SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended September 30, 1995
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to _________________
Commission file number 0-627
Douglas & Lomason Company
(exact name of registrant as specified in its charter)
Michigan 38-0495110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24600 Hallwood Court, Farmington Hills, Michigan 48335-1671
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 478-7800
Former name, former address and former fiscal year, if changed since last
year: same
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__ NO _____
CLASS OUTSTANDING AT NOVEMBER 14, 1995
Common stock, $2 par value 4,243,021
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<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Consolidated Condensed Balance Sheets
September 30 December 31
1995 1994
------------- -----------
<S> <C> <C>
ASSETS
Current assets:
Notes and accounts receivable $117,341,850 $ 99,927,502
Inventories
Raw materials 12,407,110 10,823,892
Work in process and finished goods 17,096,121 8,967,433
------------ ------------
29,503,231 19,791,325
Cash and other current assets 5,975,263 10,185,455
------------ ------------
152,820,344 129,904,282
Property, plant and equipment, net 75,742,271 66,787,613
Other non-current assets 18,218,699 14,871,532
Intangibles 38,986,836 --
------------ ------------
Total assets $285,768,150 $211,563,427
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 5,076,579 $ 5,938,130
Accounts payable and accrued expenses 85,294,152 71,787,370
Taxes on income -- 1,865,401
------------ ------------
Total current liabilities 90,370,731 79,590,901
Postretirement benefits other than
pensions 8,272,413 7,533,669
Other liabilities 17,981,733 6,822,429
Long-term debt, less current maturities 83,206,250 31,887,500
Shareholders' equity
Preferred stock
No par value, authorized 500,000
shares, issued - none
Common stock
Par value $2 per share authorized
10,000,000 shares; issued and
outstanding 4,243,021 shares in 1995
and 4,228,720 shares in 1994 8,486,042 8,457,440
Other capital 28,087,684 27,997,976
Retained earnings 53,324,345 52,048,512
Foreign currency translation adjustment (3,961,048) (2,775,000)
----------- ------------
Total shareholders' equity 85,937,023 85,728,928
------------ ------------
Total liabilities and
shareholders' equity $285,768,150 $211,563,427
============ ============
</TABLE>
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<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Consolidated Condensed Statements of Income
Three Months Ended Nine Months Ended
September 30 September 30
---------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $131,264,203 $137,679,747 $416,924,263 $384,399,109
Cost of sales 124,504,973 132,025,549 393,395,157 357,918,334
------------ ------------ ------------ ------------
Gross profit 6,759,230 5,654,198 23,529,106 26,480,775
Selling, general and
administrative
expense 6,774,730 4,855,197 18,796,817 15,732,107
------------ ------------ ------------ ------------
Operating income
(loss) (15,500) 799,001 4,732,289 10,748,668
Other income (expenses):
Interest expense, net (1,725,365) (669,656) (3,475,042) (1,877,543)
Interest income
and other 75,373 319,407 337,292 778,731
------------ ------------ ------------ ------------
(1,649,992) (350,249) (3,137,750) (1,098,812)
Earnings (loss) before
provisions for
income taxes (1,665,492) 448,752 1,594,539 9,649,856
Income tax expenses
(benefit) (865,000) 215,000 (530,000) 3,590,000
------------ ------------ ------------ ------------
Net earnings (loss) $ (800,492) $ 233,752 $ 2,124,539 $ 6,059,856
============ ============ ============ ============
Net earnings (loss)
per share $ (.19) $ .05 $ .50 $ 1.43
============ ============ ============ ============
Weighted average
number of shares 4,243,051 4,228,035 4,240,607 4,227,918
============ ============ ============ ============
</TABLE>
3
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<TABLE>
<CAPTION>
DOUGLAS & LOMASON COMPANY
Consolidated Condensed Statements of Cash Flows
Nine Months Ended
September 30
---------------------------------
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,124,539 $ 6,059,856
Depreciation 9,760,078 9,764,036
Postretirement benefits other than pensions --
Changes in operating assets and liabilities:
Increase in accounts receivable (15,745,221) (32,245,366)
Increase in inventories (229,931) (10,768,814)
Increase in prepaid expenses
and other assets (5,113,673) (499,177)
Increase in income taxes recoverable (530,000) --
Increase in accounts payable,
and accrued expenses 13,483,210 31,938,047
Increase (decrease) in other liabilities (695,492) 1,155,053
------------ -------------
Net cash provided by operating activities 3,053,510 5,403,635
------------ -------------
Cash flows from investing activities:
Proceeds from the sale of property,
plant and equipment 83,811 211,100
Acquisitions of property, plant and
equipment (13,542,312) (11,833,065)
Cost of acquisition, net of cash (43,487,920) --
------------ ------------
Net cash used by investing activities (56,946,421) (11,621,965)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt 55,000,000 17,000,000
Repayment of long-term debt (6,293,469) (4,571,015)
Proceeds from (repayment of) short-term debt -- (7,000,000)
Proceeds from exercised stock options, net 118,310 14,500
Dividends paid (848,670) (1,268,391)
------------ ------------
Net cash provided by financing activities 47,976,171 4,175,094
------------ ------------
Effect of translation on cash (39,878) --
Net decrease in cash (5,956,618) (2,043,236)
Cash at beginning of year 6,532,415 2,745,818
------------ ------------
Cash at end of quarter $ 575,797 $ 702,582
============ ============
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4
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DOUGLAS & LOMASON COMPANY
Notes to Consolidated Condensed Financial Statements
1. In the opinion of the Douglas & Lomason Company (the "Company"), the
accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position as of September 30, 1995 and 1994,
and the results of operations for the nine months then ended, and changes
in financial position for the nine months then ended, subject to year end
audit adjustments.
2. On June 8, 1995, the Company acquired the stock of Bestop, Inc.
("Bestop"). Bestop is the leading designer and manufacturer in North
America of soft tops and accessories for small sport utility vehicles.
Bestop sells its products domestically and internationally to original
equipment manufacturing (OEM) companies and in the aftermarket. The
purchase agreement required a purchase price of approximately $43,952,000.
The acquisition has been accounted for in accordance with the purchase
method of accounting.
Had the acquisition of Bestop, Inc. occurred as of January 1, 1994,
revenues, net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------- --------------------
(in 000's except for per share data)
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $131,264 $151,046 $445,289 $422,941
Net Earnings $ (800) $ 127 $ 2,155 $ 5,702
Net Earnings Per Share $ (.19) $ .03 $ .51 $ 1.35
</TABLE>
3. During the fourth quarter of 1993, the Company recorded a charge of $15.0
million in connection with management's decision to close certain
automotive plants. This resulted in an after tax charge of $9.6 million or
$2.28 per share. $5.0 million of this charge was immediately utilized for
the devaluation of building and equipment.
During 1994, $1,650,000 was charged to facility maintenance costs and the
payment of employee severance and benefit costs. These severance payments
represented the majority of the 12% expected workforce reduction. In
addition, $1.2 million of employee severance and benefit costs and
$650,000 of facilities, maintenance and other costs were taken into income
during the third and fourth quarters of 1994, respectively. Furthermore,
in compliance with current guidance, site restoration and other
environmental exit costs of $2.5 million were reclassified from the
provision for plant closing accrual to other accrued liabilities during
the fourth quarter of 1994. During the nine months ended September 30,
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1995, approximately $1.7 million was charged against the accrual for
facility maintenance and employee benefit costs. The cash outflows for the
remaining accrued liability are expected to occur over the next two years.
Selected financial information for these closed automotive facilities for
the years ended December 31 are as follows:
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<CAPTION>
1994 1993 1992
----------- ------------ -----------
<S> <C> <C> <C>
Sales $34,798,664 $ 71,754,231 $84,256,465
Pre-tax earnings
(loss) $ 359,027 $(15,597,071) $(1,902,175)
</TABLE>
6
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1995, the Company had working capital of $62.5 million and
available borrowings of $14.0 million on a $60.0 million revolver credit
agreement with two banks. The current ratio was 1.7 to 1.0.
The principal increases in the accounts receivable, inventories and accounts
payable balance sheet amounts are due to the acquisition and consolidation of
Bestop, Inc. acquired in June 1995.
Funds from operations of $3.1 million and proceeds from borrowing in 1995 of
$55.0 million and the $6.5 million cash on hand at the beginning of the year
were the principal sources of cash in the first nine months of 1995. The
acquisition of Bestop, Inc. in June, 1995 for $43.5 million, capital
expenditures of $13.2 million, debt repayment of $6.3 million, pension
obligation of $1.0 million and dividends of $.8 million were the primary uses
of cash.
The Company is in the final stages of forming a joint venture in a foreign
country to further it's global opportunities. This will require a capital
contribution of approximately $5.0 million, which will be primarily funded by
an anticipated dividend from an investment in an affiliated company.
No other significant borrowings are anticipated.
Plant Closings
The three plants included in the fourth quarter 1993 plant closing plan
discontinued operations and terminated substantially all employees during the
year of 1994. Sale of certain property, plant and equipment remains to be
completed. The cash outflows for the remaining accrued liability are expected
to occur over the next two years.
Results of Operations
Net Sales
Net sales for the three months ended September 30, 1995 of $131.3 million have
decreased $6.4 million from the three month sales of $137.7 for the period
ended September 30, 1994. This decrease of 4.7% is primarily attributable to
the decrease in volume for the Ford Aerostar, Ford Contour and Mercury
Mystique, for which the Company supplies fully trimmed seat sets, and General
Motor's decision to phase out the Chevrolet Caprice and Buick Roadmaster.
Also, the changeover of the Chrysler minivan resulted in some sales reduction.
Net sales for the nine month period ended September 30, 1995 of $416.9 million
increased $32.5 million or 8.5% over the same period in 1994. The principal
increase is due to the consolidation of the sales of the Company's recently
acquired subsidiary, Bestop, Inc. as well as the effect of a full nine months
sales in 1995 for the Contour and Mystique in Mexico which began in August
1994.
Cost of Sales
Cost of sales as a percentage of sales decreased to 94.8% for the three month
period ended September 30, 1995 compared to 95.9% in the same period in 1994.
The Company has realized an increase in the equity earnings of an investment
which has reduced cost of sales consistent with previous years' presentations.
The effect of this reduction is less than 1% of sales in both the three month
and nine month figures.
The trend of raw material price increases and reduced selling prices to our
customers as a result of long term agreements prevalent in the automotive
7
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industry had and will continue to have an adverse effect on the relationship
of cost of sales to sales. Opportunities for cost reduction will improve
this trend.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three month period ended
September 30, 1995 of $6.8 million increased $1.9 million from the $4.9
million reported for the same three month period of 1994. The Bestop
consolidation accounts for $1.7 million of this increase.
The selling, general and administrative expenses for the nine month period
ended September 30, 1995 of $18.8 million increased $3.1 million from the
$15.7 million reported for the nine month period ended September 30, 1994.
Again, this increase is principally attributable to the consolidation of
Bestop, Inc. Other factors of the increase reflect higher salaries and
increased employment costs.
Interest Expense
Interest expense in the third quarter of 1995 of $1.7 million increased $1.0
million from the same quarter in 1994. Higher debt levels in 1995 of
approximately $51.0 million primarily related to the Bestop acquisition and
capital expenditures is the principal explanation for the increase in interest
expense.
Net Earnings (Loss)
Net loss of $800,000 or $.19/share in the third quarter of 1995 compares
unfavorably with the net earnings of $234,000 or $.05/share for the third
quarter of 1994. Sales in July, 1995 and 1994 were substantially lower than
normal levels as a result of customer shutdowns for vacations and changeovers.
The impact of the reduced sales level in July results in substantial losses
that have not been recovered in August and September. The net earnings in 1994
included a reduction of $1.2 million (pretax) to the provision for plant
closings recorded in 1993. The adjustment reflected lower than expected costs
related to the fourth quarter 1993 plant closing plan.
Net earnings for the nine months ended September 30, 1995 of $2.1 million or
$.50/share decreased $4.0 million from the $6.1 million or $1.43/share
reported for the same period in 1994. Net earnings for the nine month period
in 1995 have been negatively impacted by the rising cost of raw materials and
selling price reductions included in long term agreements which are prevalent
in the automotive industry. Opportunities for cost reductions through
engineering changes will improve this trend in the future.
8
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
The Registrant filed no reports on Form 8-K during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOUGLAS & LOMASON COMPANY
-------------------------
(Registrant)
Date: November 14, 1995 /s/ James J. Hoey
-------------------------
Senior Vice President &
Chief Financial Officer
(Duly Authorized Officer
and Principal Financial
Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> $ 576
<SECURITIES> 0
<RECEIVABLES> 117,342
<ALLOWANCES> 0
<INVENTORY> 29,503
<CURRENT-ASSETS> 152,820
<PP&E> 168,474
<DEPRECIATION> 92,732
<TOTAL-ASSETS> 285,768
<CURRENT-LIABILITIES> 90,371
<BONDS> 88,283
<COMMON> 8,486
0
0
<OTHER-SE> 28,088
<TOTAL-LIABILITY-AND-EQUITY> 285,768
<SALES> 416,924
<TOTAL-REVENUES> 416,924
<CGS> 393,395
<TOTAL-COSTS> 393,395
<OTHER-EXPENSES> 18,797
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,475
<INCOME-PRETAX> 1,595
<INCOME-TAX> 530
<INCOME-CONTINUING> 2,125
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,125
<EPS-PRIMARY> .50
<EPS-DILUTED> 0
</TABLE>
