-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AjaCoQ8t80p++sofqJ9lwyOQF/a9m2Grl1JcL0gOB2jORo0k3MTMJXZj/iNxb3zj 63+XGQbG8FKlkHq3SCcOEg== 0000935799-96-000004.txt : 19960314 0000935799-96-000004.hdr.sgml : 19960314 ACCESSION NUMBER: 0000935799-96-000004 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960312 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMPSON INDUSTRIES INC CENTRAL INDEX KEY: 0000090588 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 381225111 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-06611 FILM NUMBER: 96533761 BUSINESS ADDRESS: STREET 1: 32100 TELEGRAPH RD - SUITE 120 CITY: BINGHAM FARMS STATE: MI ZIP: 48025 BUSINESS PHONE: 3135406200 MAIL ADDRESS: STREET 1: 32100 TELEGRAPH ROAD STREET 2: SUITE 120 CITY: BINGHAM FARMS STATE: MI ZIP: 48025-2453 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1995 Commission File Number 0-6611 SIMPSON INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Michigan 38-1225111 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 47603 Halyard Drive, Plymouth, Michigan 48170 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (313) 207-6200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $ 1.00 par value (Title of Class) Common Stock Purchase Rights (Title of Class) Indicate by check mark whether the Registrant (1) has filed all annual, quarterly and other reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant has been 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 aggregate market value of the registrant's voting stock held by non-affiliates of the registrant as of February 21, 1996, computed by reference to the last sale price for such stock on that date as reported on the NASDAQ National Market System, was $163,049,969. At February 21, 1996, there were outstanding 18,010,694 shares of the registrant's common stock, $1.00 par value each. Portions of the Proxy Statement for 1996 Annual Meeting of Shareholders have been incorporated by reference in this Annual Report on Form 10-K (Part III). PART I Item 1. BUSINESS Introduction Simpson Industries, Inc. (the "Company") was organized under Michigan law in 1945. The Company's executive offices are located in Plymouth, Michigan, and the eleven plants at which its manufacturing operations are conducted are located in Michigan, Ohio, Indiana, North Carolina, Ontario (Canada) and Federal District of Mexico (Mexico). Reference in this report to the Company includes Simpson Industries, Inc., its predecessors, divisions and subsidiaries, unless otherwise indicated by the context. Principal Products and Markets The Company manufactures vibration control and other products for automobile, light-truck and diesel engines, air conditioning compressor components, wheel-end and suspension components and assemblies, and transmission and driveline components which are machined from castings and forgings. These products are produced principally for original equipment manufacturers of automobiles, light trucks, diesel engines and heavy duty equipment in North America. The Company's operations are organized into two management groups --- Automotive Group and Heavy Duty Group. The Company maintains product design and process development staffs which work with customers' engineers, principally in the design, testing and development of new products, as well as in the on-going refinement of existing products. The Company also conducts its own research and development activities which are separate from the product development activities conducted in cooperation with its customers. The Company expended $2,309,000 in 1995, $2,033,000 in 1994 and $1,575,000 in 1993 for its research and development. Competition in the sale of all of the Company's products is primarily based on engineering, product design, process capability, quality, cost, delivery and responsiveness. The Company believes that its performance record in these respects places it in a strong competitive position. The Company believes that, in the manufacture of its products, it competes with numerous supplier companies, some of which are larger and have greater financial resources than the Company. In addition, many of the Company's larger customers are capable of performing their own machining work. The Company's customers to which sales exceeded 10% of total net sales include General Motors Corporation, Ford Motor Company, Chrysler Corporation and Consolidated Diesel Company (and its parent companies Cummins Engine Co., Inc. and Case Corporation). Substantially all of the Company's sales are based on competitive proposals on requests from customers. Sales of all products to General Motors Corporation, Ford Motor Company, Chrysler Corporation and Consolidated Diesel Company (and its parent companies Cummins Engine Co., Inc. and Case Corporation) during the years ended December 31, 1995, 1994 and 1993 accounted for 74.3%, 80.1%, and 83.9%, respectively, of the Company's total sales during those periods. In recent years, sales to other significant customers, in particular Caterpillar Incorporated, Mitsubishi Motors Corporation and other Japanese manufacturers, have grown in importance as the Company has broadened its customer base and more narrowly focused its product direction. However, the loss of all or a substantial portion of sales to major customers could have a detrimental effect on the Company's business. The Company believes that such a loss is unlikely because the Company's products, which generally have a life of five to ten years, require a substantial initial investment in engineering, equipment and tooling. Moreover, sales to automotive customers consist of a large number of different products as well as different types of the same products, which are sold to separate divisions and operating groups within each customer's organization. These customer operating units generally act independently when making their purchasing decisions. Because the Company principally ships to its customers' scheduled needs, information concerning its backlog is not meaningful to an understanding of its business. Purchase orders for machined products that do not necessarily represent firm contracts are generally received from larger customers. Customers issue short-term releases against the purchase orders from time to time during the year and these releases are firm orders that typically remain open for acceptance by the Company for a period of 30 days or less. The basic raw materials for the Company's products include aluminum and ferrous castings, steel forgings, steel bar stock and rubber, all of which are available from a large number of sources. The Company has been purchasing such materials from several sources. The Company holds various patents and, from time to time, in the ordinary course of its business, files patent applications. However, the Company does not consider any individual patent or patent application to be material to the operation of its business. The Company's operations, in common with those of manufacturers generally, are subject to numerous federal, state and local laws and regulations pertaining to the discharge of materials into the environment or otherwise relating to the protection of the environment. Compliance with such laws and regulations has not had and is not anticipated to have a material effect on the capital expenditures, earnings or competitive position of the Company. At December 31, 1995, the Company employed 2,050 people on an active basis. Since most of the Company's machined products are for engines, transmissions and drive trains, they are generally not affected by style changes and their production and delivery continue at a relatively uniform rate. However, the Company's operations are affected by the cyclical nature of the United States automobile, light-truck and heavy-duty vehicle markets. The Company's operations are conducted within one business segment and sales attributable to customers outside the United States from U.S. operations were $48,700,000 in 1995, $41,900,000 in 1994 and $15,900,000 in 1993. Item 2. PROPERTIES The following table sets forth the location and approximate size of the Company's facilities. Principally, owned properties are facilities involved in the manufacture of the Company's products and are owned by the Company and its subsidiaries free of encumbrances. All of these properties, as well as the related machinery and equipment, are considered to be well-maintained, suitable and adequate for their intended purpose. PROPERTIES IN ACTIVE USE Approximate Approximate Location Land Area Floor Space Gladwin, Michigan............ 5.0 Acres 71,000 Square Feet Jackson, Michigan............ 11.0 93,000 Litchfield, Michigan......... 22.8 230,000 Plymouth, Michigan........... 5.5 68,000 Middleville, Michigan........ 3.5 72,000 Fremont, Indiana............. 13.7 99,000 Bluffton, Indiana............ 12.5 119,000 Edon, Ohio................... 15.2 134,000 Troy, Ohio................... 12.2 93,000 Greenville, North Carolina... 12.6 90,000 Thamesville, Ontario......... 6.0 59,000 Iztapalapa, Mexico........... 2.8 86,000 TOTAL IN ACTIVE USE........... 122.8 1,214,000 Item 3. LEGAL PROCEEDINGS No material legal proceeding is pending to which the Company or any of its subsidiaries is a party, or of which any of their property is subject. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted by the Company to a vote of security holders through the solicitation of proxies or otherwise, during the fourth quarter of 1995. PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters STOCK PRICE AND DIVIDEND INFORMATION The Company's common stock is traded in the over-the-counter market as a National Market Issue under the symbol SMPS. Stock prices are quoted in the automated quotation system operated by the National Association of Securities Dealers (NASDAQ). The quarterly range of bid prices per share, as reported by NASDAQ, and the dividends paid thereon during the years ended December 31, 1995 and 1994 are shown in the accompanying table. Such prices may represent interdealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. At December 31, 1995 there were 3,351 shareholders of record of the Company's common stock. Bid Price Per Share Dividend Quarter Ended High Low Paid Per Share March 31, 1994 15 21/32 12 21/32 $.09 June 30, 1994 14 21/32 12 .09 September 30, 1994 13 1/2 10 .10 December 31, 1994 13 3/8 7 7/8 .10 March 31, 1995 10 1/8 9 .10 June 30, 1995 11 1/4 9 3/8 .10 September 30, 1995 12 1/8 8 5/8 .10 December 31, 1995 9 7/8 8 .10 Item 6. Selected Financial Data Five Year Summary (Dollar amounts in millions, except per share and per employee) 1995 1994 1993 1992 1991 Operating Data Net sales $395.1 $356.6 $262.5 $222.8 $191.9 Cost of products sold 354.4 319.6 234.2 197.3 175.2 Gross profit 40.7 37.0 28.3 25.5 16.7 as a % of sales 10.3 10.4 10.8 11.5 8.7 Operating earnings 28.8 26.8 19.4 16.7 9.2 as a % of sales 7.3 7.5 7.4 7.5 4.8 Net earnings 15.3 14.4 6.4* 8.0 4.5 as a % of sales 3.9 4.0 2.5 3.6 2.4 Net earnings per share 0.85 0.80 0.36 0.47 0.31 Dividend per share 0.40 0.38 0.37 0.37 0.37 Weighted average shares (millions) 18.0 18.0 17.9 16.9 14.7 At Year End Current assets $82.0 $70.5 $70.9 $76.9 $51.3 Working capital 40.3 31.7 34.5 49.7 30.4 Total assets 232.5 207.0 186.8 170.0 138.1 Long-term debt 62.3 50.4 39.0 37.0 38.5 Shareholders' equity 105.1 98.0 91.5 91.8 64.1 Book value per share 5.84 5.47 5.12 5.16 4.39 % Debt/equity 59 51 43 40 60 % Debt/total capital 38 35 31 30 38 Additional Statistics New program launches 10 23 20 N/A N/A Sales per share $21.91 $19.81 $14.64 $13.16 $13.08 Depreciation 18.9 16.3 14.2 13.4 12.4 Capital investment 31.5 38.2 37.5 22.4 15.8 % return on average equity 15.1 15.2 7.0 10.2 7.0 Sales per employee 186,706 182,240 163,034 148,451 134,633 Operating earnings per employee 13,594 13,704 12,041 11,147 6,488 Number of employees, year end 2,050 2,135 1,768 1,507 1,471 Stock Activity Price Range 8 - 7 7/8 - 10 1/2 - 8 - 4 19/32 - 12 1/8 15 21/32 14 21/32 13 5/32 9 5/32 Price at year end 9 9 1/4 14 3/32 10 13/32 8 21/32 * - Includes $3-million net charge for accounting changes. N/A - Not available. Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operation 1995 Compared to 1994 In 1995 net sales reached a record level at $395,069,000, reflecting an 11% increase over 1994/s $356,643,000. This increase was primarily driven by 10 new program launches in 1995 and the full year effect of the 23 new product programs launched in 1994 generating significant new volume. Base volumes on previously existing programs, while remaining fairly strong, declined in the latter part of the year. North American production of automobiles and light trucks decreased 2% from the prior year, while production levels increased for medium and heavy-duty diesel engines for vehicles and non-vehicular use. Management expects sales for 1996 to be comparable to 1995 as light vehicle and heavy-duty truck markets continue to experience some softness. Operating earnings increased 7% from $26,818,000 to $28,764,000 for 1995. The operating margin, at 7.3% decreased slightly from 7.5% in 1994, due principally to a shift in product mix in late 1994 and margin pressure caused by higher fixed costs and relatively flat volume in the second half of the year. Offsetting factors include lower new program launch costs than in 1994 and productivity gains on more mature production lines. Investment and other income was $1,147,000 in 1995, up $530,000 from 1994, due to higher average invested balances. Interest expense increased $1,170,000 from 1994 as a result of additional long-term borrowing issued early in the year. Income tax expense for 1995 represents an effective rate of 37.3% compared to 37.8% for 1994, which is lower due to lower foreign taxes. 1994 Compared to 1993 Net sales for 1994, at $356,643,000 were 36% above the $262,485,000 level of 1993. The major reason for the sales increase from 1993 to 1994 was the volume on several significant new product programs in addition to an 8% increase in North American auto and light truck production and heavy-duty diesel engine production increases. Operating earnings, as a percentage of sales, were 7.5% and 7.4% for 1994 and 1993, respectively. This margin improved slightly yet was reduced by start-up expenses incurred in connection with the launch of 23 new major programs. Additionally, material costs increased as a percentage of sales due to a shift to higher-material-content components along with increases in aluminum costs, not yet recoverable from customers. Offsetting some of these effects were the impact of higher volume on base business and productivity gains on existing production lines, coupled with control of administrative and selling expenses. Investment and other income was $617,000 in 1994, up from $232,000 from 1993. Interest expense increased $1,014,000 from 1993 as a result of increased long-term debt in 1994. The effective rate for income tax expense was 37.8% for 1994 compared to 42.1% for 1993. The 1993 expense of $6,850,000 included $1,300,000 of deferred tax on the expected repatriation of current and prior earnings of a Canadian subsidiary, a $200,000 charge for the adjustment of deferred tax balances to the new higher federal tax rate, and the mitigating impact of tax-exempt investment earnings. In the first quarter of 1993, the Company adopted new accounting pronouncements related to retiree medical benefits and income taxes. The net impact of the cumulative effects of the two changes was to reduce net income by $3,000,000. Liquidity and Capital Resources Net cash generated from operations was $35,781,000 in 1995 compared to $20,778,000 in 1994 and $17,042,000 in 1993. The cash flows were primarily provided from earnings and depreciation expense reduced by working capital needed to support the significant growth in 1994 and 1993. During 1995, $31,510,000 was invested in capital equipment and plant expansions compared to $38,239,000 in 1994. The investment was lower in 1995 due to the completion in 1994 of expansions at the Fremont, Indiana, and Troy, Ohio plants, as well as investments made in 1994 in support of a greater number of major new programs for 1995 and 1996. Capital expenditures for 1996 are expected to approximate $25,000,000 and will principally support the completion of the Technology Center in Plymouth, Michigan, new business, and infrastructure enhancements around the organization. During 1995, the Company entered into bank term loan agreements for $20,000,000 and $4,050,000. The $20,000,000 debt agreement carries an interest rate of 8.45% and is payable over a 10-year period. The $4,050,000 debt agreement carries an interest rate of 8.82% and is payable over 8 years. During 1995 the Company repaid a $10,000,000 bank term loan and additional cash was used to prepay $750,000 of higher-cost debt in addition to the $1,500,000 scheduled repayment. During 1994, the Company drew down the remaining $15,000,000 under a $20,000,000 unsecured loan agreement, originated in 1993, at an interest rate of 6.75% and payable over 15 years. Prepayments of $1,500,000 of higher cost debt were also made in 1994 and 1993. The Company has paid uninterrupted cash dividends each year since becoming publicly-owned in 1972. Dividends paid in 1995 were $7,192,000 compared to $6,930,000 in 1994 and $6,665,000 in 1993, reflecting the increased dividend rate in mid-1994. The per share dividend rate for years 1995, 1994 and 1993 was $.40 per share, $.38 per share and $.37 per share, respectively. The Company maintains a revolving credit facility and other short-term borrowing arrangements which total $24,623,000 of which $3,022,000 was committed as letters of credit at December 31,1995. The Company had no short-term borrowings at December 31, 1995 or December 31, 1994. The Company's long-term debt (excluding current installments) was $62,270,000 at December 31, 1995 compared to $50,375,000 at December 31, 1994. Interest rates on the long-term debt range from 6.75% to 9.98%. The Company is subject to restrictions on additional borrowing and maintenance of minimum net worth and working capital requirements. The Company believes that existing cash balances, cash from operations, and borrowings available under its revolving credit facility and other short-term arrangements will be sufficient to meet its anticipated cash needs for the foreseeable future. Impact of Inflation The Company does not expect that it will be significantly affected by inflation in 1996. Impact of FASB Statements The Company has not yet adopted Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" or Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation," which become effective in 1996. Neither statement is expected to have a material effect upon future financial statements. Item 8. Financial Statements and Supplementary Data CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31 1995 1994 1993 Net sales $395,069 $356,643 $262,485 Costs and expenses: Cost of products sold 354,436 319,557 234,191 Administrative and selling 11,869 10,268 8,908 366,305 329,825 243,099 Operating Earnings 28,764 26,818 19,386 Investment and other income, net 1,147 617 232 Interest expense (5,514) (4,344) (3,330) Earnings Before Income Taxes and Cumulative Effect of Accounting Changes 24,397 23,091 16,288 Income taxes 9,095 8,722 6,850 Earnings Before Cumulative Effect of Accounting Changes 15,302 14,369 9,438 Cumulative effect of accounting changes: Retiree medical benefits, net of income tax benefit --- --- (4,300) Income taxes --- --- 1,300 Net Earnings $ 15,302 $ 14,369 $ 6,438 Net earnings per share before cumulative effect of accounting changes $.85 $.80 $.53 Cumulative effect of accounting changes: Retiree medical benefits, net of income tax benefit --- --- (.24) Income taxes --- --- .07 Net Earnings Per Share $.85 $.80 $.36 See accompanying notes to consolidated financial statements CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31 1995 1994 1993 OPERATING ACTIVITIES Net earnings $15,302 $14,369 $ 6,438 Adjustments to reconcile net earnings to cash provided by operating activities: Cumulative effect of accounting changes, net --- --- 3,000 Depreciation 18,921 16,330 14,215 Provision for deferred income taxes 1,234 (874) 1,017 Amortization of restricted stock 330 272 256 (Gain) loss on disposition of assets (113) (41) 435 Changes in operating assets and liabilities: Accounts receivable 985 (14,660) (10,568) Inventories (1,660) (2,797) (4,240) Other assets (4,052) 5,443 (4,207) Accounts payable and accrued expenses 4,834 2,736 10,696 Cash Provided By Operating Activities 35,781 20,778 17,042 INVESTING ACTIVITIES Sale of marketable securities 2,491 83 30,323 Capital expenditures (31,510) (38,239) (37,515) Proceeds from disposal of property and equipment 1,069 478 321 Cash Used In Investing Activities (27,950) (37,678) (6,871) FINANCING ACTIVITIES Cash dividends paid (7,192) (6,930) (6,665) Principal repayments of long-term debt (12,250) (3,000) (3,000) Proceeds from long-term borrowings 24,050 15,000 5,000 Cash provided by stock transactions, net 42 78 294 Cash Provided By (Used In) Financing Activities 4,650 5,148 (4,371) Effect of foreign currency exchange rate changes (1,312) (1,420) (446) Increase (Decrease) In Cash and Cash Equivalents 11,169 (13,172) 5,354 Cash and cash equivalents at beginning of year 2,321 15,493 10,139 Cash And Cash Equivalents At End of Year $13,490 $ 2,321 $15,493
See accompanying notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS (In thousands) December 31 1995 1994 ASSETS Current Assets Cash and cash equivalents $ 13,490 $ 2,321 Marketable securities --- 2,491 Accounts receivable 47,218 48,203 Inventories 12,881 11,221 Customer tooling in process 1,334 1,057 Prepaid expenses and other current assets 7,068 5,245 Total Current Assets 81,991 70,538 Property, Plant and Equipment, at cost Land 3,146 1,667 Buildings and improvements 45,777 35,078 Machinery and equipment 205,651 192,135 254,574 228,880 Less accumulated depreciation 107,908 93,847 Net Property, Plant and Equipment 146,666 135,033 Other Assets 3,854 1,413 $232,511 $206,984 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current installments of long-term debt $ 2,030 $ 2,125 Accounts payable 21,353 20,679 Compensation and amounts withheld 9,876 8,980 Taxes, other than income taxes 2,942 2,492 Other accrued expenses 5,532 4,611 Total Current Liabilities 41,733 38,887 Long-Term Debt, excluding current installments 62,270 50,375 Accrued Retirement Benefits 12,439 10,414 Deferred Income Taxes 10,992 9,269 Shareholders' Equity Common stock, par value $1 per share: Authorized - 35,000,000 shares Outstanding - 17,981,485 shares (1994 - 17,928,914 shares) 17,981 17,929 Additional paid-in capital 23,646 23,201 Retained earnings 68,896 60,786 Unamortized value of restricted stock (1,815) (1,690) Cumulative foreign currency translation adjustments (3,499) (2,187) Excess pension cost (132) --- Total Shareholders' Equity 105,077 98,039 $232,511 $206,984 See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands) Cumulative Unamortized Foreign Additional Value Of Currency Excess Common Paid-In Retained Restricted Translation Pension Stock Capital Earnings Stock Adjustments Cost Total Balance at January 1, 1993 $11,863 $27,988 $53,574 $(1,311) $ (321) $91,793 Net earnings for 1993 6,438 6,438 Cash dividends - $.37 per share (6,665) (6,665) Exercise of stock options, net 35 259 294 Restricted stock awards, net 16 339 (355) --- Amortization of restricted stock 256 256 Translation adjustment for the year (446) (446) Excess pension cost adjustment $(123) (123) Balance at December 31, 1993 11,914 28,586 53,347 (1,410) (767) (123) 91,547 Net earnings for 1994 14,369 14,369 Cash dividends - $.38 per share (6,930) (6,930) 3-for-2 stock distribution 5,975 (5,977) (2) Exercise of stock options, net 14 66 80 Restricted stock awards, net 26 526 (552) --- Amortization of restricted stock 272 272 Translation adjustment for the year (1,420) (1,420) Excess pension cost adjustment 123 123 Balance at December 31, 1994 17,929 23,201 60,786 (1,690) (2,187) --- 98,039 Net earnings for 1995 15,302 15,302 Cash dividends - $.40 per share (7,192) (7,192) Exercise of stock options, net 7 35 42 Restricted stock awards, net 45 410 (455) --- Amortization of restricted stock 330 330 Translation adjustment for the year (1,312) (1,312) Excess pension cost adjustment (132) (132) Balance at December 31, 1995 17,981 23,646 68,896 (1,815) (3,499) (132) 105,077 See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - Significant Accounting Policies Description of the Business: The Company is a supplier of precision-machined powertrain and chassis products to the global automotive and heavy duty diesel engine markets, supplying in excess of 700 different components and assemblies to original equipment manufacturers located principally in North America. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and all subsidiaries after elimination of intercompany accounts and transactions. Foreign Currency Translation: Translation adjustments from foreign subsidiaries are reflected in the financial statements as a separate component of shareholders' equity. Foreign currency gains and losses resulting from transactions are included in determining net earnings. Cash Equivalents: Cash equivalents include all liquid investments purchased with a maturity of three months or less. Financial Instruments: Financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and long-term debt. At December 31, 1995, the fair value of these financial instruments approximates the carrying amount with the exception of long-term debt as discussed in Note C. Inventories: Inventories are stated at the lower of cost or market. Costs are determined by the last-in, first-out (LIFO) method for domestic inventories and by the first-in, first-out (FIFO) method for foreign inventories. Depreciation: Depreciation is computed using the straight-line method at annual rates which are sufficient to amortize the cost over the estimated useful lives. Customer Tooling: Costs incurred for customer-owned tooling in excess of amounts billed to date are recorded as customer tooling in process. Costs for customer-owned tooling which will be recovered as parts are shipped are included with other assets. Retiree Medical Benefits: Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which established a new accounting principle for the cost of retiree medical benefits. Prior to 1993, the Company recognized those benefits on the pay-as-you-go method. The cumulative effect of the change in accounting for retiree medical benefits was included in determining net earnings in 1993. Income Taxes: Effective January 1, 1993, the Company has determined income tax expense and deferred tax balances in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," and has included the cumulative effect of that change in accounting in determining net earnings for 1993. Income taxes for years prior to 1993 were determined in accordance with APB Opinion No. 11. No deferred income taxes have been provided for the income tax liability of approximately $350,000 which would be incurred on repatriation of the permanently reinvested portion of unremitted earnings of the foreign subsidiaries. Net Earnings Per Share: Net earnings per share are computed based upon the weighted average shares of common stock and common stock equivalents (stock options) outstanding during the year as adjusted for a 3-for-2 stock distribution in 1994. The average common and common equivalent shares used in the computation of earnings per share was 18,035,060 in 1995; 18,000,795 in 1994; and 17,935,467 in 1993. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make reasonable estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported net earnings for the period. Ultimate resolution of uncertainties could cause actual results to differ from these estimates. Note B - Inventories The components of inventories are summarized as follows: (In thousands) 1995 1994 Finished and in-process products $ 7,971 $ 7,930 Raw materials 4,910 3,291 $12,881 $11,221 The LIFO inventories comprise approximately 96% of total inventories at December 31, 1995 and 1994. The replacement cost of inventories exceeded the balance sheet carrying amounts by approximately $5,500,000 and $5,100,000 at December 31, 1995 and 1994, respectively. Note C - Debt Long-term debt at December 31 consisted of the following obligations: (In thousands) 1995 1994 Note payable to insurance company at 8.8% $ 5,250 $ 7,500 Note payable to insurance company at 9.98% 15,000 15,000 Bank term note at 9.25% --- 10,000 Bank term note at 6.75% 20,000 20,000 Bank term note at 8.45% 20,000 --- Bank term note at 8.82% 4,050 --- 64,300 52,500 Less current installments 2,030 2,125 Long-term debt, excluding current installments $62,270 $50,375 The $5,250,000 note requires semi-annual interest payments and repayment of principal in four annual installments ending June 15, 1999. The $15,000,000 note requires semi-annual interest payments and repayment of principal in ten equal annual installments commencing in August 1997 and matures August 15, 2006. The $20,000,000 bank term note at 6.75% requires quarterly interest payments and repayment of principal in ten equal annual installments commencing in December 1999 and matures December 31, 2008. The $20,000,000 bank term note at 8.45% requires quarterly interest payments and repayment of principal in twenty equal quarterly installments commencing in July 2000 with the final installment due February 7, 2005. The $4,050,000 bank term note at 8.82% requires monthly interest payments and repayment of principal in eighty-four equal monthly installments commencing in February 1996 with the final installment due January 2003. As of December 31, 1995 the estimated fair value of long-term debt, discounted at current interest rates, was $71,300,000. Under the terms of its loan agreements, the Company is subject to restrictions concerning additional borrowings and maintenance of minimum net worth and working capital. At December 31, 1995, retained earnings of approximately $18,346,000 were unrestricted. The Company has a revolving bank loan agreement under which it may borrow up to $12,000,000 through April 1, 2001 with interest at the lower of the bank's prime interest rate or a Eurodollar rate. Commitment fees are paid on the available credit. The Company also has short-term credit lines with banks under which it may borrow up to $12,623,000, of which $3,022,000 was committed as letters of credit at December 31,1995. The contract amount of the letters of credit approximate their fair value. The lines do not have termination dates, but are reviewed periodically. No compensating balances are required by any of the loan agreements. Principal maturities of long-term debt during the four years following 1996 are as follows: 1997 - $3,579,000; 1998 - $3,579,000; 1999 - $4,829,000; and 2000 - $6,079,000. Interest paid approximates interest expense for each year. Note D - Income Taxes As of January 1, 1993, the Company adopted Statement No. 109, which requires an asset and liability approach to determining deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities. Deferred taxes are measured using the enacted laws and tax rates that are expected to be in effect when the differences are anticipated to reverse. The components of earnings before income taxes were as follows: (In thousands) 1995 1994 1993 Domestic $21,772 $19,849 $13,635 Foreign 2,625 3,242 2,653 $24,397 $23,091 $16,288 The provisions for income tax expense were as follows: (In thousands) 1995 1994 1993 Current: Federal $6,439 $7,430 $4,552 Foreign 1,109 1,584 961 State 313 582 320 7,861 9,596 5,833 Deferred: Federal 1,078 (684) 644 Foreign 73 (44) 70 State 83 (146) 103 Change in tax rate --- --- 200 1,234 (874) 1,017 $9,095 $8,722 $6,850 Income taxes paid $7,650 $9,434 $6,045 A reconciliation of income tax expense to the amount computed by applying the statutory federal income tax rate to earnings before income taxes follows: (In thousands) 1995 1994 1993 Income taxes at federal statutory rate $8,539 $7,982 $5,600 Provision for repatriation of foreign earnings --- --- 1,300 State income tax, net of federal benefit 257 285 277 Change in tax rate --- --- 200 Foreign operating loss 196 435 --- Other, net 103 20 (527) $9,095 $8,722 $6,850 The tax effects of temporary differences that give rise to significant deferred tax assets and liabilities at December 31 are as follows: 1995 1994 Deferred Deferred Deferred Deferred Tax Tax Tax Tax (In thousands) Assets Liabilities Assets Liabilities Plant and equipment $ --- $14,458 $ --- $12,250 Accrued pension benefits 946 --- 691 --- Accrued retiree medical benefits 3,436 --- 3,106 --- Other accrued expenses 2,725 --- 2,103 --- Foreign net operating loss carryforward 696 --- 506 --- Other items 372 990 431 816 8,175 15,448 6,837 13,066 Valuation allowance (696) --- (506) --- $7,479 $15,448 $6,331 $13,066 As of December 31,1995,the Company has unrecognized foreign net operating loss carryforwards of approximately $2,000,000 that begin expiring in 2003. Deferred income tax assets of $3,023,000 and $2,534,000 are included in other current assets at December 31, 1995 and 1994, respectively. Note E - Pension Plans The Company has non-contributory defined benefit pension plans covering substantially all employees, subject to eligibility requirements. Benefits are based upon a percentage of compensation or monthly rates times years of service. Plan assets are held by a trustee and invested in marketable debt and equity securities and short-term investments. Benefits for certain employees are provided through multi-employer defined benefit plans. The Company also has an unfunded supplemental executive retirement plan for senior management with benefits based on compensation and years of service. Contributions to pension plans are sufficient to provide for both current service costs and amortization of past service costs over a reasonable period. Net pension expense for 1995, 1994 and 1993 included the following components: 1995 1994 1993 Assumptions used were: Discount rate 8.5% 7.5% 8.5% Rate of increase in compensation levels 5% 5% 5% Expected annual long-term rate of return on assets 9% 9% 9% (In thousands) Benefits earned during the year $1,548 $1,656 $1,343 Interest cost on projected benefit obligation 2,142 1,982 1,827 Actual return on assets (2,591) (316) (3,020) Net amortization and deferral 804 (1,313) 1,210 Multi-employer plans 574 506 430 $2,477 $2,515 $1,790 The following table sets forth the plan's funded status at September 30: 1995 1994 Assumptions used were the same as above, except: Discount rate 7.75% 8.5% Plans in Which Plans in Which Assets Accum. Assets Accum. Exceed Benefits Exceed Benefits (In thousands) Accum. Exceed Accum. Exceed Benefits Assets Benefits Assets Actuarial present value of: Vested benefit obligation $6,712 $13,911 $5,004 $11,956 Accumulated benefit obligation $7,125 $14,318 $5,299 $12,183 Projected benefit obligation $10,270 $19,512 $7,589 $16,106 Plan assets at fair value 8,148 11,912 7,442 11,645 Deficiency of assets under projected benefit obligation (2,122) (7,600) (147) (4,461) Unrecognized net loss 1,760 3,550 507 1,448 Unrecognized net asset (407) (97) (508) (150) Unrecognized prior service cost 581 432 168 480 Additional minimum liability --- (569) --- (327) (Accrued) prepaid pension liability included in the balance sheets $ (188) $(4,284) $ 20 $(3,010)
The Company has recorded an additional minimum liability at December 31, 1995 and 1994, representing the excess of the unfunded accumulated benefit obligations over the fair value of plan assets and accrued pension liabilities. The additional liability has been offset by intangible assets to the extent of previously unrecognized prior service cost, with the excess of $132,000 (net of tax) charged directly to shareholders' equity in 1995. Certain employees participate in Company-sponsored 401(k) savings plans. Under the plans, the Company contributes a defined amount to individual employee accounts based on the respective employee's contribution. Contributions approximated $1,340,000; $1,050,000 and $900,000 in 1995, 1994 and 1993, respectively. Note F - Retiree Medical Benefits The Company provides medical benefits to certain retired employees, their covered dependents, and beneficiaries. Generally, employees who have attained age 55 and who have rendered 10 years of service are eligible for these benefits. Certain medical plans are contributory and other medical plans are noncontributory. The retiree medical benefit cost for 1995, 1994 and 1993 consisted of the following: 1995 1994 1993 Assumed discount rate 8.5% 7.5% 8.5% (In thousands) Benefits earned during the year $ 464 $ 547 $335 Interest cost on accumulated retiree medical benefits 770 739 572 Net amortization 12 88 --- $1,246 $1,374 $907 The Company's retiree medical benefits are not funded. The following table presents the actuarial present value of the obligation at September 30 reconciled with amounts recognized in the balance sheet: 1995 1994 Assumed discount rate 7.75% 8.5% (In thousands) Accumulated retiree medical benefits obligation: Retirees $ 3,002 $2,910 Fully eligible, active plan participants 1,212 863 Other active employees 6,302 5,446 10,516 9,219 Unrecognized net loss (1,068) (666) Unamortized prior service cost (74) (79) $ 9,374 $8,474 Other actuarial assumptions used for the Company's retiree health care plans include: (Dollars in thousands) 1995 1994 1993 Medical cost trend rate (a) 11% 12% 13% Effect of a 1% point increase in the medical cost trend rate on the accumulated retiree medical benefit obligation $1,761 $1,517 $1,353 Effect of a 1% point increase in the medical cost trend rate on the aggregate of the service and interest cost $245 $193 $135 (a) The medical cost trend rate is assumed to decrease 1% per year, to 6% for 2000 and remaining at that level thereafter. The unrecognized net loss is amortized over the average remaining service period of 15 years of active plan participants. Note G - Long-Term Incentive Plans The Company has long-term incentive plans under which employees or directors may be granted stock options or other long-term incentives. The 1984 Plan, which allowed for options to be granted for up to 1,687,500 common shares, was terminated in 1993. Options and restricted shares previously granted under the 1984 Plan remain outstanding for up to 10 years. Stock appreciation rights (SARs), which provide that optionees may receive cash in lieu of shares, were also granted in conjunction with stock option grants. In 1993, the Company adopted the 1993 Executive Long-Term Incentive Plan for employees. The 1993 Plan permits the grant of stock options, restricted stock, stock appreciation rights, performance shares and performance units. The authorized share pool for making grants under the 1993 Plan is 1,350,000 common shares. Also in 1993, the Company adopted the 1993 Non-Employee Director Stock Option Plan. Under this plan, nonqualified stock options may be granted to non-employee directors for up to 150,000 common shares. Options granted have varying exercise dates within five years after grant date and generally expire after ten years. At December 31, 1995 there were 1,539,475 of common stock reserved for issuance under the plans of which 1,146,830 are available for future grants. Incentive plan activity is summarized as follows: Option Restricted Shares Price Range Shares 1994: Outstanding January 1, 1994 312,413 $ 4.45-12.33 164,904 Granted/awarded 63,600 12.50-14.67 37,800 Exercised (53,513) 4.45- 8.42 --- Restrictions lapsed --- --- (32,535) Canceled/forfeited (600) 6.67-12.25 (3,069) Outstanding 321,900 4.45-14.67 167,100 Exercisable 188,850 4.45-11.00 --- 1995: Granted/awarded 101,360 9.50-10.94 66,560 Exercised (22,365) 6.67-14.67 --- Restrictions lapsed --- --- (29,597) Canceled/forfeited (8,250) 6.67-14.67 (18,472) Outstanding 392,645 4.45-14.67 185,591 Exercisable 222,825 4.45-14.67 ---
Note H - Shareholder Rights Plan In 1987 the Company adopted a Shareholder Rights Plan designed to discourage partial or two-tier tender offers which could result in unequal treatment of shareholders. Under the Plan, the right to purchase one share of common stock was distributed for each outstanding share of the Company's common stock. This plan was amended in 1989 to provide that the Rights become exercisable if a person or group acquires, in a transaction not approved by the Board of Directors, 20% or more of the Company's common stock. In addition, the amendment permits the Board of Directors to declare a person or group owning 10% or more of the Company's common stock an "Adverse Person," under certain circumstances which also cause the Rights to become exercisable. When exercisable, each Right entitles shareholders to purchase one share of the Company's common stock at a specified exercise price. The Company will be entitled to redeem the Rights at $.05 per Right up to, and including, the tenth business day after the announcement that a 20% position has been acquired. If the Company is acquired or certain other transactions occur after the Rights become exercisable, each Right will entitle its holder to purchase, for the exercise price, a number of the acquiring or surviving Company's common shares having a market value of twice the exercise price. Rights were issued in 1987 to shareholders and attached to each share issued thereafter until the earlier of the dates the Rights become exercisable, expire or are redeemed. Rights expire May 11, 1997, unless extended by the Board of Directors. Note I - Commitments and Contingencies The Company has been identified as a potentially responsible party under federal environmental regulations to share in the cost of cleanups at five waste disposal sites along with many other companies. While management believes the Company's responsibility in these matters is minimal, it has established reserves which it believes are adequate to cover potential liabilities. Note J - Major Customers The Company's operations are conducted within one business segment. Export sales to customers from the United States were $48,700,000. Net sales to major customers were: (In thousands) 1995 1994 1993 General Motors Corporation $109,200 $109,800 $100,600 Ford Motor Company 92,900 89,300 50,600 Chrysler Corporation 55,000 54,400 40,000 Consolidated Diesel Company and its parent companies, Cummins Engine Company, Inc. and Case Corporation 36,500 32,300 29,000 Aggregate receivables for these customers at December 31, 1995 and 1994 approximate the same percent of total receivables as aggregate sales to these customers bear to total sales. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Simpson Industries, Inc. We have audited the accompanying consolidated balance sheets of Simpson Industries, Inc. and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Simpson Industries, Inc. and subsidiaries at December 31, 1995 and 1994, and the results of their operation and their cash flows for each of the years in the three-year period ended December 31, 1995 in conformity with generally accepted accounting principles. As discussed in notes A and D to the Consolidated Financial Statements, the Company changed its method of accounting for income taxes in 1993 to adopt the provisions of the Financial Accounting Standard Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As discussed in notes A and F to the Consolidated Financial Statements, the Company also adopted the provisions of the Financial Accounting Standard Board's Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in 1993. KPMG Peat Marwick LLP Detroit, Michigan January 26, 1996 SUMMARY OF QUARTERLY RESULTS OF OPERATION (In thousands, except per share amounts) Quarter Ended Mar.31 Jun.30 Sep.30 Dec.31 1995 Net sales $107,237 $103,600 $86,338 $97,894 Gross profit 12,381 11,912 6,625 9,715 Net earnings 5,562 4,911 1,435 3,394 Net earnings per share .31 .27 .08 .19 1994 Net sales $82,701 $91,315 $85,877 $96,750 Gross profit 9,546 10,680 7,428 9,432 Net earnings 4,084 4,478 2,465 3,342 Net earnings per share .23 .25 .14 .18 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure NONE PART III The information called for by the items within this part is included in the Company's 1996 Proxy Statement, and is incorporated herein by reference, as follows: Pages in 1996 Proxy Statement Item 10. Directors and Executive Officers of the Registrant 1-3, 12 Item 11. Executive Compensation 4-10 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions N/A PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (2) All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions. (3) Exhibits. The following exhibits designated with a "+" symbol represent the Company's management contracts or compensatory plans or arrangements for executive officers: 3.1 Restated Articles of Incorporation, as amended (previously filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference) 3.2 Bylaws, as amended (previously filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 and incorporated herein by reference) 4.1 Rights Agreement between Simpson Industries, Inc. and NBD Bank, N.A., as Rights Agent, dated as of December 18, 1989 (previously filed as Exhibit 4(a) to the Company's Current Report on Form 8-K dated January 12, 1990 and incorporated herein by reference) Letter from Simpson Industries, Inc. to State Street Bank and Trust, N.A., dated July 8, 1994, appointing the latter as successor Rights Agent; and letter from State Street Bank and Trust, N.A., to Simpson Industries, Inc., dated July 10, 1994, accepting such appointment (previously filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.1 Term Loan Agreement with Manufacturers National Bank of Detroit, dated as of June 5, 1990, as amended (previously filed as Exhibit 10. 1 to the Company's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1990 and September 30, 1991, and incorporated herein by reference) Amendment No. 3 to Term Loan Agreement with Comerica Bank (successor in interest by reason of merger to Manufacturers Bank, N.A., formerly known as Manufacturers National Bank of Detroit), dated as of December 17, 1993 (previously filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference) Amendment No. 4 to Term Loan Agreement with Comerica Bank (successor in interest by reason of merger to Manufacturers Bank, N.A., formerly known as Manufacturers National Bank of Detroit), dated as of November 1, 1994 (previously filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.2 Revolving Credit and Term Loan Agreement with Manufacturers National Bank of Detroit and Continental Bank, N.A., dated as of October 5, 1989, as amended (previously filed as Exhibits 10.11, 10.2 and 10.2, respectively, to the Company's Quarterly Reports on Form 10-Q for the quarters ended September 30, 1989, September 30, 1991 and September 30, 1992, and incorporated herein by reference) Amendment No. 1 to Amended and Restated Revolving Credit Agreement with Comerica Bank (successor in interest by reason of merger to Manufacturers Bank N.A., formerly known as Manufacturers National Bank of Detroit) and Bank of America Illinois (formerly known as Continental Bank, N.A.), dated as of December 17, 1993 (previously filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference) Amendment No. 2 to Amended and Restated Revolving Credit Agreement with Comerica Bank (successor in interest by reason of merger to Manufacturers Bank N.A., formerly known as Manufacturers National Bank of Detroit) and Bank of America Illinois (formerly known as Continental Bank, N.A.), dated as of November 1, 1994 (previously filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.3 Note Agreement with Aetna Life Insurance Company, dated June 12, 1986 (previously filed as Exhibit 10.3 to the Company's Current Report on Form 8-K, dated June 12, 1986 and incorporated herein by reference) Amendment to Note Agreement with Aetna Life Insurance Company, dated November 17, 1994 (previously filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.4+ 1984 Stock Option Plan, as amended (previously filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference) 10.8+ Supplemental Executive Retirement Plan (previously filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, and incorporated herein by reference) 10.10+ Letter Agreement, dated September 12, 1989, with Roy E. Parrott (previously filed as Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1989 and incorporated herein by reference) + Amendment to Letter Agreement with Roy E. Parrott, dated March 15, 1994 (previously filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.11 Note Agreement with Massachusetts Mutual Life Insurance Company, dated August 15, 1991 (previously filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 and incorporated herein by reference) 10.13+ Simpson Industries, Inc. 1993 Executive Long-Term Incentive Plan (previously filed as Exhibit 10. 13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.14+ Simpson Industries, Inc. 1993 Non-Employee Director Stock Option Plan (previously filed as Exhibit 10. 14 to the Company's Annual report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference) 10.15 Term Loan Agreement with Comerica Bank, dated as of December 17, 1993 (previously filed as Exhibit 10. 15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference) Amendment to Term Loan Agreement with Comerica Bank, dated as of November 1, 1994 (previously filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.16+ Letter Agreement, dated October 25, 1994, with Robert W. Navarre (previously filed as Exhibit 10. 16 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 and incorporated herein by reference) 10.17+ Letter Agreement, dated December 16, 1994, with Kathryn L. Williams (previously filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.19+ Letter Agreement, dated December 16, 1994, with James A. Hug (previously filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.20 Term Note Agreement with Comerica Bank, dated as of January 25, 1995 (previously filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.21 Term Note Agreement with Comerica Bank, dated as of February 7, 1995 (previously filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, and incorporated herein by reference) 10.22* Terms of Employment, dated February 21, 1995, with James B. Painter 11* Statement regarding Computation of per share earnings 21* Subsidiaries of registrant 23* Consent of independent public accountants 27.1* Financial Data Schedule *Filed with this report (b) No reports on Form 8-K were filed during the last quarter of the Company's fiscal year ended December 31, 1995. SIGNATURES Pursuant to the requirements of Section 13 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. SIMPSON INDUSTRIES, INC. By: /s/ Roy E. Parrott Roy E. Parrott, President and Chief Executive Officer Date: February 22, 1996 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 indicated on February 22, 1996. Signature Title /s/ Roy E. Parrott President and Chief Executive Officer Roy E. Parrott and Director (principal executive officer) /s/ Kathryn L. Williams Vice President and Chief Financial Kathryn L. Williams Officer (principal financial officer) /s/ James E. Garpow Treasurer and Assistant Secretary James E. Garpow (principal accounting officer) /s/ Robert W. Navarre Chairman of the Board and Director Robert W. Navarre /s/ Michael E. Batten Director Michael E. Batten /s/ Susan F. Haka Director Susan F. Haka /s/ George R. Kempton Director George R. Kempton /s/ Walter J. Kirchberger Director Walter J. Kirchberger /s/ Ronald L. Roudebush Director Ronald L. Roudebush /s/ F. Lee Weaver Director F. Lee Weaver /s/ Frank K. Zinn Director and Secretary Frank K. Zinn INDEX TO EXHIBITS Exhibit Number Exhibits 10.22 Terms of Employment, dated February 21, 1995, with James B. Painter 11 Statement regarding computation of per share earnings 21 Subsidiaries of registrant 23 Consent of independent public accountants 27.1 Financial Data Schedule EX-10.22 2 TERMS OF EMPLOYMENT WITH JAMES B. PAINTER February 21, 1995 Mr. James B. Painter 2923 Homewood Drive Troy, Michigan 48098-1785 Dear Jim: Our discussions with you over the past several weeks have left all of us with a very positive impression of your experience base, knowledge, personal qualities and sense of commitment. Accordingly, I am delighted to extend to you an offer of employment as Vice President of both the Heavy Duty Products Group and the Materials Management function. This assignment will make you a Corporate Officer of Simpson Industries, Inc. In this position you will be reporting directly to me as President and CEO. The terms and conditions of the offer are as follows: Salary: $150,000 Annually Bonus Guarantee: Within the first thirty days of employment with Simpson Industries, you will receive a lump sum payment of $36,200. This is in lieu of the bonus payment and savings plan match you forfeit by your mid-year departure from your current employer. This amount is subject to all applicable federal and state taxes. Relocation Assistance: Assistance is available to you to cover the cost of fulfilling your lease requirements on your apartment in Newark, Ohio. This assistance includes breaking your existing lease and the loss of a security deposit. The Company will also pay for the transfer of your furnishings in this apartment back to your home in Troy, Michigan. Vacation: Officers are entitled to four weeks of vacation per year. COBRA Simpson will reimburse the COBRA expenses you incur prior to becoming eligible for the Simpson Health Care Plan. Short-Term Incentive Plan: Upon your first day of employment, you will participate (subject to the approval of the Board of Directors) in the Company's Short-Term Incentive Plan. Participation will be in the top tier of the plan (Tier I), which has a target annual bonus of 50% and a maximum annual bonus of 75%. Long-Term Incentive Plan: You will qualify for participation in the Company's Long-Term Incentive Plan. Effective with the Board of Directors approval, 4,000 shares of Restricted Stock will be granted to you, subject to the terms and conditions of the Simpson Industries 1993 Long-Term Incentive Plan. Under this plan you will be eligible for annual stock option grants and awards of "restricted stock." Subject to Board approval, future awards will be granted in the first quarter of 1996. Executive Lease Car Program: You will be eligible for one vehicle under the terms and conditions of the Executive Lease Car Program. Comprehensive Health Plan: You will be eligible to participate in the Simpson Industries Medical/Dental plan, including a company funded flexible spending account. Eligibility for this plan commences after three months of employment. After completing three months of employment you will be eligible to receive a prorated flexible spending account benefit (the annual benefit is $600/family). After 1995 the flexible spending account benefit will be discontinued. Short-Term Disability: Employees with less than two years of service are eligible for three months of salary continuation. Employees with two or more years of service receive a full year of benefits, which are reduced each ninety days to a benefit of 70% in the last quarter of the year. The period between three months of salary continuation under the Short Term Disability Plan and the onset of Long-Term Disability benefits will be covered at 90% of base pay subject to all applicable federal and state taxes. Long-Term Disability: If you are totally and permanently disabled after a year of short-term benefits, long-term disability benefits begin for employees with two or more years of service. For employees with less than two years of service, long term disability benefits begin after six months of total disability. The plan will and any social security and Workers' Compensation benefits when added together provide 60% of base salary up to a maximum monthly benefit income of $8,000. Life Insurance: The Company will contribute an annual premium amount to provide you with life insurance equal to two times your base salary as of September 30th of each year. You select the amount of coverage desired (subject to simplified issue for amounts over $150,000) and determine whether or not to supplement the premium amount to provide additional annuity buildup. Eligibility for this benefit commences on the first day of the month following one month of employment. The policy is owned by the employee and goes with them when leaving the Company. Travel Accident Policy: This policy also commences on the first day of the month following one month of employment and provides up to $200,000 if the employee is killed or permanently injured within one year from the date of an accident during business travel. Survivor Income Benefits: The survivor income benefit, or SIB, provides that any employee who has been at Simpson for one month is covered under the plan. Your spouse or eligible children will receive monthly benefits equal to 50% of base pay. The Company benefit and any social security benefits your family might be eligible for when added together make up the 50% of pay your family receives from this plan. Payments will continue for ten years or until your spouse reaches age 62, whichever occurs first. Pension: The pension plan is a defined benefit plan and is based on career average earnings. Benefits are calculated as follows: 1.70% of annual pay to $36,270* (for each year of service) plus 2.05% of annual pay over $36,270* (for each year of service) *Will change annually along with changes in the average national wage. Normal retirement is at age 65 with 5 years of vested service. This benefit becomes vested after five years of service. Supplemental Executive Retirement Plan: Provides supplemental retirement benefit equal to 4% per year of officer service (maximum 15 years) times average of highest three of last five years of service, reduced by: 1) early retirement if under 65; 2) social security benefit; 3) pension benefits from previous employers; and 4) benefit from Simpson Defined Benefit Plan. Benefits under this plan become vested after completion of five years of service. Savings Plan: The Company provides a Savings Plan with a 401(k) feature that allows contributions by the participant of up to 25% of base pay. The first 6% is eligible for a Company match of not less than 25 cents on the dollar, to a maximum of $1.00, depending on the Company performance. Eligibility for plan participation commences on the first on the month following three months of employment. Change of Control Agreement: In the event your employment is terminated as a result of a change in control of the Company, your salary and benefits will be extended for up to 24 months. This benefit and its terms and conditions are subject to the discretion of the Board of Directors. Severance: In the event your employment is severed within an 18-month period beginning April 1, 1995, for any reason other than "just cause," Simpson Industries, Inc. will provide 12 months of base salary, benefits and outplacement service. These benefits would be discontinued if you obtain other employment. Jim, I and the other members of our management team are looking forward to your joining Simpson Industries, on or before April 1, 1995. We are confident that you will make a significant contribution to the Company's success and at the same time have an opportunity for both personal and professional growth and reward. If this accurately reflects your understanding of the offer and if these terms and conditions are agreeable to you, please sign the original copy of this letter and return it to me. On behalf of myself and the Board of Directors, Jim, we look forward to welcoming you to Simpson Industries. Best Regards, /s/ ROY E. PARROTT Roy E. Parrott /S/ JAMES B. PAINTER 2/22/95 James B. Painter Date EX-11 3 COMPUTATION OF EARNINGS PER SHARE Year Ended December 31 1995 1994 1993 Primary Average shares outstanding 17,971,416 17,916,388 17,843,837 Net effect of dilutive stock options based on the treasury stock method using average stock price 63,644 84,407 91,630 Average number of common and common equivalent shares 18,035,060 18,000,795 17,935,467 Net earnings before cumulative effect of accounting changes applicable to common stock and common stock equivalents $15,302,000 $14,369,000 $9,438,000 Cumulative effect of accounting changes (3,000,000) Net earnings applicable to common stock and common stock equivalents $15,302,000 $14,369,000 $6,438,000 Earnings per share before cumulative effect of accounting changes $.85 $.80 $.53 Cumulative effect of accounting changes (.17) Earnings per share $.85 $.80 $.36 Fully Diluted Average shares outstanding 17,971,416 17,916,388 17,843,837 Net effect of dilutive stock options based on the treasury stock method using the year-end market price, if higher than the average market price 66,774 86,921 98,241 Average number of common and common equivalent shares 18,038,190 18,003,309 17,942,078 Net earnings before cumulative effect of accounting changes applicable to common stock and common stock equivalents $15,302,000 $14,369,000 $9,438,000 Cumulative effect of accounting changes (3,000,000) Net Earnings $15,302,000 $14,369,000 $6,438,000 Earnings per share before cumulative effect of accounting changes $.85 $.80 $.53 Cumulative effect of accounting changes (.17) Earnings per share $.85 $.80 $.36 EX-21 4 SUBSIDIARIES OF REGISTRANT State of Jurisdiction Percent Name of Subsidiary Incorporation Ownership R. J. Simpson Manufacturing Company (Canada) Ltd. Ontario 100% Simpson Industries, S.A. de C.V. Federal District of Mexico 99% EX-23 5 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors and Shareholders Simpson Industries, Inc.: We consent to incorporation by reference in the registration (No. 33-39679) on Form S-8 pertaining to the Simpson Industries, Inc. Savings Plan, in the registration statement (No. 33-39678) on Form S-8 pertaining to the Simpson Industries, Inc. - Fremont Operation Savings Plan, and in the registration statement (No. 2-95425) on Form S-8 pertaining to the Simpson Industries, Inc. 1984 Stock Option Plan, of our report dated January 26, 1996, relating to the consolidated balance sheets of Simpson Industries, Inc., and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, shareholders/ equity, and cash flows for each of the years in the three-year period ended December 31, 1995, which report appears in the December 31, 1995, annual report on Form 10-K of Simpson Industries, Inc. Our report refers to the changes in accounting for income taxes and postretirement benefits other than pensions in 1993. Detroit, Michigan March 8, 1996 EX-27.1 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDING DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 JAN-01-1995 12-MOS DEC-31-1995 DEC-31-1995 13,490 0 47,218 0 12,881 81,991 254,574 107,908 232,511 41,733 0 0 0 17,981 87,096 232,511 395,069 396,216 354,436 11,869 0 0 5,514 24,397 9,095 15,302 0 0 0 15,302 0.85 0.85
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