___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 10-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the year ended December 31, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ______________.
Commission File Number 1-3574
HASTINGS MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
Michigan 38-0633740
(State of incorporation) (I.R.S. Employer Identification No.)
325 North Hanover Street
Hastings, Michigan 49058
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 945-2491
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $2.00 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes_X_ No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (<Section> 229.405 of this chapter) 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_
Aggregate market value of voting stock of Registrant held by non-affiliates
as of March 20, 1996 was $3,953,692.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 20, 1996:
Common Stock - $2 par value 389,243 Shares
Documents and Information Incorporated by Reference
Part III, Items 10, 11, 12 and 13 Proxy Statement for Annual Meeting
to be held May 7, 1996
________________________________________________________________________________
PART I
ITEM 1. BUSINESS.
Hastings Manufacturing Company (the "Company") is a Michigan
corporation organized in 1929 with its headquarters and manufacturing
facilities in Hastings, Michigan. As discussed below, through September 3,
1995, the Company also owned manufacturing and distribution facilities in
Yankton, South Dakota and Knoxville, Tennessee.
The Company operates in one business segment, automotive
replacement parts. It primarily produces and/or sells automotive piston
rings and, through September 3, 1995, oil and air filters. To a lesser
extent, it produces and/or sells mechanics' hand tools and additives for
engines, transmissions and cooling systems. These products are distributed
nationally through numerous auto parts jobbers and warehouse distributors
for sale primarily in the automotive replacement market.
All of the Company's products are also sold in Canada and these
products are produced, or finished and packaged, by the Company's Canadian
subsidiary, Hastings, Inc., located in Barrie, Ontario.
Effective on September 3, 1995, the Company entered into an
agreement and sold its filter product line assets, including its Yankton
and Knoxville plant facilities, to CLARCOR Inc. (CLARCOR) of Rockford,
Illinois for $13,874,000. The sale did not include filter-related accounts
receivable of approximately $5,725,000, which were retained for collection
by the Company. Certain filter and filter component parts inventory
located at the Company's Hastings, Michigan plant was not included in the
sale as the Company, as discussed below, will continue to supply CLARCOR
with component parts during a transition period.
The Company and CLARCOR also entered into a Transition Agreement,
dated September 3, 1995. The Transition Agreement provides for the
Company's manufacture and supply to CLARCOR of certain filters and filter
component parts until certain manufacturing equipment, located at the
Company's Hastings, Michigan plant, can be moved and set up at CLARCOR's
plant facilities. It also provides for reimbursement to the Company of
certain administrative costs directly related to the manufacture and supply
of filters and filter components to CLARCOR. It is estimated the
transition period will be completed by mid-1996.
During the course of the transition period, the Company will be
moving its piston ring packaging operations from Knoxville, Tennessee to
Hastings, Michigan.
-1-
The market for the Company's products is highly competitive. The
principal methods of competition in the industry are price, service, and
product performance. Accurate figures are not available, but the Company
believes it ranks among the three largest domestic producers of replacement
piston rings and is also a significant producer of crankcase, gasoline,
transmission, and radiator additives.
Among the Company's trade names used in marketing its products
are "Hastings," "Densite," "Casite," and "Flex-Vent," which are registered
trademarks in the United States and many foreign countries. The Company
also holds a number of patents and licenses. In the opinion of management,
the Company's business generally is not dependent upon patent protection.
The Company ships orders to customers within a short period,
ordinarily one week or less from the time orders are received.
Accordingly, backlog is not significant in the business of the Company and
no separate figures of backlog are kept by the Company. The Company's
sales have limited seasonal fluctuations.
None of the practices of the Company or the industries in which
it operates create any unusual working capital requirements that would be
material to an understanding of the business taken as a whole.
The sales of the Company are to many customers and are not
dependent upon a single customer or a few customers.
Raw materials essential to the production of the Company's
products are standard items obtainable in the open market and are purchased
from many vendors.
Research and development are performed by the Company's
engineering staff relating to improvements in products and production as
well as the design and testing of new products. The Company's expenditures
for research and development are not material.
The Company has no material governmental contracts.
Compliance with federal, state and local environmental laws and
regulations governing discharges into the environment is not expected to
have a material effect upon the capital expenditures, earnings and
competitive position of the Company.
The Company and its subsidiaries have a total employment of
approximately 624 employees. Employee relations at all of the Company's
plant locations are considered to be satisfactory.
-2-
While the Company maintains operations in Canada, there are no
unusual risks attendant to the Company's foreign operations. The products
of the Company are sold worldwide but the amount sold in foreign countries,
other than Canada, is not a material portion of the Company's total sales.
Financial information regarding the Company's Canadian subsidiary including
sales, net income or loss and identifiable assets is included in
Note 10 to the Consolidated Financial Statements contained in Item 8 below.
ITEM 2. PROPERTIES.
The general offices and manufacturing plant, which produces
piston rings and, through the transition date discussed in Item 1 above,
filters and filter component parts for CLARCOR, are owned by the Company
and are located at 325 North Hanover Street, Hastings, Michigan. This
facility consists of approximately 260,000 square feet of production space,
154,000 square feet of available warehouse area, and 35,000 square feet of
office area.
Piston ring packaging operations, presently performed at the
Knoxville, Tennessee plant facility now owned by CLARCOR, will be moved to
the Hastings, Michigan plant during the course of the transition period.
These operations will be located in the portion of the Hastings' plant
facilities presently being used to produce filters and filter component
parts.
The Company's wholly owned Canadian subsidiary, Hastings, Inc.
owns and operates plant and warehouse facilities for piston rings, oil
additives, and mechanics' hand tools and is located in Barrie, Ontario.
This facility includes approximately 65,000 square feet of production and
warehouse space, and 4,000 square feet of office space.
As of year-end, production levels within the Company's Hastings,
Michigan facility were near 75% capacity. At the conclusion of the above
noted transition period, when all piston ring manufacturing and packaging
operations are performed at the Hastings' facility, it is anticipated the
facility will be operating at 80% to 85% of capacity.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceedings other
than routine litigation incidental to its business. In the opinion of
management, the outcome of any litigation currently pending will not
materially affect the Company's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of 1995 to a
vote of security holders through the solicitation of proxies or otherwise.
-3-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
The Company's common stock is traded on the American Stock
Exchange (ticker symbol HMF). At March 8, 1996, there were 389,243
outstanding shares and the approximate number of stockholders, excluding
those held by security brokers, was 348.
High and low sales prices and cash dividends, per quarter, are as
follows:
<TABLE>
<CAPTION>
1995 1994
CASH CASH
STOCK PRICE DIVIDENDS STOCK PRICE DIVIDENDS
HIGH LOW PAID HIGH LOW PAID
<S> <C> <C> <C> <C> <C> <C>
First Quarter............ 25-1/4 18-1/4 .10 38 30-1/2 .10
Second Quarter........... 20 17-1/2 .10 34-1/2 28 .10
Third Quarter............ 28-1/4 17-1/4 .10 30-1/2 27-1/2 .10
Fourth Quarter........... 27-1/2 20-5/8 .10 30-1/2 21-1/4 .10
</TABLE>
The Company expects to continue its policy of paying regular
quarterly dividends, although this policy is dependent upon future
earnings, capital requirements, and financial condition. In addition, cash
dividends are restricted to the extent described in Note 5 to the Consolidated
Financial Statements included at Item 8 below.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
1995<F1> 1994 1993<F2> 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales.......................... $63,228,312 $74,572,222 $ 72,477,617 $64,967,100 $61,102,200
Net Income (Loss).................. (3,023,180) 448,921 (10,254,450) (436,128) 423,469
Net Income (Loss) per Share........ (7.78) 1.16 (26.41) (1.13) 1.10
Long-Term Debt..................... 3,490,625 6,223,900 4,340,150 5,405,323 6,979,827
Total Assets....................... 37,547,568 47,854,279 46,149,236 41,313,313 44,101,127
Dividends per Share................ .40 .40 .40 .60 .90
Average Shares Outstanding......... 388,675 388,572 388,191 387,259 386,440
-4-
<FN>
<F1> The 1995 data includes the effects of the sale of filter operations and
the subsequent realignment of the organizational structure to a smaller
size. Refer to Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 2 to the Consolidated
Financial Statements included at Item 8, "Financial Statements and
Supplementary Data."
<F2> The 1993 data includes the cumulative effect of changes in accounting
principles of ($11,208,934) or ($28.87) per share.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
1995 was a year of significant change for the Company. It was a
period during which the organization redirected its profile and resources.
As described under the "Nature of Operations" section of Note 1, and
further detailed in Note 2 to the Consolidated Financial Statements included
at Item 8 below, the Company is now significantly different from the
organization that began the year. The major 1995 change relates to the decision
to sell the filter product line assets in the latter part of the third quarter.
After considerable thought and analysis, management and the Board of Directors
concluded that the financial and management resources being dedicated to
the filter product line were no longer appropriate considering the
increasingly competitive, price-sensitive nature of the business. The
resulting commodity-type pricing and the Company's lack of economies of
scale in those markets further prompted this decision. By concentrating
all of its efforts on its remaining product lines, primarily piston rings,
relocating all U.S. manufacturing and distribution operations to one plant
facility and realigning its organizational structure, management is
confident that profitability and shareholder value will be maximized.
For the year, the Company experienced a net loss of $3,023,180.
The loss was primarily due to four major factors, each of which is more
fully discussed below, including (1) low gross profit margins experienced
in the filter product line due, in part, to manufacturing inefficiencies,
(2) the sale and transition out of the filter business, (3) fixed costs
incurred during the period of realigning the Company's operating structure
to a smaller organization and (4) sales mix changes in the remaining
product lines along with significant labor costs through extended overtime
incurred to meet increased production needs.
Each of the quarterly periods experienced a net loss in 1995.
The first two quarters of 1995, reflecting net losses of approximately
$250,000 and $244,000, were largely affected by the lower margin filter
business and the sales mix issues noted above. The third quarter,
reflecting a net loss of approximately $1,986,000, was primarily affected
by the direct and indirect costs associated with transitioning out of the
-5-
filter business, along with increased group health care costs and
absorption of the high labor costs noted above. The fourth quarter,
reflecting a loss of approximately $543,000, was largely affected by the
continuation of certain fixed costs as the Company realigned its structure
to better support its smaller size, along with increased group health care
costs and the high labor costs noted above.
RESULTS OF OPERATIONS
NET SALES
The Company's net sales declined in the final quarter of the
year. That decline reflects the absence of significant filter activity
through that period. The fourth quarter's net sales of $10,769,966, which
included filter product line sales of $2,804,500, were down 44.7% from 1994
fourth quarter sales of $19,467,752, which included filter product line
sales of $10,658,000. The net sales decline of 15.2% for the full year of
1995 versus 1994, $63,228,312 versus $74,572,222, likewise reflects the
filter product line sale as of September 3, 1995. Total 1995 filter
product line sales were $28,262,500 compared to $40,370,000 for 1994. The
remaining product lines posted an approximate 9.6% decline in the final
quarter of 1995 as compared to the same period in 1994. The 1994 fourth
quarter results included a portion of the proceeds from the sale of
equipment and technology to a foreign competitor. These remaining product
lines were up approximately 2.2% for the full year of 1995 versus 1994
despite those 1994 proceeds. The noted sales mix change had a significant
negative impact here as the Company increased its volume of piston ring sales
but at a lower unit price and thus gross margin. That increased activity
occurred within the Company's export markets. During 1996, the Company
anticipates a more favorable sales mix with most growth targeted within
domestic markets. Despite strong sales activity within the Company's piston
ring markets, lower automotive tool and additive volumes resulted in the near
flat fourth quarter performance by the remaining product lines. Private
brand and export piston ring activity was quite strong throughout 1995.
The domestic piston ring distributor market, having increased early in the
year, was impacted during the last half of the year by a production
shortfall. This shortfall was caused, in part, by the early-1995 product
demands and by sales mix changes within the product offerings. The next
several quarters will continue to reflect some level of diminishing filter
related volume as we are committed to supplying filter components through
the transition period which is expected to be completed in mid-1996. For
comparative purposes, all future periods will be heavily directed by the
results of the remaining product lines' volume.
Net sales in 1994 were up $2,094,605, or 2.9%, from 1993. That
sales increase was due primarily to volume gains within the piston ring
distributor markets and the inclusion of proceeds from the sale of
technology and equipment to a foreign concern. The distributor sales gains
were aided by the Company's enhanced association with two buying groups
within that industry.
-6-
COST OF SALES AND GROSS PROFIT
Total cost of sales declined by $5,827,224, or 11.5%, in 1995
from 1994. As a percent of net sales, this cost increased from 68.1% in
1994 to 71.2% in 1995. The primary contributor to the net dollar decline
was again the reduced filter volume posted through the last one-third of
1995. The increase in the cost of sales percentage, with a resulting
decline in the percentage of gross profit margin, was caused by several
independent factors. While material cost increases were minimal during
1995, average labor costs absorbed into cost of sales increased reflecting
overtime usage as the Company reacted to attain acceptable piston ring
inventory and order fill levels. The sales mix change noted above, with
higher relative private brand and export volumes, resulted in a lower
average selling price. This lower pricing equates to a higher cost of
sales relationship within those markets. In addition, the pricing
structure established for filter and filter component sales through the
transition period allows for only a minimal margin thus further suppressing
the gross profit percentage realized. This factor will have a diminishing
impact upon future results as the transition period winds down through
mid-1996.
While certain overhead costs previously allocated to filter
production are fixed, material and direct labor costs were product-specific
and thus will no longer be incurred subsequent to completion of the filter
production transition period. In addition, the previous filter allocated
fixed overhead costs will be absorbed by the piston ring packaging
operations which, over the course of the transition period, will be
relocated from the Knoxville, Tennessee facility, which was sold, to the
Hastings, Michigan plant. Because certain of these costs will no longer be
incurred, the Hastings plant is expected to be efficiently utilized, and as
the filter product line gross profit margin was lower than the remaining
product line margins, management expects gross profit margins to improve as
the filter production transition period is completed.
The 1994 gross profit margin increased slightly to 31.9% from
31.6% in 1993. That increase resulted primarily from the margin realized
on the technology and equipment sale and from a favorable product mix
change with higher relative piston ring volume through most of 1994.
EXPENSES
Total expenses, excluding interest and the loss on the sale of
the filter operations, declined $1,034,895, or 4.7%, from $22,055,417 in
1994 to $21,020,522. As a percent of net sales, such expenses increased
3.6% to 33.2% from 29.6% in 1994. The 1995 total includes $1,153,000 of
certain operating costs that were reimbursed to the Company for the period
September 4, 1995 through December 31, 1995. That reimbursement is
included in the net sales results as a sale of services. The expense
categories include the results for the full filter product line operations
through September 3, 1995 as well as certain incurred costs absorbed
-7-
subsequent to that date. Advertising expenses for 1995, up $154,974, or
13.6%, reflect higher annual product catalog costs including the cost of a
major biannual issue. In addition, there is a cost for the termination of
a previous filter sales program. Selling expenses, down $1,689,066, or
17.4%, from 1994 reflect reduced sales staff costs as that staff was
realigned subsequent to the sale. In addition, sales promotion programs,
such as inventory conversion efforts and marketing assistance allowances,
were curtailed or eliminated in 1995. General and administrative expenses
increased $375,232, or 3.3%, in 1995 from 1994. This expense group
reflects many of the administrative costs that have been reimbursed through
the transition period. The largest increase in this category, however,
remains the group health care cost. That cost increased during 1995 for
both active and retiree plan participants. Health care costs, in general,
continue to increase. The Company is subject to some additional volatility
because it is primarily self-insured for health care. Additional costs
experienced in 1995 were largely attributable to a few unusually high
claims. Management has no reason to believe 1995 costs reflect a
significant upward trend.
Management has taken significant steps to realign the Company's
operating structure to be consistent with the size of remaining operations.
This realignment will be completed over the course of 1996 as the filter
production transition is completed and management can devote its full
attention to its remaining product lines. For 1996, it is expected that
total operating expenses as a percent of sales will be comparable, or
slightly higher, than that experienced for 1995. This will be partially
due to certain nonrecurring charges for training, moving and associated
costs relating to the relocation of piston ring packaging operations to
Hastings, Michigan, as discussed above. These costs, which are expected to
be incurred throughout the second and third quarters of 1996, though
difficult to estimate, are expected to be in the $350,000 to $500,000
range. Compared to 1995, total 1996 operating expenses are expected to
decrease in the range of 35% to 40%. Beginning in 1997, as sales increases
are expected to outpace operating expense increases, operating expenses as
a percent of sales are expected to decrease.
Total expenses for 1994, excluding interest expense, increased
$853,289, or 4.0%, from $21,202,128 in 1993 to $22,055,417. This increase
reflects higher costs associated with inventory conversion efforts related
to buying group activity, an export marketing assistance program, higher
sales and shipping personnel support costs and increased group health costs
related to active plan participants.
INTEREST
Interest expense for 1995 ended $27,944, or 3.0%, lower than the
full year 1994 results after being $38,756, or 6.2%, higher than 1994
through the first three quarters. This interest expense reversal was due
to the reduction in borrowings following the filter assets and operations
sale. In addition, the remaining long-term balances have continued to
-8-
decline through scheduled payments. Total borrowings through the first
eight months of 1995 were higher than borrowings through most of 1994
reflecting a higher short-term debt level required to fund operations. In
addition, interest rates applied on certain variable rate borrowings were
higher through much of 1995.
While market interest rates did not significantly fluctuate
throughout 1995, the Company managed its interest rate risk exposure on its
variable-rate, long-term debt throughout the year by utilizing an interest
rate swap agreement to effectively convert this variable-rate debt to a
fixed interest rate of 6.92%. This swap agreement is more fully described
in Note 5 to the Consolidated Financial Statements. Considering the
reduced borrowing levels, as noted above, and current market conditions,
the Company determined it to be advantageous to terminate the interest rate
swap agreement in March 1996. Subsequent exposure to interest rate risk on
the Company's variable-rate, long-term debt will be reduced through use of
an interest rate cap arrangement.
The interest expense for 1994 was $27,927, or 3.1%, higher than
the full year 1993 results. Rising interest rates on certain variable rate
borrowings in excess of the Company's swap agreements' notional principal
coverage resulted in higher interest costs through the last half of 1994.
TAXES ON INCOME
The impact of taxes on the reported results of the Company is
detailed in Note 9 to the Consolidated Financial Statements included at
Item 8 below. The 1995 effective tax credit of 19.2% is lower than the
statutory rate due primarily to establishment of a valuation allowance for
certain unused foreign tax credits and the reversal and adjustment of certain
prior temporary differences. The 1994 effective tax rate of 42.3% is higher
than the statutory rate due primarily to state income tax requirements and
taxes on the Company's Canadian subsidiary's income at a higher statutory
rate. The net tax credit position reported for 1992 reflects the recognition of
unused foreign tax credits carried forward from previous years.
At December 31, 1995, the Company recorded net deferred income
tax assets of $8,656,780. The major components include a net operating
loss carryforward of $1,063,699 and the tax effects of accrued retirement
and postretirement benefit obligations totaling $6,812,174. The
realization of these recorded benefits is dependent upon the generation of
future taxable income.
The net operating loss carryforward expires in 2010, if not
previously utilized. Management has prepared projections of taxable income
for future years indicating that the net operating loss is expected to be
fully utilized during 1996 and 1997. Management plans to elect to carry
the entire operating loss forward to future years rather than carry a
portion of it back to prior years because carrying the loss back would
result in the loss of certain foreign tax credits. As previously
-9-
discussed, the 1995 operating loss resulted from factors that are not
expected to recur. It is largely attributable to the Company's transition
out of the lower margined filter business, the associated realignment to a
smaller organization and certain sales mix changes and product shortages
that are not expected to recur. Management is confident that by focusing
on its remaining product lines, the Company will return to profitability.
The Company expects to be able to realize the deferred tax assets
related to the retirement and postretirement benefit obligations as it pays
these benefits. Such payments will constitute an expense which is
deductible for tax reporting purposes over many future years. During each
of the last ten years, with the exception of 1995, the Company has been
able to deduct these benefit payments for tax reporting purposes and reduce
its current tax liability accordingly. It is noteworthy that amounts
currently paid and deducted have approximated the annual expense recognized
for financial reporting purposes. As such, this temporary difference,
while large, will reverse slowly over many future years with future
carryback and carryforward opportunities.
Management believes it is more likely than not that adequate
levels of future taxable income will be generated to absorb the net
operating loss carryforward, the deductible amounts related to the
retirement and postretirement benefit obligations and the remaining net
deductible temporary differences. As indicated above, management does not
believe that the future realization of all foreign tax credit carryforwards
is assured. As such, an appropriate valuation allowance related entirely
to these credits has been recorded at December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for operating
expenses, including labor costs and raw materials, and for funding accounts
receivable, capital expenditures and long-term debt service. Historically,
the Company's primary sources of cash have been from operations and from
bank borrowings. The recent sale of the Company's filter product line
assets and operations, as described in Note 2 to the Consolidated Financial
Statements, had, however, a significant impact upon the current
relationship of the various cash flow activities. Following the full
divestiture of the filter operations and the restructuring required to
support the smaller organization, the Company expects to generate
sufficient future cash flows from operations and bank borrowings to fund
its growth and operating needs.
During 1995, the Company applied net cash of $1,667,905 to
funding operating activities. The reported net loss, increased inventories
related to the remaining product lines and reduced accounts payable more
than offset the depreciation and accounts receivable reduction realized for
the year. The accounts receivable reduction primarily reflects the
collection of filter-related accounts which were not included in the filter
product line sale. Inventory levels were increased in response to order
-10-
fill concerns early in the year. The accounts payable reduction
represents, in part, the net reduction in working capital needs following
the filter sale. The net proceeds from that sale are reflected in the
investing activities section. That section also reflects the impact of
current capital expenditures and the balance of funds held in escrow from
the filter sale. Those funds, held until September 1998, are intended to
secure certain indemnification obligations of the Company relating to the
sale. The financing activities section reflects the net reduction in both
short-term and long-term debt obligations prior to and following the sale.
During 1994, the Company generated a net cash increase of
$1,453,245 from operating activities. The net income and depreciation
sources were partially offset by increased accounts receivable and
inventory levels. Increased capital expenditures during the year were
funded with proceeds from operating activities as well as from proceeds
from short-term borrowings.
Following the filter sale in September 1995, the Company
restructured its short-term line of credit with its lead bank. That line
was reduced from $8 million to $4 million. Given the net cash flow impact
from the filter asset and operations sale, the Company projects a reduced
reliance upon short-term funding needs. Due to the seasonal impact of net
sales, with a traditional soft first quarter, some access to those funds
may occur. While the first quarter operations may require use of those
monies, the Company fully anticipates that operations (which will not be
subject to current U.S. income taxes due to utilization of the net
operating loss carryforwards) will generate adequate cash flow to finance
its working capital, capital expenditures and dividend requirements through
1996.
-11-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
Hastings Manufacturing Company and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,909,506 $ 485,034
Accounts receivable, less allowance
for possible losses of $225,000
and $415,000 6,584,392 10,734,164
Refundable income taxes 226,037 307,494
Inventories (Notes 2 and 3):
Finished products 6,544,211 8,720,119
Work in process 769,917 1,273,155
Raw materials 2,621,566 4,468,048
Prepaid expenses and other assets 131,166 91,905
Future income tax benefits (Note 9) 2,108,578 2,294,982
TOTAL CURRENT ASSETS 20,895,373 28,374,901
PROPERTY AND EQUIPMENT
Land and improvements 648,266 1,217,716
Buildings 4,045,784 8,770,979
Machinery and equipment 16,061,415 25,881,850
20,755,465 35,870,545
Less accumulated depreciation 12,902,944 22,672,063
NET PROPERTY AND EQUIPMENT (Note 2) 7,852,521 13,198,482
INTANGIBLE PENSION ASSET (Note 7) 1,222,783 1,426,580
FUTURE INCOME TAX BENEFITS (Note 9) 6,548,202 4,688,969
OTHER ASSETS (Note 2) 1,028,689 165,347
$ 37,547,568 $ 47,854,279
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-12-
<TABLE>
Hastings Manufacturing Company and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks (Note 4) $ 1,500,000 $ 5,671,280
Accounts payable 2,487,870 3,283,078
Accruals:
Compensation 384,909 542,102
Pension plan contribution (Note 7) 659,387 725,882
Taxes other than income 204,992 468,565
Miscellaneous (Note 7) 459,719 526,557
Current portion of postretirement
benefit obligation (Note 8) 1,541,126 1,473,374
Current maturities of long-term
debt (Note 5) 1,560,500 1,778,800
TOTAL CURRENT LIABILITIES 8,798,503 14,469,638
LONG-TERM DEBT, less current
maturities (Note 5) 3,490,625 6,223,900
PENSION AND DEFERRED COMPENSATION
OBLIGATIONS, less current portion
(Notes 2 and 7) 4,457,614 3,368,354
POSTRETIREMENT BENEFIT OBLIGATION,
less current portion (Note 8) 15,575,848 15,492,236
TOTAL LIABILITIES 32,322,590 39,554,128
COMMITMENTS AND CONTINGENCIES
(Notes 5, 7 and 8)
-13-
STOCKHOLDERS' EQUITY (Notes 5, 6 and 7)
Preferred stock, $2 par value,
authorized but unissued 500,000 shares - -
Common stock, $2 par value, 1,750,000
shares authorized; 388,813 and
388,668 shares issued and
outstanding 777,626 777,336
Additional paid-in capital 119,318 147,384
Retained earnings 6,854,865 10,033,512
Cumulative foreign currency
translation adjustment (600,401) (716,307)
Pension liability adjustment (Note 7) (1,926,430) (1,941,774)
TOTAL STOCKHOLDERS' EQUITY 5,224,978 8,300,151
$ 37,547,568 $ 47,854,279
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-14-
<TABLE>
Hastings Manufacturing Company and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
NET SALES $ 63,228,312 $ 74,572,222 $ 72,477,617
COST OF SALES 44,990,825 50,818,049 49,590,097
Gross profit 18,237,487 23,754,173 22,887,520
EXPENSES
Advertising 1,295,321 1,140,347 1,139,654
Selling 8,026,583 9,715,649 9,402,864
General and administrative 11,681,503 11,306,271 10,655,920
Interest 892,891 920,835 892,908
Loss on sale of filter
operations (Note 2) 67,254 - -
Other, net 17,115 (106,850) 3,690
Total expenses 21,980,667 22,976,252 22,095,036
Income (loss) before income tax
expense (benefit) and cumulative
effect of changes in accounting
principles (3,743,180) 777,921 792,484
INCOME TAX EXPENSE (BENEFIT)
(Note 9) (720,000) 329,000 (162,000)
Income (loss) before cumulative
effect of changes in
accounting principles (3,023,180) 448,921 954,484
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES (net
of income tax benefit of
$5,751,497) - - (11,208,934)
NET INCOME (LOSS) $ (3,023,180) $ 448,921 $(10,254,450)
NET INCOME (LOSS) PER SHARE
Income (loss) before cumulative
effect of changes in
accounting principles $ (7.78) $ 1.16 $ 2.46
-15-
Cumulative effect of changes in
accounting principles - - (28.87)
NET INCOME (LOSS) PER SHARE $ (7.78) $ 1.16 $ (26.41)
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-16-
<TABLE>
Hastings Manufacturing Company and Subsidiaries
Consolidated Statements of Stockholders' Equity
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY PENSION
COMMON PAID-IN RETAINED TRANSLATION LIABILITY
STOCK CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1993 $ 775,626 $ 150,559 $ 20,149,776 $ (280,186) $ (597,411)
Net loss - - (10,254,450) - -
Shares issued under
restricted stock
plan, net of shares
forfeited 1,140 (4,879) - - -
Cash dividends
($.40 per share) - - (155,296) - -
Foreign currency translation
adjustment - - - (199,394) -
Pension liability adjustment
(Note 7) - - - - (1,712,384)
BALANCE, December 31, 1993 776,766 145,680 9,740,030 (479,580) (2,309,795)
Net income - - 448,921 - -
Shares issued under restricted
stock plan, net of shares
forfeited 570 1,704 - - -
Cash dividends
($.40 per share) - - (155,439) - -
Foreign currency translation
adjustment - - - (236,727) -
Pension liability adjustment
(Note 7) - - - - 368,021
BALANCE, December 31, 1994 777,336 147,384 10,033,512 (716,307) (1,941,774)
Net loss - - (3,023,180) - -
-17-
Shares issued under restricted
stock plan, net of shares
forfeited 290 (28,066) - - -
Cash dividends
($.40 per share) - - (155,467) - -
Foreign currency translation
adjustment - - - 115,906 -
Pension liability adjustment
(Note 7) - - - - 15,344
BALANCE, December 31, 1995 $ 777,626 $ 119,318 $ 6,854,865 $ (600,401) $ (1,926,430)
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-18-
<TABLE>
Hastings Manufacturing Company and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (3,023,180) $ 448,921 $ (10,254,450)
Adjustments to reconcile net
income (loss) to net cash
from (for) operating activities:
Cumulative effect of changes in
accounting principles - - 11,208,934
Depreciation 1,635,753 1,871,825 1,777,482
Loss on sale of filter
operations (Note 2) 67,254 - -
Gain on sale of property
and equipment (900) (201,167) (41,961)
Deferred income taxes (680,000) 89,000 (477,000)
Change in postretirement
benefit obligation 151,364 (1,952) 51,395
Changes in operating assets and
liabilities, net of effects
from sale of filter
operations:
Accounts receivable 4,673,975 (659,027) (860,566)
Refundable income taxes 99,222 58,599 126,960
Inventories (2,498,226) (233,828) 1,396,381
Prepaid expenses and other
current assets (55,291) 34,972 38,277
Other assets (96,636) 95,143 103,635
Accounts payable and accruals (1,941,240) (49,241) 1,320,347
Net cash from (for)
operating activities (1,667,905) 1,453,245 4,389,434
INVESTING ACTIVITIES
Capital expenditures (2,053,626) (3,530,848) (2,247,292)
Proceeds from sale of filter
operations, net of related
expenses paid (Note 2) 13,291,695 - -
Investment of proceeds from
filter sale escrow (870,549) - -
Proceeds from sale of property
and equipment 900 256,774 77,636
Net cash from (for)
investing activities 10,368,420 (3,274,074) (2,169,656)
</TABLE>
-19-
<TABLE>
Hastings Manufacturing Company and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance
of notes payable
to banks $ 23,893,920 $ 18,773,140 $ 17,700,000
Principal payments on
notes payable to banks (28,066,710) (15,500,000) (18,000,000)
Principal payments on
long-term debt (2,951,575) (1,402,650) (1,511,973)
Dividends paid (155,467) (155,439) (155,296)
Net cash from (for)
financing activities (7,279,832) 1,715,051 (1,967,269)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH 3,789 (6,744) 1,158
NET INCREASE (DECREASE) IN CASH 1,424,472 (112,522) 253,667
CASH, beginning of year 485,034 597,556 343,889
CASH, end of year $ 1,909,506 $ 485,034 $ 597,556
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes, net of
refunds $ (129,686) $ 169,619 $ 135,213
Interest 943,205 924,093 890,406
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-20-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Hastings Manufacturing Company and subsidiaries (Company) is a manufacturer
of automotive replacement parts, primarily piston rings and, through
September 3, 1995, oil and air filters. To a lesser extent, it produces
and/or sells oil additives and hand tools. Prior to September 3, 1995,
manufacturing operations were located in Hastings, Michigan; Knoxville,
Tennessee; Yankton, South Dakota; and Barrie, Ontario, Canada. As
discussed in Note 2, effective September 3, 1995, the Company sold its
filter product line assets, including its Yankton and Knoxville plant
facilities. Consequently, the Company no longer has operations in Yankton,
South Dakota and, during the course of the filter product line transition
period through mid-1996, will be moving its piston ring packaging
operations from Knoxville, Tennessee to Hastings, Michigan.
The Company distributes its products primarily through numerous auto parts
jobbers and warehouse distributors for sale primarily in the automotive
replacement market throughout the U.S. and Canada. International sales are
distributed primarily through one customer. While the Company's products
are sold worldwide, the amount sold in foreign countries is not a material
portion of the Company's total sales. The Company performs ongoing credit
evaluations of its customers and provides reserves for potential credit
losses.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and its subsidiaries. Upon consolidation, all significant
intercompany accounts and transactions are eliminated.
USE OF ESTIMATES IN THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
-21-
REVENUE RECOGNITION
The Company recognizes revenue when its products are shipped to its
customers.
The Company follows the percentage-of-completion method of accounting for
long-term contracts to sell technology and equipment. The Company's one
contract to date began during the fourth quarter of 1993 and was
approximately 35% complete at December 31, 1993. The contract was
completed during 1994.
INVENTORIES
Inventories are stated at cost, not in excess of market. The Company uses
the last-in, first-out (LIFO) method of determining costs for the material
component of parent company inventories. Remaining inventories are valued
using the first-in, first-out (FIFO) method.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed primarily by the straight-line method for
financial reporting purposes and accelerated methods with minimum lives for
income tax purposes.
RETIREMENT PLANS
The Company sponsors noncontributory, defined benefit plans which cover all
employees of the Company who are covered by collective bargaining
agreements. The plans provide benefits based on an employee's earnings and
years of benefit service. The Company funds these plans in amounts
consistent with the funding requirements of federal laws and regulations.
The plans' assets are invested in stocks, bonds, annuities and short-term
investments.
The Company also sponsors defined contribution retirement savings plans for
its employees and has entered into a deferred compensation agreement with a
former officer as described in Note 7.
The Company provides certain healthcare and life insurance benefits for
eligible retired employees. As discussed in Note 8, the Company changed
its method of accounting for postretirement benefits, effective January 1,
1993, to comply with Statement of Financial Accounting Standards (SFAS) No.
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS No. 106). Under SFAS No. 106, postretirement benefits are
accounted for on the accrual basis, during the employee's years of service,
based on the expected cost of providing benefits to that employee and the
employee's beneficiaries and covered dependents. Prior to 1993, the cost
of providing these benefits was recognized on a cash basis as the claims
were incurred.
-22-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
ADVERTISING COSTS
All advertising costs are expensed in the period in which they are
incurred.
INCOME TAXES
Effective January 1, 1993, the Company adopted the liability method of
accounting for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes" (SFAS No. 109). The Company recognized a charge of
approximately $44,000 relating to the adoption of SFAS No. 109 and included
such charge in the 1993 statement of operations as part of the cumulative
effect of changes in accounting principles.
Under SFAS No. 109, the Company provides deferred income taxes based on
enacted income tax rates in effect on the dates temporary differences
between the financial reporting and tax bases of assets and liabilities
reverse. The effect on deferred tax assets and liabilities of a change in
income tax rates is recognized in income in the period that includes the
enactment date. To the extent that available evidence about the future
raises doubt about the realization of a deferred tax asset, a valuation
allowance is established.
As disclosed in Note 9, the Company has recorded deferred tax assets
reflecting the benefit of a net operating loss carryforward expiring in
2010, foreign tax credit carryforwards expiring through 1997, accrued
retirement and postretirement obligations estimated to be payable in
varying amounts over the next 25 to 30 years and other net deductible
temporary differences. Realization of the recorded income tax benefits is
dependent on generating sufficient taxable income and foreign source
income prior to expiration of the loss carryforward and foreign tax credit
carryforwards. Although realization is not assured, management believes it
is more likely than not that all of the deferred tax assets, less an
estimated valuation allowance related to foreign tax credits which will
likely expire before realized, will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income and foreign source income
during the carryforward periods are reduced.
No provision for income taxes has been made on the accumulated
undistributed earnings of approximately $3,912,000 of the Canadian
subsidiary. These earnings are intended to be permanently reinvested in
facilities and other assets and have borne income taxes that would offset,
in major part, any tax liability resulting from their distribution.
-23-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of shares outstanding during each year; 388,675
for 1995, 388,572 for 1994, and 388,191 for 1993.
INTEREST RATE SWAP AGREEMENTS
The Company enters into interest rate swap agreements which involve the
exchange of fixed and floating rate interest payments periodically over the
life of the agreements without the exchange of the underlying principal
amounts. These agreements reduce the impact of changes in interest rates
on the Company's floating-rate long-term debt. The differential to be paid
or received is accrued as interest rates change and is recognized over the
life of the agreements as an adjustment to interest expense.
The Company does not enter into interest rate swap agreements, or other
derivative financial instruments, for trading purposes. However, at
December 31, 1995, the national amount of the interest rate swap agreement
exceeded the outstanding balance of the associated long-term debt due to
the partial reduction of debt with the filter operation sale proceeds. The
effects of the non-hedged portion of the interest rate swap agreement was
immaterial to the consolidated financial statements.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's Canadian operations, where the
functional currency is the Canadian dollar, are translated at the exchange
rate in effect at year-end for assets and liabilities. Income and expense
items are translated at the average exchange rate for the year. Related
translation adjustments are reported as a separate component of
stockholders' equity. Gains and losses from foreign currency transactions,
which are not significant, are included in current earnings.
NOTE 2 - SALE OF FILTER OPERATIONS
Effective on September 3, 1995, the Company entered into an agreement and
sold its filter product line assets to CLARCOR Inc. (CLARCOR) of Rockford,
Illinois. The Company's filter operations comprised a portion of its one
business segment, automotive replacement parts. As such, the sale of the
filter product line was accounted for as a sale of a portion of a segment
of a business. The sales price amounted to $13,874,000, resulting in a
pre-tax loss of $67,254 after consideration of all direct costs and
expenses associated with the sale, including $720,400 relating to employee
severance benefits.
-24-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
The sale did not include filter-related accounts receivable of
approximately $5,725,000, which were retained for collection by the
Company. Certain filter and filter component parts inventory, located at
the Company's Hastings, Michigan plant, was not included in the sale as the
Company, as discussed below, will continue to supply CLARCOR with component
parts during a transition period. CLARCOR did not assume any liabilities
of the Company relating to the filter operations being sold. Remaining
balances of these liabilities, which are immaterial, are included in
accounts payable and accruals at December 31, 1995. Filter-related assets
were approximately as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
Accounts receivable $ 765,000 $ 6,080,000
Inventory 1,458,000 7,410,000
Net property and equipment - 5,885,000
$ 2,223,000 $ 19,375,000
</TABLE>
Of the total $720,400 employee severance benefits accrued and expensed
relating to the sale, $146,900 was paid through December 31, 1995.
Approximately 15 salary and 40 hourly employees were involved in the
severance program. Remaining former Company employees were hired by
CLARCOR.
At December 31, 1995, other assets include cash of $870,600 held in escrow
until September 1998, to secure certain indemnification obligations of the
Company relating to the sale.
The Company and CLARCOR also entered into a Transition Agreement, dated
September 3, 1995. The Transition Agreement provides for the Company's
manufacture and supply to CLARCOR of certain filters and filter component
parts until certain manufacturing equipment, located at the Company's
Hastings, Michigan plant, can be moved and set up at CLARCOR's plant
facilities. It also provides for the reimbursement of certain administrative
costs directly related to the manufacture and supply of filters and filter
components to CLARCOR. It is estimated the transition period will be
completed by mid-1996. Expense reimbursement for the period September 4,
1995 through December 31, 1995, included in net sales, amounted to
$1,153,000.
-25-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
During the course of the transition period, the Company will be moving its
piston ring packaging operations from Knoxville, Tennessee to Hastings,
Michigan.
Sales of filters and filter component parts for the period from September 4,
1995 through December 31, 1995, amounted to $2,008,500, exclusive of the above
expense reimbursement.
Sales and estimated operating loss amounts for filter operations were
approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C> <C>
Sales $ 28,262,500 $ 40,370,000 $ 40,976,000
Estimated operating loss 2,819,000 1,320,000 24,000
</TABLE>
A significant portion of the Company's filter manufacturing and
distribution operations have historically been combined with its piston
ring and other operations. While records of sales and cost of sales
amounts were maintained by operation, the Company did not maintain separate
records of operating expenses. The above estimated operating loss amounts
reflect those operating expenses which the Company estimates will not recur
as a result of the sale.
NOTE 3 - INVENTORIES
Inventories valued using the LIFO method were $3,855,000 and $7,549,000 at
December 31, 1995 and 1994, respectively.
If the FIFO method of inventory valuation had been used by the Company,
inventories would have been $2,134,000 and $3,200,000 higher than reported
at December 31, 1995 and 1994, respectively.
Reduction of inventory quantities in 1995, 1994 and 1993, resulted in a
liquidation of LIFO inventories carried at lower costs prevailing in prior
years as compared to current years' purchases. The effect of these
reductions increased net income (or reduced the net loss) by $829,224,
$214,373, and $338,160 ($2.13, $.55 and $.87 per share) for 1995, 1994,
and 1993, respectively. Of the $829,224 amount for 1995, $689,154 resulted
from the filter operations sale discussed in Note 2 and was included in
determining the loss on sale.
-26-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
NOTE 4 - SHORT-TERM BORROWINGS
The Company maintains unsecured lines of credit with four banks aggregating
$6,500,000 and $8,000,000 and at December 31, 1995 and 1994, respectively,
with interest at negotiated rates based upon prime or LIBOR. Available
borrowings under the lines of credit amounted to $5,000,000 and $2,328,720
at December 31, 1995 and 1994, respectively. The weighted average interest
rate on short-term borrowings outstanding at December 31, 1995 and 1994,
was 8.0% and 8.4%, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C> <C>
<F1> Term loan, unsecured $ 2,800,000 $ 3,600,000
<F2> Term loan, unsecured 2,153,125 2,815,625
<F3> Economic Development
Corporation notes - 1,437,500
Other 98,000 149,575
5,051,125 8,002,700
Less current maturities 1,560,500 1,778,800
Long-term debt,
less current maturities $ 3,490,625 $ 6,223,900
<FN>
<F1> The loan calls for quarterly payments of $200,000 plus
interest based on LIBOR (effectively 7.625% at
December 31, 1995) through May 31, 1999 (see below).
<F2> The loan calls for quarterly payments of $165,625 plus
interest based on LIBOR (effectively 7.687% at
December 31, 1995) through January 1999 (see below).
<F3> The notes, which were payable $62,500 quarterly through July
2000 with interest at 73% of the bank's base lending rate,
were paid during 1995.
</FN>
</TABLE>
-27-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
The term loan agreements referred to above require the Company to maintain
working capital of at least $11,000,000 and maintain tangible net worth, as
defined, of at least $5,779,476. In addition, cumulative cash dividends
declared and paid since January 1, 1995, may not exceed the sum of
$2,500,000 and 50% of the cumulative net income after January 1, 1996.
Unrestricted retained earnings amounted to $2,344,533 at December 31, 1995.
The Company has obtained a waiver from the bank for its noncompliance with
certain restrictions.
The aggregate maturities of long-term debt are as follows:
<TABLE>
YEAR ENDING DECEMBER 31,
<CAPTION>
<S> <C>
1996 $ 1,560,500
1997 1,462,500
1998 1,462,500
1999 565,625
</TABLE>
At December 31, 1995, the Company had an interest rate swap agreement
outstanding with a commercial bank. This agreement has a current notional
principal amount of $6.7 million. This swap agreement effectively changes
the Company's interest rate exposure to a fixed rate of 6.92% on its
floating rate borrowings. A portion of this swap agreement amortizes as
the related note matures with a notional balance of $4.5 million remaining
in effect until January 2000. The Company is exposed to credit loss to the
extent of the interest rate differential in the event of nonperformance by
the other party to the interest rate swap agreement. However, the Company
does not anticipate nonperformance by the counterparty.
The estimated unrecorded fair value of the interest rate swap, representing
the amount the bank would have paid the Company to terminate the agreement,
amounted to $96,000 at December 31, 1995.
NOTE 6 - STOCKHOLDERS' EQUITY
STOCKHOLDERS' RIGHTS PLAN
On February 13, 1996, the Company's Board of Directors authorized the
adoption of a Series A Preferred Stock Purchase Rights Plan (Plan). Under
the Plan, a dividend distribution of one Series A Preferred Stock Purchase
Right (Right) was made for each outstanding share of common stock, payable
to shareholders of record on March 8, 1996. The Plan is designed to
protect shareholders against unsolicited attempts to acquire control of the
-28-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
Company in a manner that does not offer a fair price to all shareholders.
In addition, it is intended to help protect and preserve ownership of the
Company's principal tradenames and trademarks.
The Company's newly designated Series A Preferred Stock consists of 500,000
shares authorized, at $2 par value, none of which are issued. Shares of
preferred stock are reserved at a level sufficient to permit the exercise
in full of all the outstanding Rights.
Each Right entitles shareholders to purchase one one-hundredth of a share
of preferred stock from the Company at a price of $100 per share, subject
to adjustment. The Rights will become exercisable only if a person or
group (Acquiring Person) acquires 15% or more of the Company's common stock
or announces a tender offer that would result in ownership of 30% or more
of the common stock. A person beneficially owning 15% or more of the
outstanding shares of common stock on February 13, 1996, or any affiliates or
associates thereof, do not constitute an Acquiring Person under the Plan.
If the Company is acquired in a merger or other business combination
transaction or if 50% or more if its assets or earning power are sold, each
Right will entitle the Right holder to receive, upon exercise, the number
of shares of common stock of the acquiring company which at the time of the
transaction would have a market value of two times the exercise price of
the Right. Alternatively, if an Acquiring Person (1) acquires the Company
in a transaction in which the Company and its common stock survive, (2)
engages in certain self-dealing transactions or (3) becomes the owner of
more than 30% of the outstanding shares of common stock, remaining Right
holders will have the right to receive additional shares of the Company's
common stock having a market value of two times the exercise price of the
Right. Under terms specified in the Plan, the Company has the right to
redeem the Rights at one cent per Right.
RESTRICTED STOCK PLAN
The Company has established a restricted stock plan under which certain
officers and key employees may be awarded shares of restricted stock as
deferred compensation. Shares awarded pursuant to the plan are restricted
as to sale and transfer for periods of up to five years. The stock awards
vest 20% per year over the five-year period if predetermined corporate
performance goals are met. If goals are not met, the current year's
vesting amount is forfeited. If there is a change in control of the
Company, the shares will vest immediately. The recipient of the award has
all the rights of a shareholder, provided that all performance goals are
met. During 1995, 1994 and 1993, the Company awarded 1,600, 1,425 and
1,425 shares, respectively, of its common stock valued at $35,600, $45,065
-29-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
and $35,625, respectively, as deferred compensation which is ratably
charged to expense from the date of award to the end of the deferral
period. Shares valued at $63,376 (1,455 shares) and $42,791 (1,140 shares)
were forfeited during 1995 and 1994, respectively.
NOTE 7 - PENSION, RETIREMENT SAVINGS
The components of pension expense and the actuarial assumptions used to
determine this cost for the defined benefit pension plans are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C> <C>
Service cost for benefits
earned during the year $ 23,321 $ 23,328 $ 21,311
Interest cost on projected
benefit obligation 1,220,336 1,156,354 1,187,729
Actual return on plan assets (1,335,309) (455,781) (857,667)
Net amortization and deferral 649,936 (138,041) 196,022
Pension expense $ 558,284 $ 585,860 $ 547,395
Discount rate 7.25% 8.25% 7.25%
Expected rate of return on
assets 8.0% 8.0% 8.0%
Range of expected rates of
increase in compensation
levels 0-5.5% 0-5.5% 0-5.5%
</TABLE>
-30-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
The funded status of the defined benefit pension plans and amounts included
in the consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C> <C>
Actuarial present value of
accumulated benefit obligation:
Vested benefit obligation $ (15,683,431) $ (14,583,770)
Nonvested benefit obligation (1,200,726) (1,030,953)
Accumulated benefit obligation $ (16,884,157) $ (15,614,723)
Projected benefit obligation $ (16,902,042) $ (15,635,561)
Plan assets, at fair value 12,083,154 11,520,487
Projected benefit obligation
in excess of plan assets (4,818,888) (4,115,074)
Unrecognized net transition
obligation 1,222,783 1,426,580
Unrecognized net loss 2,936,718 1,962,612
Accrued pension cost $ (659,387) $ (725,882)
</TABLE>
The excess of the accumulated benefit obligation over plan assets of
$4,801,003 ($4,094,236 in 1994) is reflected in the consolidated balance
sheets. This amount, less the accrued pension plan contribution of
$659,387 ($725,882 in 1994) recorded in current liabilities, is reflected
in the accompanying consolidated balance sheets as an additional noncurrent
pension liability of $4,141,616 ($3,368,354 in 1994), a noncurrent
intangible asset of $1,222,783 ($1,426,580 in 1994), a noncurrent future
income tax benefit of $992,403 and a charge to stockholders' equity of
$1,926,430 ($1,941,774 in 1994), representing the excess of the additional
noncurrent pension liability over the unrecognized net transition
liability, net of tax in 1995.
The increase from December 31, 1994 to December 31, 1995, in the noncurrent
pension liability was primarily due to a change in the discount rate used
to determine the accumulated benefit obligation.
The Company's foreign subsidiary maintains a defined contribution
retirement savings plan. Due to overfunding of the plan, there were no
contributions in 1995, 1994 and 1993.
-31-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
The Company has two defined contribution retirement savings plans, covering
substantially all domestic employees, which are funded solely through
contributions based on formulas as defined in the plan agreements. The
assets are held in trust for the sole benefit of the employees.
Contribution expense was $857,000, $861,000 and $747,000, for 1995, 1994
and 1993, respectively, relating to these plans.
As part of the sale of its filter operations, as described in Note 2, the
Company entered into a deferred compensation agreement with a former
officer of the Company. The deferred compensation benefits are to be paid
over a period of ten years, commencing in November 1995. Deferred
compensation expense, representing the present value of future payments,
amounted to $343,450 in 1995 and is included as a cost of the filter
operations sale. At December 31, 1995, the deferred compensation liability
amounted to $339,683, of which $23,685 is due within one year.
NOTE 8 - POSTRETIREMENT BENEFIT PLANS
The Company provides certain health care, dental, prescription drug and
life insurance benefits for eligible retired employees under various plans.
The plans are unfunded. Prior to 1993, the cost of providing these
benefits to retired employees was recognized as a charge to income in the
year the claims were incurred.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which requires the accrual of the expected
cost of providing postretirement benefits to employees during the years
that the employees render services. The Company elected to immediately
recognize the January 1, 1993, accumulated postretirement benefit
obligation which resulted in a charge of $16,916,167 ($11,164,670 after
income tax benefit of $5,751,497). This charge is included in the 1993
statement of operations as part of the cumulative effect of changes in
accounting principles.
-32-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C> <C>
Service cost for benefits
earned during the year $ 209,214 $ 184,197 $ 201,594
Interest cost on projected
benefit obligation 1,440,280 1,229,734 1,300,573
Net periodic postretirement
benefit cost $ 1,649,494 $ 1,413,931 $ 1,502,167
</TABLE>
The following table sets forth the accrued postretirement benefit cost:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 9,875,799 $ 9,709,809
Fully eligible participants 3,210,463 2,074,531
Other active participants 6,350,841 4,264,118
Unfunded accumulated postretirement
benefit obligation 19,437,103 16,048,458
Unrecognized net gain (loss) (2,320,129) 917,152
Accrued postretirement benefit cost 17,116,974 16,965,610
Less current portion 1,541,126 1,473,374
Long-term portion $ 15,575,848 $ 15,492,236
</TABLE>
The increase from December 31, 1994 to December 31, 1995, in the unfunded
accumulated postretirement benefit obligation was primarily due to a change
in the discount rate used in its determination.
-33-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
For two of the three active and retired employee groups covered by the
Company's postretirement benefit plans, the medical inflation rate is
assumed to be 6.5% per year. In addition, for prescription drug costs, the
annual inflation rate is assumed to decline over the next 10 years from a
present 11.5% to 6.75%. For the remainder of the active and retired employees,
principally salaried personnel, the cost of benefits does not assume any
inflation because, effective in 1993, the Company fixed the dollar amount of its
contribution per active and retired employee. The weighted average discount
rate used in determining the accumulated postretirement benefit obligation was
7.25% and 8.25% at December 31, 1995 and 1994, respectively.
Increasing each of the assumed health care cost trend rates by one
percentage point in each year would increase the accumulated postretirement
benefit obligation by approximately $329,600 as of December 31, 1995, and
would increase the annual aggregate service and interest cost by
approximately $40,300.
NOTE 9 - INCOME TAXES
The components of income (loss) before income taxes and cumulative effect
of changes in accounting principles are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C> <C>
Domestic $ (3,352,216) $ 670,926 $ 563,397
Foreign (390,964) 106,995 229,087
$ (3,743,180) $ 777,921 $ 792,484
</TABLE>
-34-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
Income tax expense (benefit) is made up of the following components:
<TABLE>
<CAPTION>
Year ended December 31, 1995: DEFERRED-
VALUATION
ALLOWANCE
CURRENT DEFERRED CHANGE TOTAL
<S> <C> <C> <C> <C> <C>
Domestic $ 103,000 $ (935,000) $ 205,000 $ (627,000)
Foreign (143,000) 50,000 - (93,000)
$ (40,000) $ (885,000) $ 205,000 $ (720,000)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994: DEFERRED-
VALUATION
ALLOWANCE
CURRENT DEFERRED CHANGE TOTAL
<S> <C> <C> <C> <C> <C>
Domestic $ 183,000 $ 101,000 $ - $ 284,000
Foreign 57,000 (12,000) - 45,000
$ 240,000 $ 89,000 $ - $ 329,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993: DEFERRED-
VALUATION
ALLOWANCE
CURRENT DEFERRED CHANGE TOTAL
<S> <C> <C> <C> <C> <C>
Domestic $ 210,000 $ 58,000 $ (524,000) $ (256,000)
Foreign 105,000 (11,000) - 94,000
$ 315,000 $ 47,000 $ (524,000) $ (162,000)
</TABLE>
-35-
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Statements
The tax effects of temporary differences that give rise to the net future
income tax benefit are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
Deferred income tax assets:
Retirement and postretirement
benefit obligations $ 6,812,174 $ 5,768,307
Current asset valuation
allowances 789,202 1,389,087
Net operating loss carryforward 1,063,699 -
Foreign tax credit carryforwards 284,918 284,918
Deferred compensation 107,439 -
Other 331,694 -
Gross deferred income tax assets 9,389,126 7,442,312
Valuation allowance - foreign tax
credits (noncurrent) (204,918) -
Total deferred income tax assets 9,184,208 7,442,312
Deferred income tax liabilities:
Accumulated depreciation (320,187) (425,424)
Other (207,241) (32,937)
Total deferred income tax liabilities (527,428) (458,361)
Net deferred income tax assets 8,656,780 6,983,951
Less current portion 2,108,578 2,294,982
Noncurrent portion $ 6,548,202 $ 4,688,969
</TABLE>
The Company's net operating loss carryforward for federal income tax
purposes amounted to $1,063,699 at December 31, 1995, and expires in 2010,
if not previously utilized. Foreign tax credits, amounting to $80,000, net
of valuation allowance, expire through 1997, if not previously utilized.
-36-
Income taxes differed from the amount computed by applying the federal
statutory rate of 34% to income before income taxes provisions (benefit) as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C> <C>
Computed "expected" tax
(benefit) $ (1,273,000) $ 264,000 $ 269,000
Increase (decrease) in
tax resulting from:
Valuation allowance change
due to foreign tax credits 205,000 - (524,000)
Adjustment of prior
temporary differences 209,000 - -
State income taxes, net of
federal income tax
benefit - 62,000 28,000
Other 139,000 3,000 65,000
$ (720,000) $ 329,000 $ (162,000)
</TABLE>
NOTE 10 - FOREIGN OPERATIONS
The consolidated financial statements include the following amounts related
to operations of the Company's Canadian subsidiary:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C> <C>
Total assets $ 4,530,911 $ 4,631,406 $ 4,619,930
Net sales 5,820,803 6,764,019 6,512,363
Net income (loss) (297,779) 62,120 135,029
</TABLE>
-37-
INDEPENDENT AUDITORS' REPORT
Hastings Manufacturing Company
Hastings, Michigan
We have audited the accompanying consolidated balance sheets of Hastings
Manufacturing Company and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsiblity of the Company's
management. Our responsiblity 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 consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in Note 2, the Company sold its filter product line assets
effective on September 3, 1995.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hastings
Manufacturing Company and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
March 1, 1996
-38-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No information is required to be disclosed under this item of
report.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this item is incorporated herein by
reference from the sections entitled "Directors and Executive Officers" and
"Compliance with Section 16(a) of the Exchange Act" in the Registrant's
definitive proxy statement relating to its Annual Meeting of Shareholders
to be held May 7, 1996.
In addition, Thomas J. Bellgraph, Age 44, has served as Vice
President, Finance of the Company since January 1, 1996. From 1986 through
1995, Mr. Bellgraph served as Treasurer of the Company.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by
reference from the sections entitled "Executive Compensation," "Deferred
Compensation," and "Compensation of Directors" of the Registrant's
definitive proxy statement relating to its Annual Meeting of Shareholders
to be held May 7, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated herein by
reference from the section entitled "Voting Securities" of the Registrant's
definitive proxy statement relating to its Annual Meeting of Shareholders to be
held May 7, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item, if any, is incorporated
herein by reference from the sections entitled "Directors and Executive
Officers" and "Compensation Committee Interlocks and Insider Participation"
of the Registrant's definitive proxy statement relating to its Annual Meeting
of Shareholders to be held May 7, 1996.
-39-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
ITEM 14(A)1. FINANCIAL STATEMENTS.
The following financial statements are filed as part of this
document in Item 8, "Financial Statements and Supplementary Data."
Consolidated Balance Sheets as of December 31, 1995 and
1994.
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1994, and 1993.
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements
Independent Auditors' Report
ITEM 14(A)2. FINANCIAL STATEMENT SCHEDULES.
The Financial Statement Schedules set forth in the Index to
Financial Statement Schedules hereto are filed as a part of this Form 10-K
Report.
ITEM 14(A)3. EXHIBITS.
NUMBER
3(a) Amended Articles of Incorporation of Hastings Manufacturing
Company filed as an exhibit to the Form 8-K Current Report
on December 8, 1988, are incorporated herein by reference.
3(b) Bylaws of Hastings Manufacturing Company filed as an exhibit to
the Form 8-K Current Report filed December 8, 1988, are
incorporated herein by reference.
4(a) Instruments defining the rights of security holders, including
indentures filed as an exhibit to the Form 10-K Annual Report
for the year ended December 31, 1983, are incorporated
herein by reference.
4(b) NBD Bank, N.A. $3,312,500 Term Loan Agreement and Term Note,
filed as an exhibit to the Form 10-K Annual Report for the
year-ended December 31, 1993, is incorporated herein by
reference.
-40-
4(c) Interest Rate Swap Agreement dated as of December 20, 1988,
filed as an exhibit to the Form 10-K Annual Report for the year
ended December 31, 1988, is incorporated herein by reference.
4(d) Interest Rate Swap Agreement Confirmation dated October 14,
1993, filed as an exhibit to the Form 10-K Annual Report for
the year-ended December 31, 1993, is incorporated herein by
reference.
4(e) NBD Bank, N.A. $6,000,000 Credit Authorization and Master
Promissory Note, dated May 31, 1994, filed as an exhibit to the
Form 10-K Annual Report for the year-ended December 31, 1994,
is incorporated herein by reference.
4(f) First Amendment, dated May 2, 1995, to the NBD Bank, N.A.
$6,000,000 Credit Authorization and Master Promissory Note,
dated May 31, 1994.
4(g) Second Amendment, dated September 30, 1995, to the NBD Bank,
N.A. $6,000,000 Credit Authorization and Master Promissory
Note, dated May 31, 1994.
4(h) NBD Bank, N.A. $4,000,000 Term Loan Agreement and Term Note,
filed as an exhibit to the Form 10-K Annual Report for the
year-ended December 31, 1994, is incorporated herein by
reference.
4(i) Hastings Manufacturing Company has several classes of long-term
debt instruments outstanding. Except as disclosed above, the
amount of none of these classes of debt outstanding at the date
of this filing exceeds 10% of Hastings Manufacturing Company's
total consolidated assets. Hastings Manufacturing Company
agrees to furnish copies of any agreement defining the rights
of other holders of any such long-term indebtedness to the
Securities and Exchange Commission upon its request.
4(j) Preferred Stock Purchase Rights, filed as an exhibit to Form
8-K filed with the Securities and Exchange Commission on
February 15, 1996, is incorporated herein by reference.
10(a) List of Recipients of Indemnity Agreement and Form of Indemnity
Agreement, filed as an exhibit to the Company's Form 10-K
Annual Report for the year ended December 31, 1988, are
incorporated herein by reference.
10(b) 1990 Restricted Stock Plan, filed as an exhibit to the
Company's Form 10-K Annual Report for the year ended December
31, 1992, is incorporated herein by reference.*
-41-
10(c) Asset Purchase Agreement between Hastings Manufacturing Company
and CLARCOR Inc. dated as of September 3, 1995, filed as an
exhibit to the Form 8-K filed with the Securities and Exchange
Commission on September 20, 1995, is incorporated herein by
reference.
21 Subsidiaries of Hastings Manufacturing Company.
27 Financial Data Schedule.
ITEM 14(B). REPORTS ON FORM 8-K.
On November 14, 1995, the Company filed a Form 8-K/A (Amendment
No. 1) concerning the sale of the Company's filter product line assets to
CLARCOR Inc. of Rockford, Illinois. The original Form 8-K regarding the
sale was filed on September 18, 1995.
*Management contract or compensatory plan or arrangement.
-42-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
on Form 10-K to be signed below on its behalf by the undersigned, thereunto
duly authorized.
HASTINGS MANUFACTURING COMPANY
(registrant)
Dated: March 26, 1996 By /s/ Thomas J. Bellgraph
Thomas J. Bellgraph
Its Vice President, Finance
(Principal Financial and
Accounting Officer)
-43-
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated (such persons
constituting a majority of the board of directors).
SIGNATURE TITLE DATE
/s/ Andrew F. Johnson Co-Chief Executive MARCH 26,1996
Andrew F. Johnson Officer, President/
Operations and
Director
/s/ Mark R.S. Johnson Co-Chief Executive MARCH 26, 1996
Mark R.S. Johnson Officer, President/
Marketing and
Director
/s/ Dale W. Koop Vice President/ MARCH 26, 1996
Dale W. Koop Engineering and
Director
/s/ Monty C. Bennett Vice President/ MARCH 26, 1996
Monty C. Bennett Employee Services,
Secretary and Director
/s/ Douglas A. DeCamp President and Chief MARCH 26, 1996
Douglas A. DeCamp Executive Officer
FHI, Inc., Hastings,
MI and Director
/s/ William R. Cook President, Pidgas, MARCH 26, 1996
William R. Cook Inc., Hastings, MI
and Director
/s/ Neil A. Gardner Exec. Vice MARCH 26, 1996
Neil A. Gardner President, Hastings
City Bank, Hastings,
MI and Director
-44-
HASTINGS MANUFACTURING COMPANY
AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULES
FORM 10-K ITEM 14(a)2
YEAR ENDED DECEMBER 31, 1995
-45-
HASTINGS MANUFACTURING COMPANY
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
Independent Auditors' Reports on Financial 47
Statement Schedule
Schedule:
II - Valuation and Qualifying Accounts 48
Other schedules have been omitted because they were inapplicable
or otherwise not required.
-46-
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
Hastings Manufacturing Company
Hastings, Michigan
The audits referred to in our report dated March 1, 1996 relating to the
consolidated financial statements of Hastings Manufacturing Company and
subsidiaries, which is contained in Item 8 of this Form 10-K, included the
audit of the financial statement schedule listed in the accompanying index.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
March 1, 1996
-47-
<TABLE>
HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER DEDUCTIONS/ END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITE-OFFS PERIOD
<S> <C> <C> <C> <C> <C>
$ $ $ $ $
Year Ended December 31,
1995:
Allowance for possible
losses on receivables 415,000 316,000 -- 506,000 225,000
Year Ended December 31,
1994:
Allowance for possible
losses and receivables 367,000 464,000 -- 416,000 415,000
Year Ended December 31,
1993:
Allowance for possible
losses on receivables 375,000 156,000 -- 164,000 367,000
</TABLE>
-48-
EXHIBIT INDEX
NUMBER
3(a) Amended Articles of Incorporation of Hastings
Manufacturing Company filed as an exhibit to
the Form 8-K Current Report on December 8, 1988,
are incorporated herein by reference.
3(b) Bylaws of Hastings Manufacturing Company filed
as an exhibit to the Form 8-K Current Report
filed December 8, 1988, are incorporated herein
by reference.
4(a) Instruments defining the rights of security
holders, including indentures filed as an exhibit
to the Form 10-K Annual Report for the year ended
December 31, 1983, are incorporated herein by
reference.
4(b) NBD Bank, N.A. $3,312,500 Term Loan Agreement and
Term Note, filed as an exhibit to the Form 10-K
Annual Report for the year-ended December 31, 1993,
is incorporated herein by reference.
4(c) Interest Rate Swap Agreement dated as of December 20,
1988, filed as an exhibit to the Form 10-K Annual
Report for the year ended December 31, 1988, is
incorporated herein by reference.
4(d) Interest Rate Swap Agreement Confirmation dated
October 14, 1993, filed as an exhibit to the
Form 10-K Annual Report for the year-ended
December 31, 1993, is incorporated herein by
reference.
4(e) NBD Bank, N.A. $6,000,000 Credit Authorization
and Master Promissory Note, filed as an exhibit
to the Form 10-K Annual Report for the year-ended
December 31, 1994, is incorporated herein
by reference.
4(f) First Amendment, dated May 2, 1995, to the NBD Bank,
N.A. $6,000,000 Credit Authorization and Master
Promissory Note, dated May 31, 1994.
-49-
4(g) Second Amendment, dated September 30, 1995, to the
NBD Bank, N.A. $6,000,000 Credit Authorization and
Master Promissory Note, dated May 31, 1994.
4(h) NBD Bank, N.A. $4,000,000 Term Loan Agreement and
Term Note, filed as an exhibit to the Form 10-K
Annual Report for the year-ended December 31, 1994,
is incorporated herein by reference.
4(i) Hastings Manufacturing Company has several classes
of long-term debt instruments outstanding. Except as
disclosed above, the amount of none of these classes
of debt outstanding at the date of this filing exceeds
10% of the Hastings Manufacturing Company's total
consolidated assets. Hastings Manufacturing Company
agrees to furnish copies of any agreement defining the
rights of other holders of any such long-term
indebtedness to the Securities and Exchange Commission
upon its request.
4(j) Preferred Stock Purchase Rights, filed as an exhibit
to the Form 8-K filed with the Securities and Exchange
Commission on February 15, 1996, is incorporated herein
by reference.
10(a) List of Recipients of Indemnity Agreement and Form of
Indemnity Agreement, filed as an exhibit to the
Company's Form 10-K Annual Report for the year ended
December 31, 1988, are incorporated herein by reference.
10(b) 1990 Restricted Stock Plan, filed as an exhibit to the
Company's Form 10-K Annual Report for the year ended
December 31, 1992, are incorporated herein by reference.
10(c) Asset Purchase Agreement between Hastings Manufacturing
Company and CLARCOR Inc. dated as of September 3, 1995,
filed as an exhibit to the Form 8-K filed with the
Securities and Exchange Commission on September 20, 1995,
is incorporated herein by reference.
21 Subsidiaries of Hastings Manufacturing Company.
27 Financial Data Schedule.
-50-
EXHIBIT 4(f)
FIRST AMENDMENT TO LETTER AGREEMENT
THIS FIRST AMENDMENT TO LETTER AGREEMENT, dated as of May 2, 1995
(this "Amendment"), is between HASTINGS MANUFACTURING COMPANY, a Michigan
corporation (the "Company"), and NBD BANK, a Michigan banking corporation
(formerly known as NBD Bank, N.A., the "Bank").
RECITALS
A. The Company and the Bank are parties to a letter agreement dated
May 31, 1994 (the "Letter Agreement"), pursuant to which the Bank agreed,
subject to the terms and conditions thereof, to extend credit to the
Company in a maximum principal amount of $6,000,000.
B. The parties now desire to amend certain terms and provisions of
the Letter Agreement as set forth herein.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Letter Agreement shall be amended as follows:
1.1 The reference to "$6,000,000 Credit Authorization" in the heading
of the Letter Agreement shall be deemed a reference to "$8,000,000 Credit
Authorization".
1.2 The reference to "NBD Bank, N.A., a national banking association"
in the introductory paragraph of the Letter Agreement shall be deemed a
reference to "NBD Bank, a Michigan banking corporation".
1.3 The definition of "Maximum Amount" in Section 1 of the Letter
Agreement shall be amended by deleting the reference to "$6,000,000, as
such amount may be amended from time to time" and inserting "(a) $8,000,000
at any time during the period from and including the date hereof to but
excluding May 31, 1995 and (b) $6,000,000 on May 31, 1995 until the
Termination Date, as such amounts may be amended from time to time" in
place thereof.
1.4 The reference to "May 31, 1995" in the definition of "Termination
Date" in Section 1 of the Letter Agreement shall be deemed to refer to
"July 31, 1995."
1.5 The reference to "May 31, 1995" in Section 2 of the Letter
Agreement shall be deemed to refer to "July 31, 1995".
1.6 The last paragraph of Section 10 of the Letter Agreement shall be
amended by adding "in an approximate amount of $11,209,000" at the end of
clause (i) of such paragraph before the comma.
1.7 Clause (iii) of the last paragraph of Section 10 of the Letter
Agreement shall be redesignated as clause (iv) and the following shall be
added as clause (iii) to such paragraph:
(iii) the amount shown on the balance sheet of the
Company under the heading "Intangible Pension Asset"
shall not be deemed as an intangible asset for purposes
of the definition of "Tangible Net Worth", as such term
is defined and used herein, so long as there is a
related, offsetting figure of the same or greater
amount in the "Stockholder's Equity" section of the
balance sheet of the Company under the heading "Pension
Liabilities Adjustment".
1.8 Exhibit A to the Letter Agreement is hereby deleted in its
entirety and Exhibit A attached hereto is hereby substituted in place of
Exhibit A thereof.
ARTICLE II. REPRESENTATIONS. The Company represents and warrants to the
Bank that:
2.1 The execution, delivery and performance of this Amendment are
within its powers, have been duly authorized and are not in contravention
with any law, of the terms of its Articles of Incorporation or By-laws, or
any material undertaking to which it is a party or by which it is bound.
2.2 This Amendment is the legal, valid and binding obligations of the
Company enforceable against it in accordance with the respective terms
hereof.
2.3 After giving effect to the amendments herein contained, the
representations and warranties contained in Section 11 of the Letter
Agreement are true on and as of the date hereof with the same force and
effect as if made on and as of the date hereof, PROVIDED, THAT, the
representations and warranties contained in Section 11(f) of the Letter
Agreement shall be deemed to have been made with respect to the financial
statements most recently delivered pursuant to Section 9(d) of the Letter
Agreement.
2.4 No Event of Default or event or condition which, with notice or
lapse of time or both could become such an Event of Default exists or has
occurred and is continuing on the date hereof.
-2-
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until each of the following has been satisfied:
3.1 Copies of resolutions adopted by the Board of Directors of the
Company, certified by an officer of the Company, as being true and correct
and in full force and effect without amendment as of the date hereof,
authorizing the Company to enter into this Amendment and any other
documents or agreements executed pursuant hereto, if any, shall have been
delivered to the Bank.
3.2 An opinion of counsel to the Company, in form and substance
satisfactory to the Bank, as to the matters set forth in Sections 2.1 and
2.2 hereof and with respect to such other matters requested by the Bank,
has been delivered to the Bank.
3.2 This Amendment shall be signed by the Company and the Bank.
3.3 The Company shall deliver a duly executed copy of a new
promissory note in the principal amount of $8,000,000 in the form of
Exhibit A attached hereto.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Letter Agreement to "this Agreement" and
references in any note, certificate, instrument or other document to the
"Letter Agreement" or "Authorization Agreement" shall be deemed to be
references to the Letter Agreement as amended hereby and as further amended
from time to time.
4.2 The Company agrees to pay and to save the Bank harmless for the
payment of all costs and expenses arising in connection with this
Amendment, including the reasonable fees of counsel to the Bank in
connection with preparing this Amendment and the related documents.
4.3 The Company acknowledges and agrees that the Bank has fully
performed all of its obligations under all documents executed in connection
with the Letter Agreement and all actions taken by the Bank is reasonable
and appropriate under the circumstances and within its rights under the
Letter Agreement and all other documents executed in connection therewith
and otherwise available. The Company represents and warrants that it is
not aware of any claims or causes of action against the Bank, or any of its
successors or assigns. Notwithstanding this representation and as further
consideration for the agreements and understandings herein, the Company and
its heirs, successors and assigns, hereby release the Bank and its heirs,
successors and assigns from any liability, claim, right or cause of action
which now exists or hereafter arises, whether known or unknown, arising
from or in any way related to facts in existence as of the date hereof to
any agreements or transactions between the Bank and the Company or to any
acts or omissions of the Bank in connection therewith or otherwise.
-3-
4.4 Except as expressly amended hereby, the Company agrees that the
Letter Agreement, the promissory note and all other documents and
agreements executed by the Company in connection with the Letter Agreement
in favor of the Bank are ratified and confirmed and shall remain in full
force and effect and that it has no set off, counterclaim or defense with
respect to any of the foregoing. Terms used but not defined herein shall
have the respective meanings ascribed thereto in the Letter Agreement.
4.5 This Amendment shall be governed by and construed in accordance
with the laws of the State of Michigan.
4.6 This Amendment may be signed upon any number of counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused
this Amendment to be executed and delivered as of May 2, 1995.
HASTINGS MANUFACTURING COMPANY
By:/s/ THOMAS J. BELLGRAPH
Thomas J. Bellgraph
Its: TREASURER
NBD BANK
By:/s/ THOMAS A. GAMM
Thomas A. Gamm
Its: SECOND VICE PRESIDENT
-4-
EXHIBIT A
MASTER PROMISSORY NOTE
$8,000,000.00 Detroit, Michigan
May 2, 1995
For value received, on demand or at such other maturity or
maturities as are set forth in the Bank's records, and in any event no
later than July 31, 1995, HASTINGS MANUFACTURING COMPANY (the "Borrower")
promises to pay to the order of NBD BANK (the "Bank"), at the Bank's
principal office in the State of Michigan, in lawful money of the United
States of America and in immediately available funds, the principal sum of
Eight Million and 00/100 Dollars ($8,000,000.00), or such lesser amount as
is indicated on the Bank's records, together with interest computed on the
balance from time to time unpaid on the basis of the actual number of days
elapsed on a year of 360 days at the rate(s) per annum determined from time
to time pursuant to the "Letter Agreement", as defined below, and reflected
on the Bank's records, which interest shall be payable in accordance with
the terms set forth in the Letter Agreement, and to pay interest on overdue
principal from the date of demand or default until paid at the rate which
is three percent (3%) per annum in excess of the rate announced from time
to time by the Bank at its prime rate.
In no event shall the interest rate exceed the maximum rate
allowed by law. Any interest which would for any reason be deemed unlawful
under applicable law shall be applied to principal.
WAIVER: The Borrower and each endorser of this note and any other
party liable for the debt evidence by this note severally waives demand,
presentment, notice of dishonor and protest of this note, and consents to
any extension or postponement of time of its payment without limit as to
number or period, to the addition of any party, and to the release,
discharge, or suspension of any rights or remedies against any person who
may be liable for the payment of this note. No delay on the part of the
holder in the exercise of any right or remedy shall operate as a waiver.
No single or partial exercise by the holder of any right or remedy shall
preclude any future exercise of that right or remedy or the exercise of any
other right or remedy. No waiver or indulgence by the holder of any
default shall be effective unless it is in writing and signed by the
holder, nor shall a waiver on one occasion be construed as a bar to or
waiver of any right on any future occasion.
This note evidences a debt under the terms of a certain letter
agreement between the Bank and the Borrower dated May 31, 1994, as amended
by a First Amendment to Letter Agreement dated as of May 2, 1995, and as
further amended from time to time (the "Letter Agreement"), which is
incorporated by reference for additional terms and conditions, including
default and acceleration provisions.
WAIVER OF JURY TRIAL: The Bank and the Borrower, after consulting
or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a
trial by jury in any litigation based upon or arising out of this note, or
any related instrument or agreement, or any of the transactions
contemplated by this note, or any course of conduct, dealing, statements
(whether oral or written), or actions of either of them. Neither the Bank
nor the Borrower shall seek to consolidate, by counterclaim or otherwise,
any such action in which a jury trial has been waived with any other action
in which a jury trial cannot be or has not been waived. These provisions
shall not be deemed to have been modified in any respect or relinquished by
either the Bank or the Borrower except by a written instrument executed by
both of them.
Address: HASTINGS MANUFACTURING COMPANY
325 North Hanover
Hastings, Michigan 49058
Attention: Treasurer By: /s/ Thomas J. Bellgraph
Its: Treasurer
EXHIBIT 4(g)
SECOND AMENDMENT TO LETTER AGREEMENT
THIS SECOND AMENDMENT TO LETTER AGREEMENT, dated as of September 30,
1995 (this "Amendment"), is between HASTINGS MANUFACTURING COMPANY, a
Michigan corporation (the "Company"), and NBD BANK, a Michigan banking
corporation, formerly known as NBD Bank, N.A. (the "Bank").
RECITALS
A. The Company and the Bank are parties to a letter agreement dated
May 31, 1994, as amended by a First Amendment to Letter Agreement dated as
of May 2, 1995 (as amended, the "Letter Agreement"), pursuant to which the
Bank agreed, subject to the terms and conditions thereof, to extend a line
of credit to the Company in a maximum principal amount of $8,000,000.
B. The parties now desire to reduce such line of credit to
$4,000,000, and to amend certain terms and provisions of the Letter
Agreement as set forth herein.
TERMS
In consideration of the premises and of the mutual agreements herein
contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set forth in
Article III hereof, the Letter Agreement shall be amended as follows:
1.1 The reference to "$8,000,000 Credit Authorization" in the heading
of the Letter Agreement shall be deemed a reference to "$4,000,000 Credit
Authorization".
1.2 A new definition of "Default" shall be added in alphabetical
order to Section 1 of the Letter Agreement to read as follows:
"DEFAULT shall mean any event or condition which
might become an Event of Default with notice or lapse
of time or both."
1.3 The definition of "Letter of Credit" in Section 1 of the Letter
Agreement shall be amended by deleting the reference to "six months after
the date of issuance thereof in the case of commercial letters of credit"
and inserting "nine months after the date of issuance thereof in the case
of commercial letters of credit" in place thereof.
1.4 The definition of "Maximum Amount" in Section 1 of the Letter
Agreement shall be amended by deleting the reference to "(a) $8,000,000 at
any time during the period from and including the date hereof to but
excluding May 31, 1995 and (b) $6,000,000 on May 31, 1995 until the
Termination Date, as such amounts may be amended from time to time" and
inserting "$4,000,000, as such amount may be amended from time to
time" in place thereof.
1.5 The reference to "July 31, 1995" in the definition of
"Termination Date" in Section 1 of the Letter Agreement shall be deemed to
refer to "May 31, 1996".
1.6 The reference to "July 31, 1995" in Section 2 of the Letter
Agreement shall be deemed to refer to "May 31, 1996".
1.7 The penultimate sentence in Section 2 of the Letter Agreement
shall be deleted and the following sentence shall be added in place
thereof: "All Negotiated Rate Loans shall be in the minimum amount of
$500,000 and in integral multiples of $100,000, and all Floating Rate Loans
shall be in the minimum amount of $50,000 and in integral multiples
thereof.
1.8 Section 4 of the Letter Agreement entitled "Compensating
Balances" shall be deemed deleted in its entirety and a new Section 4
entitled "Commitment Fee" shall be added in place thereof as follows:
"4. COMMITMENT FEE. The Company agrees to pay to
the Bank a commitment fee on the daily average unused
amount of the Maximum Amount for the period from
September 30, 1995 to but excluding the Termination
Date, at a rate equal to one-quarter of one percent
(1/4 of I%) per annum. Accrued commitment fees shall
be payable quarterly in arrears on the last Business
Day of each March, June, September and December,
commencing on the first such Business Day occurring
after the date of this Amendment, and on the
Termination Date."
1.9 Section 10(a) of the Letter Agreement shall be deemed deleted in
its entirety and replaced with the following language:
"(a) WORKING CAPITAL. Permit or suffer the
consolidated Working Capital of the Company and its
Subsidiaries to be less than $11,000,000 at any time."
1.10 Section 10(b) of the Letter Agreement shall be deemed deleted in
its entirety and replaced with the following language:
"(b) TANGIBLE NET WORTH. Permit or suffer the
consolidated Tangible Net Worth of the Company and its
Subsidiaries to be less than the sum of (i) $18,500,000 at
any time plus (ii) beginning January 1, 1996, an amount
equal to 50% of consolidated Cumulative Net Income of the
Company and its Subsidiaries."
-2-
1.11 The reference to "1.85 to l.00" in Section 10(c) of the Letter
Agreement shall be deemed to refer to "1.40 to 1.00".
1.12 The reference is Section 10(h) of the Letter Agreement to "do not
exceed fifty percent (50%) of the consolidated Cumulative Net Income of the
Company and its Subsidiaries, beginning January 1, 1994" shall be deemed
deleted and replaced with the following language:
"do not exceed the sum of (i) $2,500,000 at any
time plus (ii) beginning January 1, 1996, fifty percent
(50%) of the consolidated Cumulative Net Income of the
Company and its Subsidiaries."
1.13 A new Section 10(k) shall be added to the Letter Agreement to
read as follows:
"(k) NEGATIVE PLEDGE LIMITATION. Enter into any
agreement with any person other than the Bank pursuant
hereto which prohibits or limits the ability of the
Company or any Subsidiary to create, incur, assume or
suffer to exist any Lien upon any of its assets,
rights, revenues or property, real, personal or mixed,
tangible or intangible, whether now owned or hereafter
acquired.
1.14 Exhibit A to the Letter Agreement is hereby deleted in its
entirety and Exhibit A attached hereto is hereby substituted in place of
Exhibit A thereof.
ARTICLE II. REPRESENTATIONS. The Company represents and warrants to the
Bank that:
2.1 The execution, delivery and performance of this Amendment are
within its powers, have been duly authorized and are not in contravention
with any law, of the terms of its Articles of Incorporation or By-laws, or
any material undertaking to which it is a party or by which it is bound.
2.2 This Amendment is the legal, valid and binding obligations of the
Company enforceable against it in accordance with the respective terms
hereof.
2.3 After giving effect to the amendments herein contained, the
representations and warranties contained in Section 11 of the Letter
Agreement are true on and as of the date hereof with the same force and
effect as if made on and as of the date hereof, PROVIDED, THAT, the
representations and warranties contained in Section 11(f) of the Letter
Agreement shall be deemed to have been made with respect to the financial
statements most recently delivered pursuant to Section 9(d) of the Letter
Agreement.
-3-
2.4 No Event of Default or event or condition which, with notice or
lapse of time or both could become such an Event of Default exists or has
occurred and is continuing on the date hereof.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not become
effective until each of the following has been satisfied:
3.1 Copies of resolutions adopted by the Board of Directors of the
Company, certified by an officer of the Company, as being true and correct
and in full force and effect without amendment as of the date hereof,
authorizing the Company to enter into this Amendment and any other
documents or agreements executed pursuant hereto, if any, shall have been
delivered to the Bank.
3.2 This Amendment shall be signed by the Company and the Bank.
3.3 The Company shall deliver a duly executed copy of a new
promissory note in the principal amount of $4,000,000 in the form of
Exhibit A attached hereto.
ARTICLE IV. MISCELLANEOUS.
4.1 References in the Letter Agreement to "this Agreement" and
references in any note, certificate, instrument or other document to the
"Letter Agreement" or "Authorization Agreement" shall be deemed to be
references to the Letter Agreement as amended hereby and as further amended
from time to time.
4.2 The Company agrees to pay and to save the Bank harmless for the
payment of all costs and expenses arising in connection with this
Amendment, including the reasonable fees of counsel to the Bank in
connection with preparing this Amendment and the related documents.
4.3 The Company acknowledges and agrees that the Bank has fully
performed all of its obligations under all documents executed in connection
with the Letter Agreement and all actions taken by the Bank is reasonable
and appropriate under the circumstances and within its rights under the
Letter Agreement and all other documents executed in connection therewith
and otherwise available. The Company represents and warrants that it is
not aware of any claims or causes of action against the Bank, or any of its
successors or assigns. Notwithstanding this representation and as further
consideration for the agreements and understandings herein, the Company and
its heirs, successors and assigns, hereby release the Bank and its heirs,
successors and assigns from any liability, claim, right or cause of action
which now exists or hereafter arises, whether known or unknown, arising
from or in any way related to facts in existence as of the date hereof to
any agreements or transactions between the Bank and the Company or to any
acts or omissions of the Bank in connection therewith or otherwise.
-4-
4.4 Except as expressly amended hereby, the Company agrees that the
Letter Agreement, the promissory note and all other documents and
agreements executed by the Company in connection with the Letter Agreement
in favor of the Bank are ratified and confirmed and shall remain in full
force and effect and that it has no set off, counterclaim or defense with
respect to any of the foregoing. Terms used but not defined herein shall
have the respective meanings ascribed thereto in the Letter Agreement.
4.5 This Amendment shall be governed by and construed in accordance
with the laws of the State of Michigan.
4.6 This Amendment may be signed upon any number of counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties signing this Amendment have caused
this Amendment to be executed and delivered as of the date first above
written.
HASTINGS MANUFACTURING COMPANY
/s/ TOM BELLGRAPH
Tom Bellgraph
Its Treasurer
NBD BANK
/s/ THOMAS A. GAMM
Thomas A. Gamm
Its Second Vice President
-5-
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF PERCENT
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
<S> <C> <C> <C>
Hastings, Inc. Ontario 100%
HMC, Inc.<F1> Michigan 100%
<FN>
<F1> Formerly Douglas Corporation
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HASTINGS MANUFACTURING COMPANY FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,909,506
<SECURITIES> 0
<RECEIVABLES> 6,584,392
<ALLOWANCES> 225,000
<INVENTORY> 9,935,694
<CURRENT-ASSETS> 20,895,373
<PP&E> 20,755,465
<DEPRECIATION> 12,902,944
<TOTAL-ASSETS> 37,547,568
<CURRENT-LIABILITIES> 8,798,503
<BONDS> 5,051,125
<COMMON> 777,626
0
0
<OTHER-SE> 4,447,352
<TOTAL-LIABILITY-AND-EQUITY> 37,547,568
<SALES> 63,228,312
<TOTAL-REVENUES> 63,228,312
<CGS> 44,990,825
<TOTAL-COSTS> 44,990,825
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 316,000
<INTEREST-EXPENSE> 892,891
<INCOME-PRETAX> (3,743,180)
<INCOME-TAX> (720,000)
<INCOME-CONTINUING> (3,023,180)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,023,180)
<EPS-PRIMARY> (7.78)
<EPS-DILUTED> (7.78)
</TABLE>
