SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 10-K
(Mark One)
_X_ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1993, or
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to ________
Commission file number 0-627
________________
DOUGLAS & LOMASON COMPANY
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 38-0495110
(State or other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
24600 Hallwood Court, Farmington Hills, Michigan 48335-1671
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (810) 478-7800
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $2.00 par value
(Title of Class)
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__
As of March 10, 1994, 4,227,970 shares of Common Stock of the
Registrant were outstanding, and the aggregate market value of the shares
of Common Stock as of such date (based on the closing price in The Nasdaq
National Market) of the Registrant held by nonaffiliates (including certain
officers and non-officer directors) was approximately $62,903,069.
Documents Incorporated by Reference
The following documents are incorporated by reference into this Form 10-K:
Part I: Item 1 - Part of Annual Report of the Registrant for the year
ended December 31, 1993
Part II: Items 5-8 - Part of Annual Report of the Registrant for the
year ended December 31, 1993
Part III: Items 10-12 - Part of definitive Proxy Statement of the
Registrant dated March 31, 1994 filed pursuant to Regulation
14A.
<PAGE>
PART I
Item 1. Business
Douglas & Lomason Company (the "Company" or the
"Registrant") is a major supplier of original equipment parts to the North
American automotive industry. Automotive products, which have accounted
for approximately 93% of the Company's total sales during each of the
last three years, include fully trimmed seating, seating components and
mechanisms, and decorative and functional body trim parts. These products
are manufactured primarily for the three major U.S. automotive
manufacturers and other original equipment suppliers.
The Company also manufactures material handling systems and
custom truck bodies and trailers. These products have accounted for
approximately 7% of the Company's total sales during each of the last
three years.
The Registrant classifies its business into two
segments: automotive products and industrial and commercial products.
Exclusive of automotive products, no segment accounts for 10 percent or
more of consolidated revenues or profits. A summary of certain segment
information appears in note (6) of notes to consolidated financial
statements on page 24 of the 1993 Annual Report to Shareholders and is
incorporated herein by reference.
AUTOMOTIVE PRODUCTS
Seating
Seating systems and components account for the principal portion
of the Company's automotive business. The Company is one of the three
major independent manufacturers and assemblers of seating systems and
components for the North American automotive industry. Seat assemblies
produced by the Company satisfy the seat requirements of a full range
of vehicles. The Company currently supplies complete seats to customer
assembly plants on a "just-in-time" (JIT) "sequenced parts delivery" (SPD)
basis for passenger cars, light and medium duty trucks, and vans.
The Company's seat frame business has grown significantly over
the 47 years it has been supplying seating systems and components to the
North American automotive industry. The Company believes it is currently
one of the largest independent manufacturers of seat frames in North
America. The seat frames manufactured by the Company are incorporated
by it into complete seats and sold to vehicle assembly plants and are
also sold separately to other seat assemblers. The Company believes that
it is recognized as one of the most vertically integrated independent
seat manufacturers in North America. The Company is capable of producing
seat frames, manual seat mechanisms, foam, covers, suspension systems,
and plastic seat trim at its manufacturing facilities.
The Company believes that opportunities for growth may emerge
in foreign transplant operations in North America and from the expanding
trend toward seat assembly outsourcing in Europe. The Company has
established technical and business relationships with two Japanese
partners to facilitate the exchange of technical information and to
establish business relationships with foreign automakers. In 1988,
the Company formed a
page 1
<PAGE>
50/50 joint venture company with Namba Press Works
Co., Ltd. of Japan. This company, named Bloomington-Normal Seating
Company, is located in Normal, Illinois and manufactures seating systems
for Diamond-Star Motors, a subsidiary of Mitsubishi Motors
Corporation. The Company also has a license agreement with Imasen
Electric of Japan for the manufacture of manual seat adjuster
mechanisms.
Body Trim Components
The Company has been supplying decorative body trim
components to the automotive industry since 1902. These products include
body side, wheel opening and structural B-pillar moldings, head and
tail lamp bezels, bumpers, including those back filled with Azdel, and
window and door sealing systems. The Company has the capability of
processing large quantities of metal, plastic and composite material
parts through injection molding, pressing, rolling, laminating and
extruding systems and finishing parts through anodizing and painting.
The Company produces a variety of injection molded and extruded
plastic moldings including bi-laminate body side and deck lid moldings.
These moldings can be finished in a variety of ways such as with a
high gloss, in body colors including metallics, or with encapsulated
colorful graphics.
Product Engineering
The Company pursues new products and processes through a 120
person product engineering staff. This staff is customer-focused in that
all new projects must be based on a customer's requirements. This
facilitates the development of products in shorter lead time and matches
products more closely to consumer requirements.
Sales and Customers
Sales coverage by the Company of the North American
automotive industry is maintained by an experienced direct sales staff
consisting of 18 account managers, divided into separate and distinct
customer-focused groups. The sales group is supported by fully
developed program management teams incorporating simultaneous engineering
techniques.
The percent of sales to total automotive sales of seating
systems and body trim components to the three major automotive
manufacturers during the past three years is as follows:
<TABLE>
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Chrysler Corporation........................ 43% 50% 51%
Ford Motor Company.......................... 28 25 25
General Motors Corporation.................. 20 18 15
</TABLE>
Sales percentages include sales to other seat assemblers for
ultimate sale to the above customers.
INDUSTRIAL AND COMMERCIAL PRODUCTS
This segment of the Company's business accounted for
approximately 7% of total Company sales in each of the three years
ended December 31, 1993.
page 2
<PAGE>
Industrial and commercial products include:
Material Handling Equipment. The Company designs and
manufactures material handling equipment such as conveyors, bagging
and packaging machines, pulleys and rollers. The Company also produces
related equipment such as elevators, bag flatteners, automatic
palletizers and bag placers. These products are sold to the
agriculture, mining and transportation industries.
Custom Truck Bodies and Trailers. The Company serves the food and
beverage industry through the design and manufacture of delivery truck
bodies and trailers for soft drinks, beer, bottled water, bakery products,
milk and ice cream, meats, frozen foods and other products. These
units include side-loading aluminum bodies and trailers, and steel,
aluminum or reinforced fiberglass refrigerated truck bodies and trailers.
Competition
The Company is one of the three major independent seat
suppliers to the North American automotive industry. The Company's
primary independent competitors are Johnson Controls Inc.'s Automotive
Products Group and Lear Seating Inc. The Company also competes with
captive seating suppliers, namely: Inland Fisher-Guide Division of
General Motors Corporation and the Plastic Trim Products Division of Ford
Motor Company.
The Company's body trim business competes with a
significant number of major competitors. There are 10 to 12 with a full
range of material, process and product capabilities similar to the
Company's and several competitors with specialized niche products.
GENERAL
Raw materials purchased by the Registrant consisting of carbon
steel, aluminum, stainless steel, plastics, and fabric are generally
available from numerous independent sources. Management believes that
the trend in its material costs is upward.
While the Registrant owns several patents and patent rights,
patent protection is not materially significant to its business.
To the best of the Registrant's knowledge, its permits are in
compliance with all federal, state and local environmental protection
provisions.
The number of persons employed by the Registrant at December
31, 1993 was 5,697.
The Registrant does not consider its business seasonal except
to the extent that automotive changeovers to new models affect business
conditions.
Item 2. Properties
The corporate offices of the Company and the product
engineering staff are located in Farmington Hills, Michigan in two
buildings containing approximately 81,000 square feet. Information as
to the Company's 20 principal facilities in operation as of December
31, 1993 is set forth below:
page 3
<PAGE>
<TABLE>
<CAPTION>
Approximate Year Owned or
Location Square Feet Acquired Leased
<S> <C> <C> <C>
AUTOMOTIVE
Seating
Columbus, Nebraska............................ 273,400 1965 Owned
Milan, Tennessee.............................. 202,300 1976 Owned
Red Oak, Iowa................................. 193,500 1967 Owned
Marianna, Arkansas............................ 188,200 1960 Owned
Havre de Grace, Maryland.(1).................. 163,500 1986 Owned
Ciudad Acuna, Mexico.......................... 134,100 1987 Owned
Excelsior Springs, Missouri.(2)............... 87,500 1993 Leased
Troy, Missouri.(1)............................ 30,000 1990 Leased
Orangeville, Ontario, Canada.(3).............. 28,300 1992 Leased
Del Rio, Texas.(3)............................ 25,000 1987 Leased
Saltillo, Mexico 44,000 1993 Owned
Body Trim Components
Cleveland, Mississippi..(1)................... 300,000 1964 Owned
Carrollton, Georgia........................... 240,700 1955 Owned
48,900 1979 Owned
LaGrange, Georgia............................. 85,900 1988 Leased
Phenix City, Alabama..(1)..................... 82,000 1970 Owned
INDUSTRIAL AND COMMERCIAL
Material Handling Equipment
Humboldt, Iowa................................ 96,300 1968 Owned
Dakota City, Iowa............................. 50,500 1978 Owned
Fairfield, CA.(3)............................. 4,900 1993 Leased
Custom Truck Bodies and Trailers
Columbus, Georgia............................ 133,000 1962 Owned
Amory, Mississippi............................ 67,000 1982 Owned
Kansas City, Missouri......................... 10,400 1983 Leased
<FN>
- ----------------
(1) The Company has announced that it will close this facility during
1994.
(2) This facility will commence operations in 1994.
(3) A distribution facility.
</TABLE>
The Company believes that substantially all of its property
and equipment is in good condition and adequate for its present
requirements.
Item 3. Legal Proceedings
There are no material legal proceedings pending against the
Registrant or its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
page 4
<PAGE>
Executive Officers of the Registrant
The names and ages of all executive officers of the
Registrant are as follows:
<TABLE>
<CAPTION>
Has Served
in Position
Name Position Since Age
<S> <C> <C> <C>
Harry A. Lomason II Chairman of the Board 1992
President 1976
Chief Executive Officer 1982 59
James B. Nicholson Vice Chairman of the
Board 1990 50
James J. Hoey Senior Vice President 1992
Chief Financial Officer 1985 57
Robert T. Hill Senior Vice President-
Sales, Marketing,
Engineering and Strategic
Planning 1992 52
Ollie V. Cheatham Vice President-Human
Resources 1984 49
A. Warren Vice President-Safety,
Daubenspeck III Environmental and
Loss Control 1988 42
Scott E. Paradise Vice President-Automotive
Sales 1993 39
Joe Kamil Vice President-Research &
Development and Engineering
Services 1991 40
Robert D. Stachura Vice President and
Executive Manager-
Manufacturing 1990 51
H. James Kouris Vice President-Purchasing 1976 63
Roger H. Morelli Vice President-Materials &
Quality Assurance and
Executive Manager-Decorative
Plants 1987 49
Dan D. Smith Vice President-
Manufacturing Analysis 1989 45
Gary A. Pniewski Vice President and Product
Team Manager-Seating 1994 49
Verne C. Hampton II Secretary 1977 59
Melynn M. Zylka Treasurer 1990 33
</TABLE>
page 5
<PAGE>
Officers of the Registrant are elected each year at the Annual
Meeting of the Board of Directors to serve for the ensuing year or until
their successors are elected and qualified.
All of the executive officers of the Registrant named above
have held various executive positions with the Registrant for more than
five years except: Mr. Nicholson who has been President and Chief
Executive Officer of PVS Chemicals, Inc. and a Director of the Company
for more than five years; Mr. Hampton who has been a partner with the
law firm of Dickinson, Wright, Moon, Van Dusen and Freeman for more than
five years; Mr. Hill who joined the Company in October 1992 after serving
in various positions with General Motors Corporation for more than
five years, the most recent of which was Director for the Quality
Network of the Delco Chassis Division; and Mr. Pniewski who joined the
Company in January 1994 after serving in various positions with Ford
Motor Company for more than twenty years, the most recent of which was
Vehicle Seat Systems Engineering Manager in the Plastics and Trim Products
Division.
There is no family relationship between any of the foregoing
persons.
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
The information set forth under the caption "Shareholder
Information" on page 29 the 1993 Annual Report of the Registrant is
incorporated by reference herein. As of December 31, 1993 there were 806
holders of record of the Registrant's Common Stock.
Item 6. Selected Financial Data
The information set forth under the caption "Selected
Financial and Other Data" on page 17 the 1993 Annual Report of the
Registrant is incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
on pages 16 and 17 of the 1993 Annual Report of the Registrant is
incorporated by reference herein.
Item 8. Financial Statements and Supplementary Data
The information set forth on pages 18 through 27 of the 1993
Annual Report of the Registrant is incorporated by reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
page 6
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information set forth under the caption "Information About
Directors and Nominees for Directors" on pages 3 and 4 of the definitive
Proxy Statement of the Registrant dated March 31, 1994 filed with the
Securities and Exchange Commission pursuant to Regulation 14A is
incorporated by reference herein for information as to directors of the
Registrant.
Reference is made to Part I of this Report for information as to
executive officers of the Registrant.
Item 11. Executive Compensation
The information set forth under the caption "Executive
Compensation" on pages 6, 7 and 8 of the definitive Proxy Statement
of the Registrant dated March 31, 1994 filed with the Securities and
Exchange Commission pursuant to Regulation 14A is incorporated by
reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Security
Ownership" on pages 1 and 2 of the definitive Proxy Statement of the
Registrant dated March 31, 1994 filed with the Securities and Exchange
Commission pursuant to Regulation 14A is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
The information set forth in footnotes (2) and (3) under the
caption "Executive Compensation" and in the last paragraph under the
caption "Retirement Plan" on pages 6 and 7 of the definitive Proxy
Statement of the Registrant dated March 31, 1994 filed with the Securities
and Exchange Commission pursuant to Regulation 14A is incorporated by
reference herein.
page 7
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements
The following consolidated financial statements
of Douglas & Lomason Company and subsidiaries
included in the Douglas & Lomason Company 1993
Annual Report to its Shareholders for the year
ended December 31, 1993 are incorporated herein
by reference:
Consolidated Balance Sheets at December 31, 1993
and 1992.
Consolidated Statements of Earnings for each of
the years in the three year period ended
December 31, 1993.
Consolidated Statements of Shareholders' Equity
for each of the years in the three year period
ended December 31, 1993.
Consolidated Statements of Cash Flows for each of
the years in the three year period ended
December 31, 1993.
Notes to Consolidated Financial Statements.
The consolidated financial information for the
years ended December 31, 1993, 1992, and 1991 set
forth under "Index to Consolidated Financial
Statements and Schedules."
EXHIBITS
(The Exhibit marked with one asterisk below was
filed as an Exhibit to the Form 10-K Report of
the Registrant for the fiscal year ended
December 31, 1983; the Exhibit marked with two
asterisks below was filed as an Exhibit to the
Form 10-Q Report of the Registrant for the
quarter ended June 30, 1988; the Exhibit marked
with three asterisks below was filed as an
Exhibit to the Form 10-K Report of the
Registrant for the fiscal year ended December 31,
1989; the Exhibits marked with four asterisks
below were filed as Exhibits to the Form 10-K
Report of the Registrant for the fiscal year
ended December 31, 1991; and the Exhibit marked
with five asterisks below was filed as an
Exhibit to the Form 10-K Report of the Registrant
for the fiscal year ended December 31, 1992, and
are incorporated herein by reference, the Exhibit
numbers in brackets being those in such Form 10-K
or 10-Q Reports).
page 8
<PAGE>
(3)(a) Restated Articles of
Incorporation of Registrant.
(3)(b) By-Laws of the Registrant.
(4)(a)** Term Loan Agreement dated as of
May 20, 1988 between Registrant
and the Banks named in Section
2.1 thereof [1].
(4)(a)(1)**** Amendments to Term Loan
Agreement dated as of May 20,
1988. [(4)(a)(1)]
(4)(b)**** Term Loan Agreement dated as of
December 19, 1991 between
Registrant and NBD Bank, N.A.
and Manufacturers Bank, N.A.,
as amended. [(4)(b)]
(10)(a)* 1982 Incentive Stock Option
Plan of the Registrant [10](1)
(10)(b)*** 1990 Stock Option Plan of the
Registrant [(10)(b)](1)
(10)(c)**** Joint Venture Agreement dated
as of July 25, 1986 between
Registrant and Namba Press
Works Co., Ltd. [(10)(c)]
(13) Portions of 1993 Annual Report
of Registrant.
(22)***** Subsidiaries of the Registrant.
[(22)]
(24) Consent of KPMG Peat Marwick.
(b) Reports on Form 8-K.
The Registrant has not filed
any reports on Form 8-K during
the last quarter of the period
covered by this report.
(1) This document is a management contract or compensatory
plan.
page 9
<PAGE>
SIGNATURES
Pursuant to the requirements of the 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 on
the 29th day of March, 1994.
DOUGLAS & LOMASON COMPANY
By: /s/H. A. Lomason II
-------------------------------
H. A. Lomason II
Chairman of the Board,
President and Chief Executive
Officer
(Principal Executive Officer)
By: /s/James J. Hoey
-------------------------------
James J. Hoey
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
By: /s/Melynn M. Zylka
-------------------------------
Melynn M. Zylka
Treasurer
(Principal Accounting 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 indicated on March 29, 1994.
Signature Title
--------- -----
/s/James E. George Director
----------------------
James E. George
/s/H. A. Lomason II Director
----------------------
H. A. Lomason II
/s/Dale A. Johnson Director
----------------------
Dale A. Johnson
/s/Charles R. Moon Director
----------------------
Charles R. Moon
/s/James B. Nicholson Director
----------------------
James B. Nicholson
Director
----------------------
Richard N. Vandekieft
/s/Gary T. Walther Director
----------------------
Gary T. Walther
<PAGE>
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The consolidated balance sheets of the Company and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of
earnings, shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1993, together with the related notes
and the report of KPMG Peat Marwick, independent Certified Public
Accountants, all contained in the Company's 1993 Annual Report to
Shareholders, are incorporated herein by reference.
The following additional financial data should be read in conjunction with
the financial statements in the 1993 Annual Report to Shareholders. All
other schedules are omitted, as the required information is inapplicable or
the information is presented in the consolidated financial statements or
related notes. Financial statements and related schedules of the
Registrant have been omitted because the Registrant is primarily an
operating company and the subsidiaries included in the consolidated
financial statements are totally held.
<TABLE>
<CAPTION>
Index
Page
----
<S> <C>
Independent Auditors' Report F-2
Schedule V - Property, Plant, and Equipment F-3
Schedule VI - Accumulated Depreciation of
Property, Plant, and Equipment F-4
Schedule VIII - Valuation and Qualifying Accounts F-5
Schedule IX - Short-Term Borrowings F-6
Schedule X - Supplementary Income Statement Information F-7
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Douglas & Lomason Company:
Under date of January 31, 1994, we reported on the consolidated balance
sheets of Douglas & Lomason Company and subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of earnings,
shareholders' equity, and cash flows for each of the years in the three-
year period ended December 31, 1993, as contained in the 1993 Annual Report
to Shareholders. These financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the year
1993. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedules as listed in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in notes 1 and 8 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and
postretirement benefits other than pensions in 1993.
/s/ KPMG Peat Marwick
Detroit, Michigan
January 31, 1994
F-2
<PAGE>
Schedule V
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES
Property, Plant, and Equipment
Years ended December 31, 1991, 1992, and 1993
(Expressed in thousands of dollars)
<TABLE>
<CAPTION>
Year Ended December 31, 1991
-----------------------------------------------------------
Balance at Balance at
December 31, Additions December 31,
1990 at Cost Retirements Other 1991
------ ------- ----------- ----- ------
<S> <C> <C> <C> <C> <C>
Land and land improvements 2,673 51 - - 2,724
Buildings 21,942 1,109 6 - 23,045
Leasehold improvements 766 2 14 - 754
Machinery and equipment 74,038 3,596 584 - 77,050
Transportation equipment 2,449 146 33 - 2,562
Furniture and fixtures 12,858 1,194 962 - 13,090
114,726 6,098 1,599 - 119,225
<CAPTION>
Year Ended December 31, 1992
-----------------------------------------------------------
Balance at Balance at
December 31, Additions December 31,
1991 at Cost Retirements Other 1992
------ ------- ----------- ----- ------
<S> <C> <C> <C> <C> <C>
Land and land improvements 2,724 552 1 - 3,275
Buildings 23,045 1,955 282 - 24,718
Leasehold improvements 754 27 - - 781
Machinery and equipment 77,050 10,600 196 - 87,454
Transportation equipment 2,562 354 186 - 2,730
Furniture and fixtures 13,090 3,256 8 - 16,338
119,225 16,744 673 - 135,296
<CAPTION>
Year Ended December 31, 1993
-----------------------------------------------------------
Balance at Balance at
December 31, Additions December 31,
1992 at Cost Retirements Other (1) 1993
------ ------- ----------- --------- ------
<S> <C> <C> <C> <C> <C>
Land and land improvements 3,275 141 22 - 3,394
Buildings 24,718 3,793 - (400) 28,111
Leasehold improvements 781 321 - - 1,102
Machinery and equipment 87,454 12,426 1,147 (10,800) 87,933
Transportation equipment 2,730 353 226 - 2,857
Furniture and fixtures 16,338 3,426 410 - 19,354
135,296 20,460 1,805 (11,200) 142,751
<FN>
(1) Reduction relating to provision for plant closings to adjust to
estimated net realizable value.
</TABLE>
F-3
<PAGE>
Schedule VI
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES
Accumulated Depreciation of Property, Plant, and Equipment
Years ended December 31, 1991, 1992, and 1993
(Expressed in thousands of dollars)
<TABLE>
<CAPTION>
Year Ended December 31, 1991
----------------------------------------------------------
Additions
Charged
Balance at to Costs Balance at
December 31, and December 31,
1990 Expenses Retirements Other 1991
------ -------- ----------- ----- ------
<S> <C> <C> <C> <C> <C>
Land and land improvements 651 102 - - 753
Buildings 7,685 891 7 - 8,569
Leasehold improvements 408 92 14 - 486
Machinery and equipment 32,294 7,671 495 - 39,470
Transportation equipment 1,855 336 23 - 2,168
Furniture and fixtures 7,107 1,519 916 - 7,710
50,000 10,611 1,455 - 59,156
<CAPTION>
Year Ended December 31, 1992
----------------------------------------------------------
Additions
Charged
Balance at to Costs Balance at
December 31, and December 31,
1991 Expenses Retirements Other 1992
------ -------- ----------- ----- ------
<S> <C> <C> <C> <C> <C>
Land and land improvements 753 91 - - 844
Buildings 8,569 927 1 - 9,495
Leasehold improvements 486 7,299 - - 7,785
Machinery and equipment 39,470 260 135 - 39,595
Transportation equipment 2,168 1,851 170 - 3,849
Furniture and fixtures 7,170 4 8 - 7,706
59,156 10,432 314 - 69,274
<CAPTION>
Year Ended December 31, 1993
----------------------------------------------------------
Additions
Charged
Balance at to Costs Balance at
December 31, and December 31,
1992 Expenses Retirements Other (2) 1993
------ -------- ----------- --------- ------
<S> <C> <C> <C> <C> <C>
Land and land improvements 844 93 7 - 930
Buildings 9,495 1,130 76 - 10,549
Leasehold improvements 7,785 18 - - 7,803
Machinery and equipment 39,595 8,150 1,055 (6,178) 40,512
Transportation equipment 3,849 324 200 - 3,973
Furniture and fixtures 7,706 2,287 119 - 9,874
69,274 12,002 1,457 (6,178) 73,641
<FN>
(2) Reduction relating to provision for plant closings to adjust to
estimated net realizable value.
</TABLE>
F-4
<PAGE>
Schedule VIII
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1992, 1991, and 1990
(Expressed in thousands of dollars)
<TABLE>
<CAPTION>
Balance at Charged to Balance at
December 31, Costs and December 31,
1990 Expenses Deductions 1991
------ -------- ---------- ------
<S> <C> <C> <C> <C>
None - - - -
<CAPTION>
Balance at Charged to Balance at
December 31, Costs and December 31,
1991 Expenses Deductions 1992
------ -------- ---------- ------
<S> <C> <C> <C> <C>
None - - - -
<CAPTION>
Balance at Charged to Balance at
December 31, Costs and December 31,
1992 Expenses Deductions 1993
------ -------- ---------- ------
<S> <C> <C> <C> <C>
Other accrued plant
closing liabilities - 9,078 - 9,078
</TABLE>
F-5
<PAGE>
Schedule IX
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES
Short-Term Borrowings
Years ended December 31, 1992, 1991, and 1990
(Expressed in thousands of dollars, except for percentages)
<TABLE>
<CAPTION>
Weighted
Maximum Average Average
Amount Amount Interest
Balance at Weighted Outstanding Outstanding Rate
December 31, Average During the During the During the
1991 Interest Rate Period Period Period
------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Payable to banks - - - - -
<CAPTION>
Weighted
Maximum Average Average
Amount Amount Interest
Balance at Weighted Outstanding Outstanding Rate
December 31, Average During the During the During the
1992 Interest Rate Period Period Period
------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Payable to banks - - - - -
<CAPTION>
Weighted
Maximum Average Average
Amount Amount Interest
Balance at Weighted Outstanding Outstanding Rate
December 31, Average During the During the During the
1993 Interest Rate Period Period Period
------ ------------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Payable to banks 7,000 3.95% 13,000 3,890 3.86%
</TABLE>
F-6
<PAGE>
Schedule X
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES
Supplementary Income Statement Information
Years ended December 31, 1993, 1992, and 1991
(Expressed in thousands of dollars)
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs 9,979 9,261 7,359
</TABLE>
Other disclosures under Rule 12-11 are omitted because the individual
amounts do not exceed 1 percent of total consolidated net sales.
F-7
RESTATED ARTICLES OF INCORPORATION
For use by Domestic Profit Corporations
Pursuant to the provisions of Act 284, Public Acts
of 1972, the undersigned corporation executes the following
Articles:
1. The present name of the Company is: Douglas &
Lomason Company
2. The Company identification number assigned by the
Bureau is: 060-765
3. All former names of the Company are: None
4. The date of filing the original Articles of
Incorporation was: October 9, 1902
The following Restated Articles of Incorporation
supersede the Articles of Incorporation as amended and shall
be the Articles of Incorporation for the Company:
ARTICLE I
The name of the Company is:
Douglas & Lomason Company
ARTICLE II
The purpose or purposes for which the Company is formed are:
<PAGE>
To buy, sell, manufacture all kinds of automobile parts,
machinery, automotive body ornamentation of every kind,
nature or description; to manufacture, buy, sell and deal in
pressure vessels, metal containers, packaging machinery,
truck bodies, and any and all products of metal or any other
type of material; to acquire or use, convey, sell, rent,
lease, mortgage, pledge and deal in property, real, personal
or mixed, or any interest therein. In general, to carry on
any business in connection therewith and incident thereto
not forbidden by the laws of the State of Michigan and with
all the powers conferred upon corporations by the laws of
the State of Michigan.
ARTICLE III
The total number of shares of all classes of stock
which the Company shall have authority to issue is as
follows:
(A) 500,000 shares of Preferred Stock without par
value (Preferred Stock); and
(B) 10,000,000 shares of Common Stock of the par
value of $2.00 per share (Common Stock).
The designations, voting powers, preferences and
relative, participating, optional or other special rights,
and qualifications, limitations or restrictions of the above
classes of stock and other general provisions relating
thereto shall be as follows:
PART I
PREFERRED STOCK
1. The Board of Directors is expressly authorized
at any time, and from time to time, to provide for the
issuance of shares of Preferred Stock in one or more series,
and for such consideration or considerations as the Board of
Directors may determine, with such voting powers, full or
limited, or without voting powers, and with such
designations, preferences and relative, participating,
optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the
issue thereof adopted by the Board of Directors, all except
as otherwise required by law or these Articles of
Incorporation, and including but without limiting the
generality of the foregoing, the following:
-2-
<PAGE>
(a) The distinctive designation and number of
shares comprising such series, which number may (except
where otherwise provided by the Board of Directors in
creating such series) be increased or decreased (but not
below the number of shares then outstanding) from time to
time by action of the Board of Directors.
(b) The dividend rate or rates on the shares
of such series and the relation which such dividends shall
bear to the dividends payable on any other class of capital
stock or on any other series of Preferred Stock, the terms
and conditions upon which and the periods in respect of
which dividends shall be payable, whether and upon what
conditions such dividends shall be cumulative and, if
cumulative, the date or dates from which dividends shall
accumulate.
(c) Whether the shares of such series shall
be redeemable, and, if redeemable, whether redeemable for
cash, property or rights, including securities of any other
corporation, at the option of either the holder or the
Company or upon the happening of a specified event, the
limitations and restrictions with respect to such
redemption, the time or times when, the price or prices or
rate or rates at which, the adjustments with which and the
manner in which such shares shall be redeemable, including
the manner of selecting shares of such series for redemption
if less than all shares are to be redeemed.
(d) The rights to which the holders of shares
of such series shall be entitled, and the preferences, if
any, over any other series (or of any other series over such
series), upon the voluntary or involuntary liquidation,
dissolution, distribution or winding up of the Company,
which rights may vary depending on whether such liquidation,
dissolution, distribution or winding up is voluntary or
involuntary, and, if voluntary, may vary at different dates.
(e) Whether the shares of such series shall
be subject to the operation of a purchase, retirement or
sinking fund, and, if so, whether and upon what conditions
such purchase, retirement or sinking fund shall be
cumulative or noncumulative, the extent to which and the
manner in which such fund shall be applied to the purchase
or redemption of the shares of such series for retirement or
to other corporate purposes and the terms and provisions
relative to the operation thereof.
(f) Whether the shares of such series shall
be convertible into or exchangeable for shares of any other
-3-
<PAGE>
class or of any other series of any class of capital stock
or other securities of the Company, or the securities of any
other corporation or entity, and, if so convertible or
exchangeable, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting
the same, and any other terms and conditions of such
conversion or exchange.
(g) The voting powers, full and/or limited,
if any, of the shares of such series, and whether and under
what conditions the shares of such series (alone or together
with the shares of one or more other series) shall be
entitled to vote separately as a single class, upon any
merger or consolidation or other transaction of the Company,
or upon any other matter, including without limitation the
election of one or more additional directors of the Company
in case of dividend arrearages or other specified events.
(h) Whether the issuance of any additional
shares of such series, or of any shares of any other series,
shall be subject to restrictions as to issuance, or as to
the powers, preferences or rights of any such other series.
(i) Any other preferences, privileges and
powers and relative, participating, optional or other
special rights, and qualifications, limitations or
restrictions of such series, as the Board of Directors may
deem advisable and as shall not be inconsistent with the
provisions of these Articles of Incorporation.
2. All shares of Preferred Stock of any one
series shall be of equal rank and identical in all respects,
except that shares of any one series issued at different
times may differ as to the dates from which dividends
thereon, if cumulative, shall be cumulative.
3. Shares of Preferred Stock redeemed, converted,
exchanged, purchased, retired or surrendered to the Company,
or which have been issued and reacquired in any manner, may,
upon compliance with any applicable provisions of the
Michigan Business Corporation Act, be given the status of
authorized and unissued shares of Preferred Stock and may be
reissued by the Board of Directors as part of the series of
which they were originally a part or may be reclassified
into and reissued as part of a new series or as a part of
any other series, all subject to the protective conditions
or restrictions of any outstanding series of Preferred
Stock.
-4-
<PAGE>
PART II
COMMON STOCK
1. Except as otherwise required by law or by
these Articles of Incorporation, each holder of Common Stock
shall have one vote for each share of Common Stock held by
the holder on all matters voted upon by the holders of
Common Stock.
2. Subject to the preferential dividend rights,
if any, applicable to shares of Preferred Stock and subject
to applicable requirements, if any, with respect to the
setting aside of sums for purchase, retirement or sinking
funds for Preferred Stock, the holders of Common Stock shall
be entitled to receive, to the extent permitted by law, such
dividends as may be declared from time to time by the Board
of Directors.
3. In the event of any liquidation, dissolution
or winding up of the Company, the holders of Common Stock
shall be entitled, after payment or provisions for payment
of the debts and other liabilities of the Company and the
amounts to which the holders of any Preferred Stock shall be
entitled, to share ratably in the remaining net assets of
the Company.
ARTICLE IV
1. The address of the current registered office is:
24600 Hallwood Court, Farmington Hills, Michigan 48018
2. The name of the current resident agent is:
Harry A. Lomason II
ARTICLE V
The term of the corporate existence is perpetual.
ARTICLE VI
(A) Except as set forth in paragraph (B) of this
Article, the affirmative vote or consent of the holders of
not less than 80 percent of all shares of stock of this
company (the "Company") entitled to vote in elections of
directors, voting for purposes of this Article as one class,
shall be required:
(1) To adopt any agreement for, or to
-5-
<PAGE>
approve, the merger or consolidation of the Company or any
subsidiary (as hereinafter defined) with or into any other
person (as hereinafter defined), or
(2) To authorize any sale, lease, transfer,
exchange, mortgage, pledge or other disposition to any other
person of all or substantially all of the assets of the
Company or any subsidiary, or
(3) To authorize the issuance or transfer by
the Company or any subsidiary of any voting securities of
the Company or any subsidiary in exchange or payment for the
securities or assets of any other person,
if, in any such case, as of the record date for the
determination of shareholders entitled to notice thereof and
to vote thereon or consent thereto, such other person is, or
at any time within the preceding twelve months has been, the
beneficial owner (as hereinafter defined) of 5 percent or
more of the outstanding shares of stock of the Company
entitled to vote in elections of directors. If such other
person is not, and has not been, a 5 percent beneficial
owner, the provisions of this paragraph (A) shall not apply,
and the provisions of Michigan law shall apply.
(B) The provisions of paragraph (A) of this
Article shall not apply, and the provisions of Michigan law
shall apply, to any transaction referred to in paragraph (A)
of this Article if:
(1) Prior to the time that such person became
the beneficial owner of 5 percent or more of the outstanding
shares of stock of the Company entitled to vote in elections
of directors, a majority of the directors of the Company
shall have approved a memorandum of understanding with such
other person setting forth the principal terms of such
transaction and such transaction is substantially consistent
therewith, or
(2) Subsequent to the time such person became
the beneficial owner of 5 percent or more of the outstanding
shares of stock of the Company entitled to vote in elections
of directors, a majority of the continuing directors of the
Company (as hereinafter defined) shall have approved such
transaction, or
(3) Such transaction is with a corporation of
which a majority of the outstanding shares of all classes of
stock entitled to vote in elections of directors is owned of
record or beneficially by the Company and/or any subsidiary.
-6-
<PAGE>
(C) The affirmative vote or consent of the holders
of not less than 80 percent of the outstanding shares of
stock of the Company entitled to vote in elections of
directors, voting for purposes of this Article as one class,
shall be required for the adoption of any plan for the
dissolution of the Company if the Board of Directors shall
not have, by resolution, recommended to the shareholders the
adoption of such plan for dissolution of the Company. If
the Board of Directors shall have so recommended to the
shareholders such plan for dissolution of the Company, the
provisions of Michigan law shall apply.
(D) For purposes of this Article:
(1) Any specified person shall be deemed to
be the beneficial owner of shares of stock of the Company
(a) which such specified person or any affiliates or
associates of such person (as such terms are hereinafter
defined) owns, in whole or in part, directly or indirectly,
whether of record or not, (b) which such specified person or
any affiliates or associates of such person has the right to
acquire pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise, or (c)
which are beneficially owned, directly or indirectly
(including shares deemed owned through application of
clauses (a) and (b) above), by any other person with which
such specified person or any affiliates or associates of
such person has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing
of stock of the Company.
(2) an "affiliate" or "associate" are defined
as set forth in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934 as in
effect at the date of adoption of this Article by the
shareholders of the Company;
(3) a "continuing director" shall mean and
include a person who was a member of the Board of Directors
of the Company on the date of adoption of this Article by
the shareholders of the Company, or a person who was
thereafter elected a director of the Company by the
shareholders prior to the time that such person acquired a 5
percent stock ownership, or a person recommended by a
majority of the then continuing directors in office to
succeed a continuing director;
(4) a "person" is any individual, corporation
or other entity;
(5) a "subsidiary" is any corporation at
-7-
<PAGE>
least 50 percent of the voting securities of which are
owned, directly or indirectly, by the Company;
(E) For purposes of determining whether a person
owns beneficially 5 percent or more of the outstanding
shares of stock of the Company entitled to vote in elections
of directors, the outstanding shares of stock of the Company
shall include shares deemed owned through application of
clauses (a), (b), or (c) of paragraph (D)(1) above but shall
not include any other shares which may be issuable pursuant
to any agreement or upon exercise of conversion rights,
warrants or options, or otherwise.
(F) A majority of the continuing directors of the
Board shall have the power and duty to determine for the
purposes of this Article, on the basis of information known
to the Company, whether (a) such person beneficially owns 5
percent or more of the outstanding shares of stock of the
Company entitled to vote in elections of directors, (b) a
person is an "affiliate" or "associate" (as defined above)
of the person, and (c) the memorandum of understanding
referred to above is substantially consistent with the
transaction covered thereby. Any such determination shall
be conclusive and binding for all purposes of this Article.
(G) The shareholders of the Company shall be
entitled to statutory appraisal rights to the maximum extent
permissible under the provisions of Michigan law,
notwithstanding any exception otherwise provided therein,
with respect to any transaction described in paragraph (A)
of this Article VI which requires the affirmative vote of
the holders of not less than 80 percent of all shares of
stock of the Company entitled to vote in elections of
directors pursuant to the provisions of said paragraph (A).
ARTICLE VII
Notwithstanding any other provisions of these
Articles of Incorporation:
(A) No amendment of these Articles of
Incorporation shall alter, amend, modify or repeal any or
all of the provisions of Article VI or this Article VII of
these Articles of Incorporation unless so adopted by the
affirmative vote or consent of the holders of not less than
80 percent of the outstanding shares of stock of the Company
entitled to vote in elections of directors, voting for
purposes of this Article as one class; and
(B) The By-Laws of the Company shall not be made,
-8-
<PAGE>
altered, amended, supplemented or repealed by the
shareholders of the Company except by the affirmative vote
of the holders of not less than 80 percent of the
outstanding shares of stock of the Company entitled to vote
in elections of directors, voting for purposes of this
Article as one class. Nothing contained herein shall
detract from the authority of the Board of Directors to
make, alter, amend, supplement or repeal any or all
provisions of the By-Laws as provided therein.
ARTICLE VIII
A director of the Company shall not be personally
liable to the Company or its shareholders for monetary
damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of
loyalty to the Company or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) a violation
of Section 551(1) of the Michigan Business Corporation Act,
or (iv) for any transaction from which the director derived
any improper personal benefit. If the Michigan Business
Corporation Act is amended after approval by the
shareholders of this provision to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director of the Company
shall be eliminated or limited to the fullest extent
permitted by the Michigan Business Corporation Act, as so
amended.
Any repeal or modification of the foregoing
paragraph by the shareholders of the Company shall not
adversely affect any right or protection of a director of
the Company existing at the time of such repeal or
modification.
-9-
<PAGE>
These Restated Articles of Incorporation were duly adopted
on the 17th day of February, 1994, in accordance with the
provisions of Section 642 of the Act and were duly adopted
by the Board of Directors without a vote of the
shareholders. These Restated Articles of Incorporation only
restate and integrate and do not further amend the
provisions of the Articles of Incorporation as heretofore
amended and there is no material discrepency between those
provisions and the provisions of these Restated Articles.
Signed this 17th day of February, 1994.
Douglas & Lomason Company
By /s/ Harry A. Lomason II
----------------------------------
Harry A. Lomason II
Chairman of the Board and President
Name of Person or Organization Remitting Fees:
Dickinson, Wright, Moon, VanDusen & Freeman
Preparer's Name and Business Telephone Number:
Verne C. Hampton, II
(313) 223-3500
-10-
BY-LAWS
OF
DOUGLAS & LOMASON COMPANY
A Michigan Corporation
ARTICLE I
Shareholders' Meetings
Section 1. Annual Meeting. The annual meeting of shareholders
shall be held on such date during the month of March or April of each year
and at such time and place as shall be fixed by the Board of Directors, for
the purpose of the election of directors and for the transaction of such
other business as may properly come before the meeting. Any annual meeting
not held on the day designated therefore may be held on any day thereafter
to which said meeting may be adjourned.
Section 2. Special Shareholders' Meetings. Special meetings of
shareholders may be called by the Chairman of the Board, the President, or
by the Board of Directors.
Section 3. Place of Meeting. The Board of Directors may
designate any place either within or without the State of Michigan as the
place of meeting for any annual meeting or for any special meeting called
by the Board of Directors. If no designation is made or if a special
meeting be called otherwise than by the Board of Directors, the place of
meeting shall be the registered office of the Company in the State of
Michigan.
Section 4. Notice of Meetings. Written notice of the date,
time, place and purposes of a meeting of shareholders shall be given not
less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, to each shareholder of record
entitled to vote at the meeting. If mailed, such notice shall be deemed to
be given when deposited in the United States mail by the Company or its
duly authorized agent, addressed to the shareholder at his or her address
as it appears on the stock transfer books of the Company, with postage
prepaid.
Section 5. Quorum. At all meetings of shareholders, except
where it is otherwise provided by law, the holders of a majority of the
outstanding shares entitled to vote, being present in person or represented
by proxy, shall constitute a quorum for all purposes.
Section 6. Inspectors of Election. Prior to the annual meeting
of shareholders, the Chairman of the Board or the President shall appoint
at least two Inspectors of Election to act as inspectors at such meeting
and at any meeting of shareholders which may be held during the ensuing
year. It shall be the duty of Inspectors of Election to receive and
classify all proxies as received, check the proxies with the record of
shareholders entitled to vote at such meetings, pass on all matters as to
the qualification of shareholders to vote and the validity of proxies, the
acceptance or rejection of proxies, tabulate votes, and report to the
chairman of the meeting the total number of shares represented at the
meeting in person or by proxy, and the result of the voting.
Section 7. Voting. At all meetings of shareholders, every
shareholder of record as of the applicable record date shall be entitled to
vote, either in person or by proxy appointed by an instrument in writing,
subscribed by such shareholder or by an authorized agent of the
shareholder. Each outstanding share of capital stock is entitled to one
vote on each matter submitted to a vote, except as otherwise provided in
the Articles of Incorporation. A vote may be cast either orally or in
writing, at the discretion of the chairman of the meeting.
Section 8. Adjournments. Any annual or special meeting of
shareholders, whether or not a quorum is present, may be adjourned from
time to time by a majority vote of the shares present in person or by
proxy. Unless the Board of Directors fixes a new record date for the
adjourned meeting, it is not necessary to give notice of the adjourned
meeting if the date, time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken and at the
adjourned meeting only such business is transacted as might have been
transacted at the original meeting.
<PAGE>
ARTICLE II
Directors
Section 1. Number and Term of Office. The number of directors
constituting the entire Board of Directors shall not be less than three (3)
nor more than twelve (12), the exact number of directors to be fixed from
time to time only by vote of a majority of the Board then in office.
The Board of Directors shall be divided into three classes as
nearly equal in number as possible, with the term of office of one class
expiring each year. The first class of the Board of Directors shall be
elected to hold office for a term expiring at the annual meeting of
shareholders in 1984; directors of the second class shall be elected to
hold office for a term expiring at the next succeeding annual meeting; and
directors of the third class shall be elected to hold office for a term
expiring at the third succeeding annual meeting, and in each case, until
their respective successors are elected and have qualified, or until their
earlier death, resignation or removal. At each annual election held after
the initial classification and election in the manner provided above,
directors elected to succeed those whose terms expire shall be elected to
serve until the end of the third annual meeting of shareholders after their
election and until their respective successors are elected and have
qualified, or until their earlier death, resignation or removal. When the
number of directors is changed, any newly created directorships or any
decrease in directorships shall be so apportioned among the classes as to
make all classes as nearly equal in number as possible. No decrease in the
number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
The age limit shall be 70 for directors. A director will not be
eligible for re-election at the annual meeting of the shareholders next
following the date on which he attains the age of 70, provided, however,
that the age limit shall not apply to persons who were directors of the
Company at November 17, 1993, and further, the age limit may be waived by
the directors in individual cases. If a director is less than age 70 at the
time of election but shall be over age 70 at the time of expiration of his
term, such director shall serve his full term notwithstanding the age
limitation set forth herein.
Section 2. Vacancies. During the intervals between annual
meetings of shareholders, any vacancy occurring in the Board of Directors
caused by resignation, removal, death or other incapacity, and any newly
created directorships resulting from an increase in the number of directors
shall be filled by a majority vote of the directors then in office, whether
or not a quorum. Each director chosen to fill a vacancy shall hold office
for the unexpired term in respect of which such vacancy occurred and until
his successor is elected and qualified, or until his earlier death,
resignation or removal. Each director chosen to fill a newly created
directorship shall hold office until the next election for the class for
which such director shall have been chosen and until his successor is
elected and qualified, or until his earlier death, resignation or removal.
Section 3. Removal. A director of the Company may be removed
from office for any reason (i) by a two-thirds vote of the full Board in
attendance and voting at any meeting, but not by less than a majority of
the entire Board then in office, or (ii) by the vote of the holders of
two-thirds of the capital stock then outstanding and entitled to vote, at a
special meeting of the shareholders called for that purpose.
Section 4. Annual and Regular Meetings. The annual meeting of
the Board of Directors shall be held on the date of the annual meeting of
the shareholders of the Company. There shall be regular meetings of the
Board of Directors, in addition to the annual meeting, at the principal
office of the Company, or at such other place as may be designated (i) by
the Chairman of the Board or the President, provided that notice of such
designation of a regular meeting is given personally or by telephone, mail
or telegram or similar means of communication to the last known address of
each director at least three (3) days before such meeting, or (ii) by a
resolution of the Board of Directors.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be held whenever called by the Chairman of the Board, or the
President, or pursuant to resolution of the Board of Directors. Notice
thereof shall be given personally or by telephone, mail or telegram or
similar means of communication to the last known address of each director
at least one (1) day before such meeting. Any director may waive notice of
any meeting. Neither the business to be transacted at, nor the purpose of,
a special meeting need be specified in the notice or waiver of notice of
the meeting.
Section 6. Quorum and Voting. A majority of the members of the
Board of Directors then in office shall constitute a quorum for the
transaction of business, except where otherwise provided by law or the
Articles of Incorporation or the By-Laws; but a majority of members present
at any regular or special meeting, although less than a quorum, may adjourn
the meeting from time to time, without notice. The vote of the majority of
members present at a meeting at which a quorum is present constitutes the
action of the Board of Directors, unless the vote of a larger number is
required by law or the Articles of Incorporation or the ByLaws.
Section 7. Action of Directors Without a Meeting. Except as
otherwise provided by law, action required or permitted to be taken
pursuant to authorization voted at a meeting of the Board of Directors or a
committee thereof may be taken without a meeting if, before or after the
action, all members of the Board of Directors or of the committee consent
thereto in writing. The written consents shall be filed with the minutes
of the proceedings of the Board of Directors or committee. The consent has
the same effect as a vote of the Board of Directors or committee for all
purposes.
Section 8. Compensation. The members of the Board of Directors
of the Company who are not full time officers or employees of the Company
shall receive such reasonable compensation and expenses for their services
all as determined by the Board of Directors.
Section 9. Nomination of Directors. Nominations for election to
the Board of Directors of the Company at a meeting of shareholders may be
made by the Board of Directors, on behalf of the Board of Directors by any
nominating committee appointed by the Board of Directors, or by any
shareholder of the Company entitled to vote for the election of directors
at the meeting. Nominations, other than those made by or on behalf of the
Board of Directors, shall be made by notice in writing delivered to or
mailed, postage prepaid, and received by the Secretary of the Company at
least 60 days but no more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of shareholders. The notice shall set
forth (i) the name and address of the shareholder who intends to make the
nomination; (ii) the name, age, business address and, if known, residence
address of each nominee; (iii) the principal occupation or employment of
each nominee; (iv) the number of shares of stock of the Company which are
beneficially owned by each nominee and by the nominating shareholder; (v)
any other information concerning the nominee that must be disclosed of
nominees in proxy solicitation material pursuant to Regulation 14A of the
Securities Exchange Act of 1934 (or any subsequent provision replacing such
Regulation); and (vi) the executed consent of each nominee to serve as a
director of the Company, if elected. The chairman of the meeting of
shareholders may, if the facts warrant, determine that a nomination was not
made in accordance with the foregoing procedures, and if the chairman
should so determine, the chairman shall so declare to the meeting and the
defective nomination shall be disregarded.
ARTICLE III
Committees
Section 1. Audit Committee. There shall be an audit committee
consisting of not less than two members of the Board of Directors with the
chairman of the audit committee and the members thereof designated by the
Chairman of the Board. The audit committee shall recommend to the Board
the conditions and term of appointment of independent public accountants
for the auditing of the books and accounts of the Company, the scope of
audit procedures, the nature of services to be performed for the Company
and the fees to be paid to the independent public accountants. From time
to time, as considered necessary and desirable, the committee shall confer
with such accountants for the exchanging of views relating to the scope and
results of the auditing of books and accounts of the Company and shall
provide to the Board such assistance as may be required with respect to the
corporate and reporting practices of the Company. The audit committee
shall perform such other duties as the Board of Directors may prescribe.
Section 2. Executive Committee. There shall be an executive
committee consisting of either the Chairman of the Board or the president
of the Company as chairman of the committee, as determined by the Board of
Directors. The other members of the committee shall be selected by the
chairman of the committee and may be officers of the Company representing
different phases of the Company's operations. The committee shall perform
such duties as the Chairman of the Board, the President or the Board of
Directors may prescribe.
Section 3. Nominating Committee. There shall be a nominating
committee consisting of not less than two members of the Board of Directors
with the chairman of the committee and the members thereof designated by
the Chairman of the Board. The committee shall recommend to the Board of
Directors nominees for election as directors or to fill vacancies on the
Board and shall perform such other duties as the Board of Directors may
prescribe.
Section 4. Other Committees. From time to time, the Board of
Directors may constitute and appoint any other committee or committees
which the Board may deem necessary or proper for the conduct of the
Company's business. Any such committee created by the Board of Directors
shall have such duties, powers and authority as shall be specified in the
resolution constituting such committee.
ARTICLE IV
Officers
Section 1. Number. The officers of the Company shall be a
Chairman of the Board, a President, one or more Vice Presidents, one or
more of whom may be designated as Senior Vice President or Executive Vice
President, a Secretary and a Treasurer. The Board of Directors may also
elect a Vice Chairman of the Board and a Controller and elect or appoint
one or more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers. The Board of Directors shall have power to create such other
offices as they may from time to time deem expedient.
Section 2. Election and Term of Office. The officers of the
Company shall be elected annually or appointed by the Board of Directors at
the annual meeting of the Board of Directors held on the date of the annual
meeting of shareholders. If the election of officers shall not be held at
that time, such election shall be held as soon thereafter as convenient.
Each officer shall hold office until his successor shall have been duly
elected and qualified or until his death, resignation or removal in the
manner hereafter provided.
Section 3. Removal and Vacancies. Any officer elected or
appointed by the Board of Directors may be removed at any time with or
without cause by the Board of Directors. Vacancies among officers of the
Company during the year may be filled by the Board of Directors for the
unexpired portion of the term.
Section 4. Chief Executive and Chief Operating Officers. The
Board of Directors shall, from time to time, designate one of the officers
of the Company as the chief executive officer of the Company and may, from
time to time, but shall not be required to do so, designate one of the
officers of the Company as the chief operating officer of the Company. The
chief executive officer shall, subject to the direction of the Board of
Directors, have general supervision of the business of the Company and
shall supervise the departments, officers and employees thereof, and shall
prescribe duties of other officers and employees insofar as they are not
specifically provided for by the By-Laws or by resolution of the Board of
Directors. He shall be an ex-officio member of all standing committees of
the Board of Directors and the Company. The chief operating officer shall
have such duties as may be designed by the chief executive officer or by
the Board of Directors.
Section 5. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the shareholders and of the Board of
Directors. He shall perform such other duties as may be designated by the
Board of Directors.
Section 6. Vice Chairman of the Board. The Vice Chairman of the
Board shall perform such duties as may be designed by the Chief Executive
Officer or by the Board of Directors. In the absence or disability of the
Chairman of the Board and the President, he shall preside at meetings of
shareholders and the Board of Directors.
Section 7. President. In the absence or incapacity of the
Chairman of the Board, the President shall perform the duties of that
office. He shall perform such duties as may be designated by the chief
executive officer, subject to the direction of the Board of Directors, or
by the Board of Directors.
Section 8. Vice Presidents. In the absence or incapacity of the
President, one of the Vice Presidents in such succession or order as shall
be determined by the Board of Directors shall perform the duties of that
office. The order in which the Vice Presidents are named in any election
shall establish such determination of seniority in the absence of any more
specific determination by the Board of Directors. The Vice Presidents
shall perform such duties and be vested with such other powers as the Board
of Directors, the Chairman of the Board or the President may from time to
time prescribe.
Section 9. Secretary, Treasurer and Controller. The Secretary,
the Treasurer, and the Controller shall perform such duties as are incident
to their offices, or are properly required of them by the Chairman of the
Board, the President, the Board of Directors, or are assigned to them by
the Articles of Incorporation or these By-Laws.
Section 10. Assistant Secretary and Assistant Treasurer. The
Assistant Secretary or Assistant Secretaries and Assistant Treasurer or
Assistant Treasurers shall perform such duties as shall be assigned to them
by the officers or the Board of Directors. The Assistant Secretary
designated by the chief executive officer of the Company shall, in the
absence of the Secretary, perform the duties and exercise the powers of the
Secretary, and the Assistant Treasurer designated by the chief executive
officer of the Company shall, in the absence of the Treasurer, perform the
duties and exercise the powers of the Treasurer.
Section 11. Other Officers. Other officers appointed by the
Board of Directors shall exercise such powers and perform such duties as
may be delegated to them by the officers or the Board of Directors of the
Company.
Section 12. Compensation. The compensation of the officers of
the Company shall be fixed by the Board of Directors.
Section 13. Additional Duties and Authorities. All of the
officers of the Company shall have authority to execute on behalf of the
Company any and all contracts, agreements, bonds, deeds, mortgages, leases
or other obligations of the Company arising in the regular course of
business of the Company.
ARTICLE V
Capital Stock
Section 1. Certificates. The interest of each shareholder of
the Company shall be evidenced by certificates for shares of stock,
certifying the number of shares represented thereby and in such form not
inconsistent with the Articles of Incorporation as the Board of Directors
may from time to time prescribe.
The stock certificates shall be signed by the Chairman of the
Board, the President or a Vice President and also by the Secretary or an
Assistant Secretary or by the Treasurer or an Assistant Treasurer. The
seal of the Company may be engraved on the certificates instead of being
manually affixed, and the signatures of officers may be facsimile
signatures if the certificate is countersigned by a transfer agent or
registered by a registrar other than the Company itself. In case any
officer who has signed or whose facsimile signature has been placed upon
any certificate shall have ceased to be such officer before the certificate
is issued, the certificate may be issued by the Company with the same
effect as if such officer had not ceased to be such officer at the time of
its issue. All certificates of stock surrendered to the Company for
transfer shall be cancelled and, except in the case of lost or destroyed
certificates as hereinafter provided, no new certificate shall be issued
until the former certificate or certificates for the shares represented
thereby shall have been surrendered and cancelled.
Section 2. Lost Certificates. When a certificate of stock
previously issued is alleged to have been lost or destroyed, a new
certificate may be issued therefor upon such terms and indemnity to the
Company as the Board of Directors may prescribe.
Section 3. Transfer of Shares. Transfer of shares of stock of
the Company shall be made only on the stock transfer books of the Company,
and the Company may decline to recognize the holder of any certificate of
stock of the Company as a shareholder until the shares represented by such
certificate are transferred into his or her name on the stock transfer
books of the Company. The Company shall be entitled to treat the holder of
record of any shares of stock as the absolute owner thereof, and shall not
be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by law. The
Board of Directors may appoint one or more stock transfer agents and
registrars (which functions may be combined), and may require all stock
certificates to bear the signature of such transfer agent and such
registrar.
Section 4. Fixing of Record Date. For the purpose of
determining shareholders entitled to notice of and to vote at a meeting of
shareholders or any adjournment thereof, or for the purpose of determining
shareholders entitled to receive payment of a dividend or for the purpose
of any other action, the Board of Directors may fix in advance a date as
the record date for any such determination of shareholders. The date shall
not be more than sixty (60) nor less than ten (10) days before the date of
the meeting, nor more than sixty (60) days before any other action.
<PAGE>
ARTICLE VI
Miscellaneous
Section 1. Seal. The corporate seal of the Company shall
consist of the words "Douglas & Lomason Company" around the periphery of a
circle, with the words "Corporate Seal" within the circle formed by the
name of the Company.
Section 2. Fiscal Year. The fiscal year of the Company shall
begin on the first day of January in each year and end on the thirty-first
day of December in each year.
Section 3. Indemnification of Directors, Officers and Employees.
The Company shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the Company, or is or was serving another organization
or entity at the request of the Company. Such indemnification shall be to
the fullest extent, and shall be determined in such manner, as now or
hereafter permitted by law. The indemnification shall continue to a person
who has ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors, personal representatives and
administrators of such person. Neither the Company nor its directors or
officers nor any person acting on its behalf shall be liable to anyone for
any determination as to the existence or absence of conduct which would
provide a basis for making or refusing to make any payment hereunder or for
taking or omitting to take any other action hereunder, in reliance upon the
advice of counsel.
ARTICLE VII
Amendment of By-Laws
The By-Laws may be altered, amended, supplemented or repealed in
whole or in part and new By-Laws may be adopted either:
(a) By the affirmative vote of the holders of record of not less
than 80 percent of the outstanding shares of stock of the Company entitled
to vote in election of directors, voting for purposes of this Article as
one class; or
(b) By the affirmative vote of a majority of the Board of
Directors at any meeting of the Board, or by written consent signed by all
members of the Board of Directors in accordance with Section 7 of Article
II of these By-Laws; provided, however, no such alteration, amendment or
repeal of Article II, Sections 1 or 2 (number and term of office and
vacancies) or this Article VII of these By-Laws shall be made by the Board
of Directors or be effective unless such alteration, amendment or repeal
shall be first approved by a majority of those members of the Board of
Directors who would qualify as continuing directors within the meaning of
Article XII of the Articles of Incorporation.
Management's Discussion and Analysis
of Financial Condition and Results of Operation
LIQUIDITY AND CAPITAL RESOURCES
Funds provided from operations of $13.9 million and net proceeds from short-
term borrowings of $7.0 million were the Company's primary sources of cash in
1993. The funds provided from operations were negatively impacted by the
decline in operating earnings which were $11.2 million before provision for
plant closings in 1993 compared to $15.2 million in 1992. The funds generated
from operations and the short-term borrowings enabled the Company to purchase
additional property, plant and equipment amounting to $20.5 million and to
reduce long-term debt by $5.3 million.
A provision for plant closings was recorded in the fourth quarter of 1993, but
did not affect cash in 1993 (note 9). However, it is expected to require
approximately $5.0 million in 1994, with the remaining $5.0 million paid by
1996. Management expects to fund these costs with cash provided by operations
or short-term lines of credit.
At December 31, 1993, the Company had available borrowings of $13.0 million
from its lines of credit at two banks in addition to $2.7 million in cash.
Management believes it has adequate sources of liquidity to meet the Company's
operating and capital expenditure requirements in 1994.
RESULTS OF OPERATIONS - 1993 VERSUS 1992
Net Sales
Net sales of $424.8 million for 1993 increased 9% compared to 1992 net sales
of $391.2 million. Sales of products for Chrysler's highly successful LH
model and increased sales at the Richmond, Michigan plant prior to its closing
in May, 1993 were the significant components of the 1993 sales increase. The
decline in sales as a result of the planned plant closings will be more than
offset by the start-up of new production in 1994.
Cost of Sales
Cost of sales as a percentage of net sales increased to 92.7% in 1993 compared
to 91.6% in 1992. This unfavorable trend in both the third and fourth quarter
of 1993 is a direct result of the excess start-up costs at the new plant in
Saltillo, Mexico, combined with an increase in the price of steel which is a
major component in automotive seating systems. Price concessions to customers
also adversely affected the cost of sales ratio. The total cost reduction
estimated to be realized from the plant closings is expected to approximate
$3.0 million in 1994 and $5.0 million annually thereafter.
Selling, General and Administrative Expense
Selling, general and administrative expenses in 1993 increased approximately
$1.8 million from 1992, but remained constant as a percentage of sales.
Additional staffing for Sales and Information Services was the principal
component of this increase.
Depreciation Expense
Depreciation expense in 1993 increased $1.6 million or 15% from 1992. The
increase was attributable to significantly higher capital expenditures of
$20.5 million in 1993 and $16.7 million in 1992. The effect of the plant
closings is expected to result in a decrease in depreciation expense of
approximately $1.0 million in 1994.
Interest Expense
Interest expense in 1993 decreased $.8 million or 23% from 1992. This
decrease is attributable to lower average debt and lower interest rates.
Net Earnings (Loss)
Net loss in 1993 of $7.2 million or $1.70 per share resulted principally from
the change in accounting principle of $3.8 million or $.90 per share and the
provision for plant closings of $9.6 million or $2.28 per share. Net earnings
from operations in 1993, exclusive of the two items mentioned above, were $6.2
million or $1.47 per share compared to $8.8 million or $2.25 per share in
1992.
The 1993 net earnings from operations before the provision for plant closings
were negatively impacted by excessive start-up costs at the Saltillo, Mexico
plant and an increase in the price of steel which is a major component in
automotive seating systems. Customer price concessions also affected net
sales and net earnings adversely. The fourth quarter net loss of $7.9 million
or $1.86 per share was significantly contributed to by the provision for plant
closings of $9.6 million or $2.28 per share. Net earnings from operations
before the provision for plant closings in the fourth quarter were $1.7
million or $.42 per share compared to $3.0 million or $.72 per share in 1992.
In November 1992, FASB issued Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits," which requires
employers to record postemployment benefit costs that are probable and
estimable over the period during which the benefit vests or accumulates. The
provisions of Statement No. 112 are effective for fiscal years beginning after
December 15, 1993. The Company does not expect implementation of this
Statement in 1994 to have any effect on its financial statements.
RESULTS OF OPERATIONS - 1992 VERSUS 1991
Net Sales
Net sales of $391.2 million for 1992 increased 4.1% compared to 1991 sales of
$375.6 million. This increase was attributable to improved sales in the first
quarter of 1992 as compared to the first quarter of 1991 when sales were
negatively impacted by the events in the Persian Gulf. In addition, fourth
quarter 1992 sales showed improvement over the same period of 1991, and this
improvement continued into the first quarter of 1993.
Cost of Sales
Cost of sales as a percentage of net sales increased .5% in 1992 compared to
1991. Start-up costs at a new plant in Mexico, costs related to the expected
downsizing of a domestic plant and price reductions due to continued customer
pressure were the principal components of the cost of sales (as a percentage
of sales) increase.
Page 16
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.2 million in 1992
compared to 1991 principally as a result of additional staffing in Sales,
Engineering and Information Services to position the Company as a full service
manufacturer.
Depreciation Expense
Depreciation expense in 1992 decreased $.2 million or approximately 2% from
1991. The decline was attributable to significantly lower capital
expenditures in 1991 and 1990. Capital expenditures of $16.7 million in 1992
resulted in increased depreciation expense.
Interest Expense
Interest expense in 1992 decreased $1.9 million or approximately 35% from
1991. This decrease was primarily attributable to substantial debt reduction
of $21.3 million in 1992, $18.7 million in 1991 and $16.9 million in 1990 for
a total of $56.9 million in the three year period.
Net Earnings
Net earnings in 1992 of $8.8 million compared favorably to the net earnings in
1991 of $7.2 million. Although net earnings increased 21.2%, the net earnings
per share of $2.25 in 1992 were lower than the net earnings per share of $2.29
in 1991 as a direct result of the additional 1,046,277 shares outstanding
principally due to the offering of common stock in April, 1992.
<PAGE>
<TABLE>
<CAPTION>
Douglas & Lomason Company and Subsidiaries
Selected Financial and Other Data
(In thousands of dollars except as to per share and other data)
1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
For the Year
Net sales $424,843 $391,178 $375,618 $418,118 $424,926 $325,498
Cost of sales 393,935 358,191 342,202 385,302 406,470 313,943
Gross profit 30,908 32,987 33,416 32,816 18,456 11,555
Capital additions 20,460 16,744 6,098 8,749 16,708 26,805
Depreciation expense 12,002 10,432 10,611 11,666 11,169 7,636
Interest expense 2,706 3,530 5,416 8,028 8,322 3,787
Income tax expense
(benefit) (2,607) 3,823 4,650 3,102 (2,296) (3,692)
Earnings (loss)
before cumulative
effect for change
in accounting
principle (3,411) 8,770 7,235 4,964 (3,372) (4,629)
Net earnings (loss) (7,168) 8,770 7,235 4,964 (3,372) (3,969)
At Year End
Total assets $174,283 $156,351 $139,192 $148,820 $169,975 $161,916
Working capital 36,205 50,633 45,723 52,689 31,123 33,025
Property, plant and
equipment less
accumulated
depreciation 69,110 66,022 60,070 64,726 67,886 62,525
Long-term debt 21,826 25,655 46,486 67,627 56,253 48,911
Shareholders' equity 77,675 85,881 54,204 47,382 41,408 45,096
Per Share Data
Book value $ 18.37 $ 20.47 $ 17.21 $ 15.05 $ 13.68 $ 15.09
Net earnings (loss)
per share (1.70) 2.25 2.29 1.57 (1.12) (1.31)
Dividends .40 .30 .14 .07 .25 .33
Other Data
Number of employees 5,697 5,817 5,562 5,424 6,285 6,076
Number of
shareholders 806 846 858 887 903 891
Weighted average
number of common
and common
equivalent
shares
outstanding 4,214,372 3,890,115 3,154,365 3,159,311 3,018,002 3,033,798
<FN>
Per share data and outstanding shares for 1991 and prior have been
retroactively adjusted to reflect the 1992 3-for-2 stock split distributed
April 2, 1992.
</TABLE>
Page 17
<PAGE>
<TABLE>
<CAPTION>
Douglas & Lomason Company and Subsidiaries
Consolidated Balance Sheets
December 31, 1993 and 1992
1993 1992
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,745,818 $ 8,238,779
Accounts receivable (note 6) 70,458,109 55,598,421
Inventories (note 2) 14,435,433 18,713,466
Deferred tax assets (note 5) 5,542,000 2,002,392
Prepaid expenses and
other current assets 1,042,843 1,106,008
Total current assets 94,224,203 85,659,066
Property, plant and equipment at cost
less accumulated depreciation
(notes 3, 4 and 9) 69,109,773 66,022,118
Other assets 10,949,345 4,669,945
$174,283,321 $156,351,129
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings (note 4) $ 7,000,000 $ ---
Current installments of long-term
debt (note 4) 5,829,315 5,330,679
Accounts payable 31,100,497 19,848,825
Accrued payroll 3,280,660 3,258,727
Income taxes payable 800,149 2,194,024
Accrued plant closing
expenses (note 9) 5,065,000 ---
Other accrued expenses (note 7) 4,943,872 4,394,155
Total current liabilities 58,019,493 35,026,410
Long-term debt, excluding current
installments (note 4) 21,825,630 25,654,945
Postretirement benefits, other
than pensions (note 8) 6,521,094 ---
Deferred income taxes (note 5) 992,000 6,045,000
Other liabilities (note 9) 9,250,484 3,743,797
Shareholders' equity (notes 4 and 11):
Preferred stock, no par value.
Authorized 500,000 shares;
no shares issued --- ---
Common stock, $2 par value.
Authorized 10,000,000 shares;
issued 4,227,220 in 1993
(4,194,945 in 1992) 8,454,440 8,389,890
Other capital 27,986,476 27,383,113
Retained earnings 41,253,360 50,107,974
Foreign currency translation adjustment (19,656) ---
Total shareholders' equity 77,674,620 85,880,977
$174,283,321 $156,351,129
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
Page 18
<PAGE>
<TABLE>
<CAPTION>
Douglas & Lomason Company and Subsidiaries
Consolidated Statements of Earnings
Years ended December 31, 1993, 1992 and 1991
1993 1992 1991
<S> <C> <C> <C>
Net sales $424,842,681 $391,178,399 $375,617,887
Cost of sales 393,934,783 358,190,994 342,202,103
Gross profit 30,907,898 32,987,405 33,415,784
Selling, general
and administrative
expenses 19,670,926 17,834,224 16,624,742
Provision for plant
closings (note 9) 15,000,000 --- ---
Operating income
(loss) (3,763,028) 15,153,181 16,791,042
Other income (expenses):
Interest expense (2,706,072) (3,530,314) (5,415,669)
Interest income and
other, net 451,526 970,020 509,894
(2,254,546) (2,560,294) (4,905,775)
Earnings (loss)
before income
taxes and
cumulative effect
of change in
accounting
principle (6,017,574) 12,592,887 11,885,267
Income tax (benefit)
expense (note 5) (2,607,000) 3,823,000 4,650,000
Earnings (loss)
before cumulative
effect of change
in accounting
principle (3,410,574) 8,769,887 7,235,267
Cumulative effect at
January 1, 1993 of
change in accounting
for postretirement
benefits other than
pensions, net of
income tax benefit
(note 8) (3,756,930) --- ---
Net earnings (loss) $ (7,167,504) $ 8,769,887 $ 7,235,267
Earnings (loss) per
share before
cumulative effect
of change in
accounting
principle $ (.80) $ 2.25 $ 2.29
Cumulative per share
effect of change
in accounting for
postretirement
benefits other
than pensions,
net of income tax
benefit (.90) --- ---
Net earnings (loss)
per share $ (1.70) $ 2.25 $ 2.29
Dividends per share $ .40 $ .30 $ .14
Weighted average number
of common and common
equivalent shares
outstanding 4,214,372 3,890,115 3,154,365
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
Page 19
<PAGE>
<TABLE>
<CAPTION>
Douglas & Lomason Company and Subsidiaries
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1993, 1992 and 1991
Foreign
Currency
Common Other Retained Translation Shareholders'
Stock Capital Earnings Adjustment Equity
<S> <C> <C> <C> <C> <C>
Balance at
December 31,
1990 $6,295,836 $ 5,300,866 $35,785,422 $ - $47,382,124
Net earnings - - 7,235,267 - 7,235,267
Dividends, $.14
per share - - (419,772) - (419,772)
Issuance of 750
shares under
employee stock
option plan 1,500 4,625 - - 6,125
Balance at
December 31,
1991 6,297,336 5,305,491 42,600,917 - 54,203,744
Net earnings - - 8,769,887 - 8,769,887
Dividends, $.30
per share - - (1,262,830) - (1,262,830)
Issuance of 114,157
shares under
employee stock
option plans, net
of 1,868 shares
received as
consideration for
exercised stock
options 228,314 1,310,466 - - 1,538,780
Redemption of 174
fractional shares
as a result of
3-for-2 stock
split (348) 348 - - -
Issuance of
932,294 shares
through public
offering,net
of expenses 1,864,588 20,766,808 - - 22,631,396
Balance at
December 31,
1992 8,389,890 27,383,113 50,107,974 - 85,880,977
Net loss - - (7,167,504) - (7,167,504)
Dividends, $.40
per share - - (1,687,110) - (1,687,110)
Foreign currency
translation
adjustment - - - (19,656) (19,656)
Issuance of 32,275
shares under
employee stock
option plan 64,550 603,363 - - 667,913
Balance at
December 31,
1993 $8,454,440 $27,986,476 $41,253,360 $(19,656) $77,674,620
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
Page 20
<PAGE>
<TABLE>
<CAPTION>
Douglas & Lomason Company and Subsidiaries
Consolidated Statements of Cash Flows
Years ended December 31, 1993, 1992 and 1991
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(7,167,504) $ 8,769,887 $ 7,235,267
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating
activities:
Provision for plant closings 15,000,000 --- ---
Cumulative effect of change
in accounting for post-
retirement benefits other
than pensions, net of tax
benefit 3,756,930 --- ---
Depreciation 12,002,047 10,431,627 10,611,232
Net (gain) loss on sale of
property, plant and equipment (68,241) 58,469 69,332
Provision for deferred income
taxes (6,386,000) (14,000) (33,000)
Changes in operating assets and
liabilities:
Increase in accounts receivable (14,859,688) (7,125,536) (3,128,062)
Decrease (increase) in
inventories 4,278,033 (195,438) 4,681,905
Decrease (increase) in prepaid
expenses and other assets (4,216,235) (1,039,454) 2,426,654
Increase (decrease) in accounts
payable 11,251,672 7,101,746 (1,593,978)
Increase (decrease) in income
taxes payable and
accrued expenses (822,225) (1,079,099) 3,635,872
Increase in other liabilities 1,151,245 400,190 301,586
Net cash provided by
operating activities 13,920,034 17,308,392 24,206,808
Cash flows from investing activities:
Proceeds from the sale of property,
plant and equipment 416,291 301,283 74,034
Capital expenditures (20,459,754) (16,743,833) (6,098,337)
Net cash used in investing
activities (20,043,463) (16,442,550) (6,024,303)
Cash flows from financing activities:
Net proceeds from public
stock offering --- 22,631,396 ---
Proceeds from issuance of
long-term debt --- --- 20,000,000
Principal payments on long-
term debt (5,330,679) (21,341,271) (38,715,962)
Proceeds from short-term
borrowings, net 7,000,000 --- ---
Proceeds from exercised stock
options, net 667,913 1,538,780 6,125
Dividends paid (1,687,110) (1,262,830) (419,772)
Net cash provided (used) in
financing activities 650,124 1,566,075 (19,129,609)
Effect of translation adjustment
on cash (19,656) --- ---
Net increase (decrease) in cash and
cash equivalents (5,492,961) 2,431,917 (947,104)
Cash and cash equivalents at
beginning of year 8,238,779 5,806,862 6,753,966
Cash and cash equivalents at end
of year $ 2,745,818 $ 8,238,779 $ 5,806,862
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest $ 2,716,378 $ 3,561,905 $ 5,356,252
Income taxes $ 5,078,975 $ 3,942,491 $ 2,658,256
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
Page 21
<PAGE>
Douglas & Lomason Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1993, 1992 and 1991
(1)
Summary of Significant
Accounting Policies
Principles of Consolidation
The consolidated financial statements include the Accounting financial
statements of Douglas & Lomason Company and its wholly owned subsidiaries.
All significant inter-company balances and transactions have been eliminated
in consolidation. The Company's investment in a 50% owned affiliate is
accounted for on the equity method.
Cash Equivalents
The Company considers all investments with original maturities of three months
or less to be cash equivalents.
Financial Instruments
Financial instruments consist primarily of cash equivalents, accounts
receivable, accounts payable and bank debt. At December 31, 1993, the Company
believes the fair value of these financial instruments approximates the
carrying amount.
Inventories
Inventories are stated at the lower of cost or market (net realizable value).
Cost for substantially all inventories is determined by the last-in, first-out
(LIFO) cost method. Tooling in process represents unique manufacturing
equipment costs incurred, which are partially reimbursed by customers, and the
balance amortized over the years the tools benefit. Tooling costs that
benefit future periods, less current amortization, are included in other
assets.
Property, Plant and Equipment
Depreciation is computed using both straight line and accelerated methods over
the estimated useful lives of the assets: 10 to 20 years for land
improvements, 10 to 40 years for buildings and 2 to 12 years for machinery and
equipment.
The cost and accumulated depreciation of a fully depreciated asset remain in
the accounts. When a sale or abandonment occurs, the cost and related
accumulated depreciation are removed from the accounts and the resulting gain
or loss is reflected in earnings. Repairs and maintenance are charged to
earnings as incurred; renewals and betterments are capitalized.
Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Standards No. 109, "Accounting for Income Taxes." For the years ended
December 31, 1992 and 1991, income taxes were determined in accordance with
Statement of Financial Accounting Standards No. 96, "Accounting for Income
Taxes." Both Statement 109 and Statement 96 require income taxes be
determined using the asset and liability method. Accordingly, deferred income
taxes are recognized for the tax consequences of "temporary differences" by
applying enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax bases of existing
assets and liabilities.
The adoption of Statement 109 did not have a material effect on the 1993
Consolidated Financial Statements.
Supplemental Health Care Retirement Benefits
Effective January 1, 1993, the Company adopted Statement of Financial
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," which establishes a new accounting principle for the cost of
retiree health care and other postretirement benefits (also see note 8).
Prior to 1993, the Company recognized those benefits on the pay-as-you-go
method. The cumulative effect of the change in accounting for postretirement
benefits other than pensions is reported in the 1993 consolidated statement of
earnings.
Translation of Foreign Currencies
Assets and liabilities of foreign subsidiaries are translated at the rate of
exchange in effect on the balance sheet date; income and expenses are
translated at the average rates of exchange prevailing during the year. The
resulting translation adjustments are recorded directly into a separate
component of stockholders' equity.
Reclassifications
Certain amounts related to prior years have been reclassified to conform with
1993 presentation.
(2)
Inventories
Substantially all inventories are valued on the last-in, first-out (LIFO) cost
method. In the opinion of management, the first-in, first-out (FIFO) cost
approximates replacement cost.
Inventories consist of the following:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Raw materials $12,741,266 $13,133,590
Work in process 5,327,528 5,534,457
Tooling in process 2,010,539 5,680,314
Finished goods 3,356,670 3,323,092
Inventories at FIFO basis 23,436,003 27,671,453
Less adjustment of certain
inventories to a LIFO basis 9,000,570 8,957,987
$14,435,433 $18,713,466
</TABLE>
During 1992 and 1991, certain LIFO inventory layers were reduced. During
1992, this reduction resulted in charging higher inventory costs prevailing in
previous years to costs of goods sold in 1992, thus increasing costs of goods
sold by approximately $100,000 above the amount that would have resulted from
liquidating inventory recorded at December 31, 1992 prices. During 1991, this
reduction resulted in charging lower inventory costs prevailing in previous
years to costs of goods sold in 1991, thus reducing costs of goods sold by
approximately $600,000 below the amount that would have resulted from
liquidating inventory recorded at December 31, 1991 prices.
Page 22
<PAGE>
(3)
Property, Plant and Equipment
A summary of property, plant and equipment follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land and land improvements $ 3,393,836 $ 3,275,305
Buildings and building improvements 29,213,262 25,498,711
Machinery and equipment 107,468,485 102,829,928
Construction in process 2,675,640 3,691,888
142,751,223 135,295,832
Less accumulated depreciation 73,641,450 69,273,714
$ 69,109,773 $ 66,022,118
</TABLE>
Amounts included above, which have been capitalized under capital lease are as
follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Machinery and equipment $ 6,181,567 $ 6,181,567
Less accumulated depreciation 3,508,462 3,030,958
$ 2,673,105 $ 3,150,609
</TABLE>
(4)
Indebtedness
At December 31, 1993, the Company had unsecured lines of credit aggregating
$20 million with two banks. Interest only payments are due at various dates
at interest rates based on various factors which are at or below the banks'
prime rate. At December 31, 1993, $7.0 million was outstanding on these lines
of credit, and the effective rate of interest was 3.9 percent. These lines of
credit expire on April 30, 1994, but are expected to be renewed at that time.
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Notes payable to banks $23,437,500 $27,812,500
Capital leases 2,217,445 3,173,124
Other 2,000,000 ---
27,654,945 30,985,624
Less current installments 5,829,315 5,330,679
$21,825,630 $25,654,945
</TABLE>
At December 31, 1993, the Company had an unsecured term loan with two banks
totaling $15.0 million. Quarterly payments of principal and interest (at
7.95%) are required with the final balance due October 31, 1999. The
aggregate maturities on this loan are $2,500,000 each year from 1994 through
1999.
The Company had another unsecured term loan agreement with two banks totaling
$8,437,500 at December 31, 1993. Quarterly payments of principal and interest
(at 9.95%) are required with the final balance due May 31, 1998. The
aggregate maturities on this loan are $1,875,000 each year from 1994 through
1997; and $937,500 in 1998.
During 1993, the Company acquired intangible assets in exchange for a $2.0
million obligation. This obligation is payable in five equal annual
installments from 1994 through 1998.
<PAGE>
Under a capital lease agreement, the Company has agreed to purchase certain
equipment leased at a nominal amount on the expiration date. The following is
a schedule by year of future minimum lease payments under this capital lease
together with the present value of the total minimum lease payments:
<TABLE>
<S> <C>
Years ending December 31:
1994 $1,236,306
1995 1,236,306
Total minimum lease payments 2,472,612
Less amount representing interest at 9.94% 255,167
Present value of minimum lease payments $2,217,445
</TABLE>
The bank notes and lease agreement contain restrictive covenants regarding
consolidated working capital, net worth and total liabilities. The Company
was in compliance with all such covenants at December 31, 1993.
(5)
Income Taxes
Earnings (loss) before income taxes and cumulative effect of change in
accounting, as shown in the consolidated statements of earnings consist of the
following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Domestic $(4,344,385) $12,891,117 $11,830,978
Foreign (1,673,189) (298,230) 54,289
$(6,017,574) $12,592,887 $11,885,267
</TABLE>
Components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current:
Federal $ 3,438,000 $3,556,000 $4,128,000
State 343,000 160,000 526,000
Foreign (2,000) 121,000 29,000
3,779,000 3,837,000 4,683,000
Deferred:
Federal (4,969,000) (225,000) (43,000)
State (580,000) 211,000 10,000
Foreign (837,000) --- ---
(6,386,000) (14,000) (33,000)
$(2,607,000) $3,823,000 $4,650,000
</TABLE>
Page 23
<PAGE>
A reconciliation of the "expected" income tax expense (benefit) based on the
federal corporate income tax rate of 34% to the actual income tax expense
(benefit) is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Expected income tax
expense (benefit) $(2,046,000) $4,281,000 $4,041,000
State income taxes, net
of federal income tax benefit (156,000) 245,000 354,000
Research and development tax
credits (332,000) (700,000) -
Foreign tax rate differential (268,000) 222,000 11,000
Other items, net 195,000 (225,000) 244,000
Actual income tax expense
(benefit) $(2,607,000) $3,823,000 $4,650,000
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1993 are as follows:
<TABLE>
<CAPTION>
Deferred Deferred
Tax Assets Tax Liabilities
<S> <C> <C>
Plant and equipment, due to
difference in depreciation $ 1,696,000 $6,745,000
Accrued postretirement benefits
deductible for tax purposes
when paid 2,768,000 ---
Other expenses deductible for tax
purposes when paid 2,377,000 ---
Accrued plant closing costs 5,397,000 ---
Other items, net 765,000 246,000
$13,003,000 6,991,000
Less valuation allowance on
deferred tax assets (1,463,000) ---
$11,540,000 $6,991,000
</TABLE>
Management has determined, based on the Company's history of domestic taxable
income and its expectation of the future, that domestic operating income of
the Company will likely be sufficient to fully recognize these net deferred
tax assets.
The Company has a foreign tax net operating loss carry forward of
approximately $2.3 million at December 31, 1993, which will expire if not used
by 1998. A valuation allowance is recorded for the total amount of certain
foreign deferred tax assets because of the uncertainty of their ultimate
realization.
<PAGE>
(6)
Industry Segment
The Company's operations are within the following industry segments:
Segment automotive products, material handling equipment and specialized truck
bodies and trailers. A summary of certain segment information and a
reconciliation to the related consolidated financial statement amounts follow:
<TABLE>
<CAPTION>
1993
----------------------------------------------
Automotive All Other
Products Segments Consolidated
------------ ----------- ------------
<S> <C> <C> <C>
Sales to customers $397,356,003 $27,486,678 $424,842,681
Operating profit (loss)
(note 9) $ (1,601,322) $ 1,456,917 $ (144,405)
General corporate expense, net (3,167,097)
Interest expense (2,706,072)
Loss before income taxes and
cumulative effect of change
in accounting principle $ (6,017,574)
Identifiable assets at
December 31 $149,772,959 $12,032,522 $161,805,481
Corporate assets 12,477,840
Total assets $174,283,321
<CAPTION>
1992
----------------------------------------------
Automotive All Other
Products Segments Consolidated
------------ ----------- ------------
<S> <C> <C> <C>
Sales to customers $363,299,730 $27,878,669 $391,178,399
Operating profit (loss) $ 18,268,931 $ (258,530) $ 18,010,401
General corporate expense, net (1,887,200)
Interest expense (3,530,314)
Earnings before income taxes $ 12,592,887
Identifiable assets at
December 31 $135,277,457 $ 9,217,223 $144,494,680
Corporate assets 11,856,449
Total assets $156,351,129
<CAPTION>
1991
----------------------------------------------
Automotive All Other
Products Segments Consolidated
------------ ----------- -------------
<S> <C> <C> <C>
Sales to customers $348,754,400 $26,863,487 $375,617,887
Operating profit (loss) $ 20,719,055 $ (396,288) $ 20,322,767
General corporate expense, net (3,021,831)
Interest expense (5,415,669)
Earnings before income taxes $ 11,885,267
Identifiable assets at
December 31 $119,190,828 $10,865,989 $130,056,817
Corporate assets 9,135,513
Total assets $139,192,330
</TABLE>
Page 24
<PAGE>
The automotive products operations relate principally to the production of
fully trimmed seating, seat frame assemblies and mechanisms, energy management
systems and body trim used as components in the assembly of passenger cars and
trucks. Automotive product sales for 1993 include revenue from Chrysler, Ford
and General Motors representing 51, 25 and 15 percent, respectively, of total
automotive products sales (50, 25 and 18 percent in 1992 and 43, 28 and 20
percent in 1991). Automotive product sales to Bloomington-Normal Seating
Company (a 50% owned affiliate) approximated $18.7 million, $23.6 million and
$24.4 million for the years ended December 31, 1993, 1992 and 1991,
respectively. Depreciation and capital expenditures of the automotive
products segment for the year ended December 31, 1993 were $10.7 and $18.2
million, respectively ($9.6 million and $15.7 million in 1992, and $9.8
million and $5.3 million in 1991).
At December 31, 1993, the Company's trade accounts receivable due from
Chrysler, Ford and General Motors represents 55, 16 and 12 percent,
respectively, of total consolidated accounts receivable (54, 18 and 14 percent
in 1992). Total accounts receivable from Bloomington-Normal Seating Company
approximated $1.7 million and $1.8 million at December 31, 1993 and 1992,
respectively.
Identifiable assets are those assets used in, or resulting from, the operation
of a segment. Corporate assets, principally cash and cash equivalents,
administrative offices and other assets, are not classified as identifiable
assets.
(7)
Pension Benefits
The Company has non-contributory pension plans covering substantially all of
its salaried and hourly employees. The benefits are based on either years of
service and the employee's compensation during the last five years of
employment, or a fixed-dollar rate for each year of credited service up to a
maximum of thirty years. The Company's policy is to fund pension costs
accrued.
The following table sets forth the funded status of the plans and amounts
recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Actuarial present value of:
Vested benefits $30,072,000 $23,785,000
Accumulated benefits 31,338,000 25,241,000
Projected benefits 37,378,000 31,190,000
Plan assets at fair market value 42,471,000 43,946,000
Plan assets in excess of projected benefits 5,093,000 12,756,000
Unamortized transition assets (2,963,000) (3,298,000)
Unamortized prior service cost 1,673,000 1,512,000
Unrecognized net gain (4,971,000) (11,720,000)
Accrued pension cost included
in consolidated balance sheets $ 1,168,000 $ 750,000
</TABLE>
Assets in the plans consist mainly of investments in common stocks, private
sector bonds and federal government obligations.
The components of net pension cost are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service $ 2,033,000 $ 1,836,000 $ 1,648,000
Interest cost 2,469,000 2,212,000 1,942,000
Actual return on assets 300,000 (8,388,000) (8,542,000)
Net amortization
and deferral (4,384,000) 5,190,000 6,123,000
Net pension cost $ 418,000 $ 850,000 $ 1,171,000
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected
benefit obligation at December 31, 1993, were 7.25% and 4%, respectively (8%
and 5%, respectively for the previous two years presented). The expected
long-term rate of return on assets was 8%.
(8)
Other Postretirement Benefits
In addition to providing pension benefits, the Company sponsors two
postretirement benefit plans that cover salaried employees and their
dependents. One plan provides medical benefits and the other plan provides
life insurance benefits. The postretirement medical plan is contributory
until the retiree turns age 65 or if the retiree is at least age 62 and
retired with 15 or more years of service. The accounting for this plan is
consistent with the Company's expressed intent to modify its future
contribution policy such that the Company's contributions will be capped at
three times the 1993 cost levels. The life insurance plan provides death
benefits that vary depending on salary at retirement.
The Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," as of
January 1, 1993. The effect of adopting Statement 106 on net earnings for the
year ended December 31, 1993 was a decrease of approximately $4,040,000, which
includes an increase in the pre-tax net periodic postretirement benefit cost
of approximately $559,000. Postretirement benefit costs were less than
$200,000 for the years ended December 31, 1992 and 1991, which were recorded
on a cash basis and have not been restated.
The following table presents the funded status of these obligations reconciled
with amounts recognized in the Company's consolidated balance sheet at
December 31, 1993:
Page 25
<PAGE>
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 3,492,000
Fully eligible active salaried employees 1,364,000
Other active employees 4,399,000
9,255,000
Assets at fair value, primarily insurance contracts 921,000
Accumulated postretirement benefit obligation in
excess of assets 8,334,000
Unrecognized net loss (1,813,000)
Accrued postretirement benefit cost included
in the consolidated balance sheet $ 6,521,000
Net periodic postretirement benefit cost for
the year ended December 31, 1993 included
the following components:
Service cost $ 341,000
Interest cost 572,000
Actual return on assets (59,000)
Net periodic postretirement benefit cost $ 854,000
</TABLE>
For measurement purposes, the annual percent rate of increase in the per
capita cost of health care benefits (i.e. health care cost trend rate) for
1993 was assumed to vary by age category and by type of health care service.
For benefits provided to participants under age 65, the 1993 trend was assumed
to be 15% for prescriptions drugs and 14% for all other costs. The over age
65 trends for 1993 were assumed to be 15% for prescriptions drugs, 11.5% for
charges related to Medicare Part B expenses and 6.0% for Medicare Part A
charges. These rates were assumed to decrease gradually to 6 percent (5.5%
for Medicare Part A charges) over the next 15 years and remain at that level
thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. For example, increasing the assumed health
care cost trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1993 by 1.8
percent and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year ended December 31, 1993 by
1.4 percent.
The weighted average discount rate and rate of increase in future compensation
levels used in determining the accumulated postretirement benefit obligation
were 7.25 % and 4%, respectively at December 31, 1993. The expected long-term
rate of return on assets was 8%.
Beginning in 1994, the unrecognized net loss will be amortized over the
average remaining service period of active plan participants (21 years).
(9)
Provision for Plant Closings
During the fourth quarter of 1993, the Company accrued $15.0 million in
connection with management's decision to close four automotive plants.
This resulted in an after tax charge of $9.6 million or $2.28 per share. The
provision consists principally of the devaluation of building and equipment
($5.0 million) to estimated realizable value, employee severance and benefit
costs ($3.0 million), site restoration and other environmental exit costs
($2.6 million) and other facilities consolidation costs ($4.4 million). A
substantial portion of these costs are expected to be funded in 1994, with the
remainder by 1996.
(10)
Environmental Matters
The Company is involved in proceedings related to environmental matters. As
of December 31, 1993, the Company has recorded a $3.1 million liability for
estimated future clean-up costs in connection with its internal site
assessment and compliance program (which includes $2.6 million included in the
provision for plant closings accrual discussed in note 9).
The Company believes this accrual is adequate for environmental matters known
at the current time. Changes in EPA standards, improvements in clean-up
technology and discovery of additional information concerning these sites and
other sites could result in future expenses that are greater than the accrued
liability. Management believes that these matters will not have a material
adverse effect upon its future financial position or results of operations.
<PAGE>
(11)
Stock Option Plans
Under the Company's 1990 Stock Option Plan, 225,000 shares (as adjusted for
the 1992 stock split) of the Company's common stock have been reserved for
grants to officers and key employees at prices which are not less than the
fair market value on the date of the grant. Stock options outstanding of
7,875 at December 31, 1993 for the 1982 Incentive Stock Option Plan are
exercisable at an option price of $17.50 per share. This Plan expired in
February, 1992 and accordingly no additional options are available for grant.
Stock options outstanding of 58,300 at December 31, 1993 under the 1990 Plan
are exercisable at a weighted option price of $15.36 per share. Options
granted, but not exercised, expire within five years from the date of the
grant. Transactions for the years ended December 31, 1993, 1992 and 1991 were
as follows:
<TABLE>
<CAPTION>
Number of Shares
---------------------------------
1993 1992 1991
------- -------- -------
<S> <C> <C> <C>
Outstanding at beginning of year 100,075 133,575 137,025
Granted --- 83,575 750
Exercised (32,275) (116,025) (750)
Canceled (1,625) (1,050) (3,450)
Outstanding at end of year 66,175 100,075 133,575
Available for grant at end of year 78,550 78,050 160,875
</TABLE>
Page 26
<PAGE>
Independent Auditors' Report
To the Shareholders and Board of Directors
of Douglas & Lomason Company:
We have audited the accompanying consolidated balance sheets of Douglas &
Lomason Company and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of earnings, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1993.
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 Douglas &
Lomason Company and subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in note 1 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 Standards Board's Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." As
discussed in notes 1 and 8 to the consolidated financial statements, the
Company also adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" in 1993.
/s/ KPMG Peat Marwick
Detroit, Michigan
January 31, 1994
<PAGE>
<TABLE>
<CAPTION>
Quarterly Financial Summary
(In thousands of dollars except as to per share data; unaudited)
First Second Third Fourth
1993 Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Net sales $115,403 $103,859 $92,995 $112,586 $424,843
Gross profit 12,412 8,295 2,367 7,834 30,908
Earnings (loss) before
income taxes and
cumulative effect of
change in accounting
principle 6,792 2,855 (3,038) (12,627) (6,018)
Net earnings (loss) 605 1,850 (1,763) (7,860) (7,168)
Earnings (loss) per share
before cumulative effect
of change in accounting
principle 1.04 .44 (.42) (1.86) (.80)
Net earnings (loss)
per share .14 .44 (.42) (1.86) (1.70)
<CAPTION>
First Second Third Fourth
1992 Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
Net sales $90,815 $98,992 $90,826 $110,545 $391,178
Gross profit 7,141 9,679 6,952 9,215 32,987
Earnings before income
taxes 1,748 4,610 2,555 3,680 12,593
Net earnings 1,043 3,030 1,660 3,037 8,770
Net earnings
per share .33 .77 .40 .72 2.25
</TABLE>
Fourth quarter net earnings in 1993 were negatively impacted by the provision
for plant closings of $2.28 per share. Fourth quarter net earnings in 1992
were negatively impacted by costs associated with the start-up of a new
facility in Mexico and the costs accrued related to the expected downsizing of
a plant in 1993. These costs in 1992 were offset by the favorable tax benefit
realized from recording research and development tax credits. The net effect
of fourth quarter adjustments in 1992 was a decrease of $.14 per share.
Page 27
<PAGE>
SHAREHOLDER INFORMATION
Annual Meeting
The Annual Meeting of Shareholders will be held on Friday, April 29, 1994,
at 11:00 a.m. CDT at the New World Inn, 265 33rd Avenue, Columbus, NE.
All shareholders are cordially invited to attend.
Stock Market Information
Douglas & Lomason Company common stock is traded in the National Market
System of The Nasdaq Stock Market under the symbol DOUG. Stock price
quotations are printed daily in major newspapers. As of December 31,
1993, there were 4,227,220 shares of common stock outstanding, of which
approximately 15% was owned by officers and directors and 43% by
institutions. At that date, there were 806 shareholders of record. Also
at that date, the following securities firms were registered as market
makers of the Company's common stock:
Bear, Stearns & Co. Inc. Neuberger & Berman
First of Michigan Corporation Sherwood Securities Corp.
Herzog, Heine, Geduld, Inc. Stifel Nicolaus & Co.
Kemper Securities, Inc. Troster Singer Corp.
Stock Prices and Cash Dividends
<TABLE>
<CAPTION>
1993
----------------------------
Market Price
---------------- Cash
Quarter High Low Dividend
- ------- ------ ------ --------
<S> <C> <C> <C>
First 29 22 1/4 $ .10
Second 29 22 1/2 .10
Third 27 1/2 16 3/4 .10
Fourth 20 16 .10
------
$ .40
<CAPTION>
1992
----------------------------
Market Price
---------------- Cash
Quarter High Low Dividend
- ------- ------ ------ --------
<S> <C> <C> <C>
First 31 11 5/8 $ --
Second 35 17 1/2 .10
Third 21 15 .10
Fourth 23 14 .10
------
$ .30
</TABLE>
The Company has paid a cash dividend each year since 1957.
Form 10-K and Other Financial Publications
The Form 10-K for the year ended December 31, 1993, as well as other financial
publications of the Company, may be obtained without charge. Requests should
be directed to Patricia L. Shelton, Assistant Vice President and Assistant
Secretary, at the corporate offices.
Investor Relations Contact
Shareholders and prospective investors may contact the Company with questions
or requests for additional information. Inquiries should be directed to James
J. Hoey, Senior Vice President and Chief Financial Officer, at the corporate
offices.
Transfer Agent and Registrar
NBD Bank, N.A., Detroit, MI. To write or telephone, contact:
Securities Transfer Services
P.O. Box 8204
Boston, MA 02266
(800)257-1770
Independent Auditors
KPMG Peat Marwick, Detroit, MI
Legal Counsel
Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, MI
Smith, Currie & Hancock, Atlanta, GA
Page 29
The Board of Directors and Shareholders
Douglas & Lomason Company:
We consent to incorporation by reference in the Registration Statement No.
33-36359 on Form S-8 of Douglas & Lomason Company of our report dated
January 31, 1994, relating to the consolidated balance sheets of Douglas &
Lomason Company and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows and related schedules for each of the years in the three-year period
ended December 31, 1993, which report appears in the December 31, 1993,
annual report on Form 10-K of Douglas & Lomason Company. Our report refers
to the changes in accounting for income taxes and postretirement benefits
other than pensions in 1993.
/s/ KPMG Peat Marwick
Detroit, Michigan
March 25, 1994
