEPCT TO OMITTED INFORMATION January 1, 1996 WHICH HAS BEEN FILED SEPARATELY January 1, 1997 WITH THE COMMISSION January 1, 1998 (b) Seller may retain the economic benefits of implemented changes that were initiated by Seller, with the written approval of the Buyer, in design (SPECS), processing, packing (per packaging plan agreement), and shipping to achieve the productivity improvements that Seller needs to reduce prices as specified in the foregoing section. With each change that Seller initiates, Seller must ion. With each change that Seller initiates, Seller must furnish information and data that demonstrate, in conformance with good engineering practice, the feasibility of the change. Buyer usually will conduct its own engineering analysis of the proposed change and shall not be obligated to approve any change that it believes to be detrimental. When implemented in production, the annual savings of approved SPECS, net of any related costs incurred by Buyer, will be applied as an offset to the Seller's productivity commitment. Savings in excess of Seller's productivity commitment in a given year will be applied toward the next year's commitment. SERVICE AND REPLACEMENT (a) At Buyer's request, Seller will sell to Buyer (i) the supplies of this Agreement necessary to fulfill Buyer's current model service and replacement requirements for such supplies at the prices specified herein plus any actual cost differential for packaging, and (ii) if such supplies are assemblies, service and replacement parts of the assemblies at prices such that the total price of all parts of the assembly does not exceed the price of the assembly less assembly costs, plus any actual cost differential for packaging. (b) At Buyer's request during the seven-year (or longer if required by law) after Buyer's complete current model purchases, Seller will sell to Buyer supplies to fulfill Buyer's past model service and replacement requirements at the prices specified herein plus actual cost differentials for packaging and manufacturing. During the seventh year of such period, Buyer and Seller will negotiate in good faith with regard to Seller's continued manufacture of service and replacement supplies. PAYMENT TERMS Payment terms will be net 15th, 25th and 35th TERMINATION Sections 17(a) - (c) of the terms and conditions of the purchase order are hereby deleted and replaced by the following: If during this Agreement, (a) the quality of Seller's supplies deteriorates, (b) Seller does not remain competitive in quality and delivery with other responsible suppliers or potential suppliers, (c) Seller fails to take appropriate actions to ensure the long-term cost competitiveness of the product covered by the Agreement, or (d) Buyer can substitute supplies of significantly advance design or processing, Buyer may terminate its purchase obligations in whole or in part without further liability. Buyer shall provide written notice to Seller which outlines its causes for termination and specifies a termination date at least three months after the date of the notice. If Seller demonstrates to Buyer, within one month of the date of the notice, that Seller will correct the causes by the termination date or a subsequent date acceptable to Buyer, termination will be suspended and this Agreement will continue. ACCEPTED: EXCEL INDUSTRIES, INC.: FORD MOTOR COMPANY: TITLE/DATE TITLE/DATE EX-21 3 SUBSIDIARY LISTING EXHIBIT 21 Name of Subsidiary State of Incorporation Excel Corporation Indiana Excel Metalcraft, Ltd. Canada Excel Industries of Michigan, Inc. Michigan EX-23 4 ACCOUNTANT CONSENT EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 2-91986) effective July 19, 1984, the Registration Statement on Form S-8 (No. 33-14508) effective June 11, 1987 and the Prospectus constituting part of the Registration Statement of Form S-3 (No. 33-52315) effective March 17, 1994 of Excel Industries, Inc. of our report dated February 17, 1994 appearing on page 16 of this Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page 34 of this Form 10-K. PRICE WATERHOUSE South Bend, Indiana March 30, 1994 -----END PRIVACY-ENHANCED MESSAGE-----