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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 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
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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 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]
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Aggregate market value of voting stock of Registrant held by non-affiliates
as of March 20, 1998 was $6,297,291.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 20, 1998:
Common Stock - $2 par value 391,963 Shares
Documents and Information Incorporated by Reference
Part III, Items 10, 11, 12 and 13 Proxy Statement for Annual Meeting
to be held May 5, 1998
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PART I
ITEM 1. BUSINESS.
Hastings Manufacturing Company (the "Company") is a Michigan
corporation organized in 1929 with its headquarters and U.S. manufacturing
facilities in Hastings, Michigan.
The Company operates in one business segment, automotive
replacement parts. It primarily produces and sells automotive and light
duty truck piston rings. To a lesser extent, it packages and sells
mechanics' specialty hand tools and additives for engines, transmissions
and cooling systems. These products are distributed nationally and
internationally through numerous warehouse distributors, large-scale engine
rebuilders and various retailer outlets primarily in the automotive
replacement market. Certain of the Company's piston ring products are
produced for original equipment applications.
All of the Company's products are also sold in Canada. These
products are produced and/or packaged and distributed, by the Company's
Canadian subsidiary, Hastings, Inc., located in Barrie, Ontario.
Effective on September 3, 1995, the Company entered into an
agreement that resulted in the sale of its former filter product line
assets to CLARCOR Inc. ("CLARCOR") of Rockford, Illinois. 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, continued to supply CLARCOR with component parts during a transition
period.
The Company and CLARCOR entered into a Transition Agreement, also
dated September 3, 1995. That Agreement provided 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, could be moved and set up at CLARCOR's plant
facilities. It also provided for reimbursement to the Company of certain
administrative costs directly related to the manufacture and supply of
filters and filter components to CLARCOR. The transition period concluded
in August 1996.
Effective in May 1996, the Company moved its piston ring
packaging operations from its former facility in Knoxville, Tennessee to
Hastings, Michigan thus consolidating its piston ring operations.
The Transition Agreement also included certain provisions for the
continued distribution (not manufacture) of filter products through the
Company's Canadian subsidiary, at the discretion of CLARCOR. In early
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November 1996, the Company received notification from CLARCOR that this
arrangement would terminate on December 31, 1996.
As described in Note 3 to the Consolidated Financial Statements
(included in Item 8), in December 1996, management and the Board of
Directors approved a restructuring plan designed to significantly reduce
operating costs and provide for a more streamlined operating structure
concentrating on piston ring manufacturing. In addition to reducing
staffing levels at both the U.S. and Canadian manufacturing facilities, the
restructuring plan calls for the termination of most Canadian piston ring
manufacturing effective April 30, 1997. The Company's Canadian subsidiary
continues to distribute piston rings throughout Canada. However, its
product is now sourced primarily by U.S. operations. The Canadian facility
also continues to manufacture certain piston ring parts and provide
packaging operations for tools and piston ring sets.
Fiscal 1997 was a critical year for the Company as it returned to
profitability, recognizing net income for the first full year since 1994.
This return to profitability was the result of various factors, including
(1) a net sales gain in 1997 from 1996 within the remaining products lines,
(2) a gross profit percentage improvements driven, in part, by the
completion of the transition period in 1996 and (3) a net reduction in
operating expenses reflecting the absorption of certain non-recurring items
in 1996 and the favorable impact of the restructuring effort in 1997.
Fiscal 1997 also saw significant changes in the way the Company
distributes its products overseas and, at home, how changes in the
manufacturing processes improved quality and productivity.
Prior to 1997, the Company had a single distributor conducting
the majority of its export sales under a series of negotiated three-year
contracts. Considering perceived changes in the global market, a mutual
decision was made to allow this arrangement to expire effective December
31, 1996. During 1997, the Company made significant progress in expanding
its overseas distribution channels on a country-direct basis. By the close
of 1997, the Company had contracted with new distributors and was selling
products direct in Australia, South America, the Middle East, Israel,
Puerto Rico and South America. While export sales were down in 1997
compared to 1996, due to the time lag associated with converting to the
direct export distributors, the Company remains committed to broadening its
direct export business and feels that efforts will be justified in the
coming years.
Beginning in 1996 and carrying over to 1997, the Company made
significant strides in improving its manufacturing operations. The
Company's initiatives to improve quality and productivity were rewarded
with QS-9000 and ISO-9002 quality registrations in July 1997.
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The market for the Company's products is highly competitive.
The principal methods of competition in the industry are price, service,
product performance and product availability. Accurate figures are not
available, but the Company believes it ranks among the three largest
domestic producers of replacement piston rings.
Among the Company's trade names used in marketing its products
are "Hastings," "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 protections.
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 or
competitive position of the Company.
The Company and its subsidiaries have a total employment of
approximately 440 employees. Employee relations at all of the Company's
plant locations are considered to be satisfactory.
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. Financial information regarding the
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Company's Canadian subsidiary including sales, operating profit or loss and
identifiable assets, along with total export sales from the Company's U.S.
operations to unaffiliated customers, is included in Note 11 to the
Consolidated Financial Statements contained in Item 8 below.
ITEM 2. PROPERTIES.
The general offices and manufacturing and distribution plant,
which produces and distributes piston rings and, through the transition
date discussed in Item 1 above, produced filters and filter component parts
for CLARCOR Inc., 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.
The Company's wholly owned Canadian subsidiary, Hastings, Inc.,
owns and operates manufacturing 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% 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 1997 to a
vote of security holders through the solicitation of proxies or otherwise.
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 20, 1998, there were 391,963
outstanding shares and the approximate number of shareholders, excluding
those held by security brokers, was 299.
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High and low sales prices and cash dividends, per quarter, are as
set forth below. All results are on a pre-split basis and have not been
adjusted to reflect the two-for-one stock split as discussed in Note 12 to
the Consolidated Financial Statements in Item 8 below.
<TABLE>
<CAPTION>
1997 1996
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CASH CASH
STOCK PRICE DIVIDENDS STOCK PRICE DIVIDENDS
HIGH LOW PAID HIGH LOW PAID
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<S> <C> <C> <C> <C> <C> <C>
First Quarter. . . . 30-1/4 25 .10 23-3/4 21 .10
Second Quarter . . . 28-7/8 26 .10 26 22-3/4 .10
Third Quarter. . . . 39-1/4 26-3/4 .15 27 23 .10
Fourth Quarter . . . 41-1/2 37-3/4 .15 26 24 .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 in accordance with the Company's loan agreements
as described in Note 6 to the Consolidated Financial Statements included in
Item 8 below. Unrestricted retained earnings under the agreements amounted
to $2,183,785 at December 31, 1997.
The Company made no unregistered sales of any of its securities
during fiscal year 1997.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
1997 1996<F2> 1995<F3> 1994 1993<F4>
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales . . . . . . . . . . . . $35,574,954 $39,408,610 $63,228,312 $74,572,222 $72,477,617
Net Income (Loss) . . . . . . . . 955,233 (884,843) (3,023,180) 448,921 (10,254,450)
Basic and Diluted Net
Income (Loss) per Share<F1> . . 1.24 (1.15) (3.93) .58 (13.34)
Long-Term Debt. . . . . . . . . . 565,625 2,028,125 3,490,625 6,223,900 4,340,150
Total Assets. . . . . . . . . . . 33,390,331 34,454,989 37,547,568 47,854,279 46,149,236
Dividends per Share<F1> . . . . . .25 .20 .20 .20 .20
Average Shares Outstanding:<F1>
Basic . . . . . . . . . . . . . 768,516 768,516 768,516 768,516 768,516
Diluted . . . . . . . . . . . . 768,680 768,516 768,516 768,516 768,516
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<FN>
<F1> Average shares outstanding and the related per share results have been
adjusted to reflect the two-for-one stock split discussed in Note 12 to the
Consolidated Financial Statements included in Item 8 below.
<F2> The 1996 data includes non-recurring restructuring and relocation
costs totaling $819,900. Refer to Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Notes 2 and
3 to the Consolidated Financial Statements included in Item 8, "Financial
Statements and Supplementing Data."
<F3> 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 in Item 8, "Financial Statements and
Supplementary Data."
<F4> The 1993 data includes the cumulative effect of changes in accounting
principles of ($11,208,934) or ($14.59) per share.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Following the sale of the Company's filter assets and operations
in September 1995, as discussed in Note 2 to the Consolidated Financial
Statements, quarterly and annual results were impacted to varying degrees
through the fourth quarter of 1996. The Company was obligated during a
transition period to provide the purchaser with support for the filter
operations. The terms of the related Transition Agreement have been fully
documented in previous disclosures. Numerous operating relationships were
impacted by the sale and by the subsequent transition period. While filter
operations had no direct impact on the 1997 results, comparative operations
from 1996 and 1995 continue to reflect certain "filter" relationships as
indicated throughout the following analysis. In addition to the filter
operations sale impact, the Company announced a restructuring program in
the fourth quarter of 1996 as discussed in Note 3 to the Consolidated
Financial Statements. The impact from that program is likewise reflected
in the following analysis as applicable.
For the year, the Company generated net income of $955,233
compared to a net loss of $884,843 in 1996. This return to profitability
was the result of various factors, each of which is more fully described
below. These include (1) a net sales gain in 1997 from 1996 within the
remaining product lines, (2) a gross profit percentage improvement driven,
in part, by the completion of the transition period in 1996 and (3) a net
reduction in operating expenses reflecting the absorption of certain
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non-recurring items in 1996 and the favorable impact of the restructuring
effort on 1997.
For 1997, the Company reported four quarters of positive earnings
from operations for the first time since 1993. Contrary to 1996, when
significant positive and/or negative factors impacted the individual
quarterly results, 1997 realized a more consistent operating performance.
RESULTS OF OPERATIONS
NET SALES
The Company's net sales increased by $236,147 in the final
quarter of 1997 relative to 1996 despite the inclusion of $207,800 of
"filter sensitive" volume in the 1996 period. As such, sales from the
remaining products increased by $443,947, or 5.6%, in the 1997 final
quarter from the same period in 1996.
The net sales decline of 9.7% for the full year of 1997 versus
1996, from $39,408,610 to $35,574,954, reflects an impact from the filter
transition. Total 1996 filter related sales were $5,992,800. Net of this
component, the remaining product lines posted a net sales gain of 6.5%, or
$2,159,144. As discussed in Note 11, the Company's export sales volume was
down in 1997 from 1996. This was due to lower export sales through
traditional export channels and the time lag associated with converting
additional export markets to a country-direct basis. This market
conversion effort follows the expiration of an agreement with our former
export representative as of December 31, 1996. Activity with that
representative had been conducted under a series of negotiated three-year
agreements. Considering perceived changes in the global market, a mutual
decision was made to allow the arrangement to expire. The Company remains
committed to broadening its direct export business and feels that those
efforts will be justified in the coming years. Following on the success of
1996 in its traditional domestic aftermarket channels, the Company again
realized solid growth during 1997. These gains were achieved through a
continued focus on our aftermarket customers combined with the presence of
an acceptable sales order fill performance. That order fill success
continued a commitment from 1996 following the Company's less than desired
performance in this area through much of 1995. The Company's private brand
and original equipment volumes were steady in 1997 when compared to their
1996 levels. That volume is primarily driven by industry demands that were
relatively flat in 1997. While the Company remains cautious as to its
private brand and original equipment markets, early 1998 results are
favorable in both its domestic and export sales activities.
Net sales in 1996 were down $23,819,702, or 37.7%, from 1995.
Approximately $22,300,000 of that decline was directly related to the
filter operations sale with the remaining decline resulting from a
reduction in sales of the remaining product lines. That decline resulted
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directly from reduced export sales in 1996 from 1995 reflecting lower
export sales through the Company's traditional markets and an inventory
reduction effort on the part of the Company's former primary export
representative through 1996. That volume decline was a factor in the
decision to expand our country-direct efforts.
COST OF SALES AND GROSS PROFIT
Total cost of sales for 1997 declined by $5,013,944, or 17.1%,
from 1996. The reported gross profit percentage increased to 31.7% for the
full year 1997 from 25.7% in 1996. The aggregate cost of sales reduction,
with a corresponding improvement of the gross profit percentage, reflects
the absence of any filter operations in 1997 following the inclusion of
$5,992,800 of filter net sales activity in 1996. That filter activity
included $736,000 of support expenses billed back to the filter operations
purchaser. The gross margin on the remainder of the filter related sales
was at a minimal rate as dictated by the terms of the Transition Agreement.
In addition to specific filter product costs included in the 1996 results,
certain product driven distribution and support operating costs are
included in cost of sales. Those operating costs declined following the
1996 relocation from the Knoxville facility. Distribution costs decreased
from $1,925,000 in 1996 to $921,000 in 1997. In addition, the reduction of
certain other costs, such as retiree medical expenses, combined with the
absence of all Knoxville related support costs contributed to the lower
cost of sales level in 1997. With respect to retiree medical expenses,
reference is made to Note 9 to the Consolidated Financial Statements in
Item 8, which more fully discusses the April 1997 amendment to the
Company's postretirement benefit plans, the related financial statement
effects and a recent response to such by legal representatives of certain
affected retirees. For 1997, product cost factors (materials, labor and
overhead) changed little from 1996. Material costs incurred only minimal
inflation as reflected in Note 4. Though labor rates increased by 3% early
in 1997, productivity gains offset most of that adjustment. The gross
profit margin generated in the fourth quarter (31.2%) was only slightly
lower than the margin reported through the third quarter of this year
(31.9%). Higher payroll support costs, including pension costs and
workers' compensation premiums, contributed to this lower relative margin
in the final quarter of 1997.
Total cost of sales for 1996 declined by $20,666,684, or 41.4%,
from 1995. The primary contributor to this significant net dollar decline
was again the reduced filter operations throughout 1996. The corresponding
increase in the realized gross profit margin percentage for 1996 (25.7%)
from 1995 (21.0%) was the result of several factors. Relocation out of the
Knoxville facility in early 1996 resulted in lower relative distribution
costs in the 1996 cost of sales category. In addition, the phase-out of
filter operations in general, combined with the improved distributor piston
ring volume, further improved the 1996 realized gross profit percentage.
The 1996 results were also favorably impacted by the liquidation of certain
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LIFO inventory reserves related to the final transfer of inventory balances
to the purchaser.
OPERATING EXPENSES
Total operating expenses declined $1,896,427, or 17.1%, from
$11,082,798 to $9,186,371. As a percent of net sales, these costs declined
2.3%, from 28.1% in 1996 to 25.8% in 1997. Exclusive of the non-recurring
restructuring and relocation costs discussed below, 1997 operating expenses
still declined by $1,076,527. This reduction reflects the absence of
filter expenses in 1997, as well as the positive results of the
restructuring plan as reported in Note 3. Advertising, up $23,321, or
6.7%, reflects increased outlays for a biannual product line catalog and
cooperative advertising programming offset by lower support staff salaries
and reduced printed materials purchases. Selling expenses, down $472,928,
or 13.2%, primarily reflects reduced sales staff support costs driven by
the restructuring efforts by both the parent company and the Canadian
subsidiary. In addition, this expense line item now reflects the full
absence of any filter related sales support costs as incurred through the
1996 comparative period. These filter support costs, reported within the
selling expense category, totaled $425,000 for 1996. The general and
administrative expenses, down $626,920, or 9.9%, in 1997 from 1996, reflect
several factors. This category included certain filter support costs
totaling $311,000 in 1996 that were "billed back" to the purchaser in
combination with the noted selling expenses. In addition, this category
reflects a consistent decline in many of the general office operating
costs, reflecting the reduced demands from the post-filter operating
environment, as well as a reduction in retiree medical expenses as
discussed in Note 9. Slightly offsetting these cost reductions was the
1997 cost related to Year 2000 compliance, as discussed below. The
non-recurring restructuring and relocation costs for 1996 reflect the costs
associated with the relocation of certain inventories and shipping
operations out of the Company's former Knoxville, Tennessee facility and
the restructuring program announced in the fourth quarter of 1996. These
events are more fully discussed in Notes 2 and 3 to the Consolidated
Financial Statements.
During 1997, the Company utilized the services of an outside
consultant to assist in converting its computer systems to be Year 2000
compliant. At December 31, 1997, management believes the Company's core
mainframe operating system and applications, its personal computer (PC)
operating systems and the majority of its PC applications are compliant.
The remaining PC applications are expected to be compliant during 1998 with
the next software release or upgrade. Manufacturing equipment testing for
Year 2000 compliance has been substantially completed with the remainder to
be completed during 1998. The Company's software vendors have been
contacted requesting assurances regarding Year 2000 compliance. Responses
are in the process of being received and reviewed. Costs relating to the
project during 1997, which approximated $110,000, were expensed as incurred
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and are included in 1997 "General and Administrative" expenses. Future
costs to be incurred to complete the Year 2000 project are not expected to
be material.
Total operating expenses for 1996 decreased significantly from
1995 for each of the primary categories. Again, the filter operations sale
was the primary factor in that decline as the Company scaled down multiple
programs and personnel relative to the refocused operations. As noted
above, however, 1996 then absorbed significant operating expenses
associated with the post-filter transition including both the inventory
relocation effort in the first half of that year and the subsequent
restructuring costs in the fourth quarter of that year.
OTHER EXPENSES
Other expenses, net increased by $261,639 in 1997 from 1996.
The net interest position for 1997 reflects both lower expense and income.
This relationship represents a continued decline in net borrowings
resulting from normal long-term debt amortization combined with the use of
interest earning funds previously held through 1996 for capital equipment
acquisitions. The 1997 interest income amount primarily reflects earnings
on the balance of escrowed funds to be held through September 1998 related
to the filter operations sale. The favorable 1996 "Other, net" results
reflect a $204,500 gain from the termination of an interest rate swap
agreement in March of that year.
Other expenses, net declined by $712,746 in 1996 from 1995. The
comparative interest expense and interest income relationships reflect
primarily the impact from financing activities related to the filter
operations sales. Following the sale, various short-term and long-term
debt obligations were liquidated. In addition, 1995 absorbed the minimal
loss incurred on the filter operations sale while 1996 absorbed the gain
from the noted favorable interest rate swap termination.
TAXES ON INCOME
The impact of income taxes on the reported results of the Company
is detailed in Note 10 to the Consolidated Financial Statements. The 1997
effective tax rate of 39.4% is higher than the statutory federal rate due
primarily to the impact of state income taxes. The 1996 effective tax
credit rate of 28.5% is lower than the statutory rate due primarily to the
increase of a valuation allowance for certain unused foreign tax credits
and the recognition of an accumulated state income tax obligation. The
1995 effective tax credit rate of 19.2% was due primarily to the initial
establishment of that valuation allowance for unused tax credits and the
reversal and adjustment of certain prior temporary differences.
As of December 31, 1997, the Company recorded net deferred income
tax assets of $8,180,610. The major components included the tax effect of
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net operating loss carryforwards of $796,643 and accrued retirement and
postretirement benefit obligations totaling $6,512,584. The realization of
these recorded benefits is dependent upon the generation of future taxable
income.
The net operating loss carryforwards fully expire in 2010 and
2011, if not previously utilized. Management has prepared projections of
taxable income for future years indicating that the cumulative net
operating loss is expected to be fully utilized by early 1999. Management
elected 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. It is
further felt that the 1995 and 1996 operating losses resulted from factors
that are not expected to recur. They were largely attributable to the
Company's transition out of the filter operations and a delay in
recognizing the restructuring required to support the ongoing product
operations. As evidenced by the improved 1997 results, management is
confident that the restructuring will result in continued profitability.
The Company further 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 and 1996, the
Company has been able to deduct these benefits for tax reporting purposes
and reduce its current tax liability accordingly. Amounts currently paid
and deducted have historically approximated the annual expense recognized
for financial reporting purposes. As a result of the retiree medical plan
amendment as discussed in Note 9, current tax deductible payments are
expected to exceed the annual expense recognition for financial reporting
purposes, thus accelerating the absorption of the future periods' tax
benefit.
Management believes it is more likely than not that adequate
levels of future income will be generated to absorb the net operating loss
carryforwards, the deductible amounts related to the retirement and
postretirement benefit obligations and the remaining net deductible
temporary differences. In addition, based upon projected foreign source
income, management believes it is more likely than not that the foreign tax
credits will be utilized prior to their expiration.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements continue to be 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 sale of the filter
operations in 1995 had a significant impact upon the 1995 and 1996 cash
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flow activities. With the full transition out of filter operations, and
the favorable impact to date of the restructuring effort, the Company
expects to generate sufficient future funds from operations and bank
borrowings to fund its growth and operating needs. The short-term
borrowing lines available to the Company as of December 31, 1997 totaled
$4.7 million, of which $1.3 million was unused. During January 1998, the
Company obtained an additional $1.5 million unsecured line of credit with
another bank. An interest rate collar arrangement is currently in place,
effectively limiting the borrowing rate on certain long-term and short-term
funds to a minimum of 6.75% and a maximum of 8.25%.
During 1997, the Company generated net cash of $2,129,643 from
operating activities. The reported net income, depreciation and deferred
income tax components were only partially countered by increased accounts
receivable and a reduction in the postretirement benefit obligation. The
deferred income tax change reflects the absorption of a portion of the loss
carryforwards in the current year while the postretirement benefit factor
reflects, in part, the current impact from the plan modification effective
in April 1997. The investing activities for 1997 essentially reflect
capital equipment purchases of $1,770,302 as the Company continues to
enhance its production capabilities. That total should decline somewhat in
1998 as the Company focuses on certain capacity issues. The financing
activities for 1997 reflect a modest decrease in our reliance upon short-
term borrowings combined with the reduction of long-term debt levels
through normally scheduled quarterly payments.
During 1996, the Company generated net cash of $1,188,280 from
operating activities. The reported net loss and the reductions in accounts
payable and accruals were more than offset by depreciation expense and by
reductions in accounts receivable and inventories. The realized reductions
in accounts payable, accounts receivable and inventories were primarily a
result of the Company's full transition out of filter operations. The
outlay of $1,343,291 for capital expenditures in 1996 reflects, in part,
enhancements to the Hastings, Michigan facility in relation to the
inventory and shipping operations relocation from the Knoxville facility.
The financing activities for 1996 reflected a reduced reliance upon short-
term borrowings throughout most of that year combined with the reduction of
long-term debt levels through scheduled payments.
From a cash flow perspective, 1995 was a year of substantial
change. The Company incurred an operating loss while attempting to
structure its transition out of the filter operations. Proceeds from the
sale, however, were used to acquire capital assets in support of continuing
product operations and to restructure our debt position as evidenced by the
financing activities section. Within the operating activities section,
inventory levels were increased late in the year in response to customer
backorder concerns from earlier in that year.
The structure and operations of the Company have changed
-12-
<PAGE>
considerably over the past three year period. With the filter operations
transition completed and the initial benefits now being reflected from the
restructuring effort, the Company anticipates that operations (which should
be subject to minimal current cash outflows for U.S. income taxes due to
utilization of the net operating loss carryforwards), in combination with
the unused portion of available short-term lines of credit, will generate
adequate cash flows to fund its working capital, capital outlays and
dividend needs through 1998.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 130,
REPORTING COMPREHENSIVE INCOME, issued in June 1997, establishes standards
for the reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS No. 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.
SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION, issued in June 1997 and which supersedes SFAS No. 14,
FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE, establishes
standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial
statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS No. 131 defines operating segments as components of a
company about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance.
SFAS No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER
POSTRETIREMENT BENEFITS, issued in February 1998, revises employers'
disclosures about pension and other postretirement benefit plans. It does
not change the measurement or recognition of those plans. SFAS No. 132
standardizes the disclosure requirements to the extent practicable,
requires additional information on changes in the benefit obligations and
fair values of plan assets that will facilitate financial analysis and
eliminates certain disclosures that are no longer as useful as when they
were first required to be presented.
All three of these new Statements are effective for the Company
in 1998 and require restatement of prior year comparative information.
The implementation of these new Statements will not affect results of
operations and financial position, but may have an impact on future
-13-
<PAGE>
financial statement disclosures. With respect to SFAS No. 131, the
Company does not expect to change its operating segment groupings.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
With the exception of historical matters, the matters discussed
in this commentary include certain predictions and projections that may be
considered forward-looking statements under securities laws, including, but
not limited to, those statements under the captions "Results of Operations"
and "Liquidity and Capital Resources." These statements are subject to a
number of important risks and uncertainties that could cause actual results
to differ materially including, but not limited to, economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices. The Company undertakes no
obligation to update, amend or clarify forward-looking statements, whether
as a result of new information, future events or otherwise.
ITEM 7A. QUANTITIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK.
No information is required to be disclosed under this item.
-14-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Hastings Manufacturing Company and Subsidiaries
<TABLE>
Consolidated Balance Sheets
===========================================================================
<CAPTION>
DECEMBER 31
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 558,172 $ 1,457,783
Accounts receivable, less allowance
for possible losses of $215,000 5,148,906 4,893,200
Refundable income taxes 13,475 66,667
Inventories (Note 4):
Finished products 7,460,534 7,134,216
Work in process 572,307 415,581
Raw materials 1,239,657 1,751,323
Prepaid expenses and other assets 75,669 152,807
Future income tax benefits (Note 10) 2,351,687 2,413,877
Other current assets (Note 2) 958,517 -
----------- -----------
TOTAL CURRENT ASSETS 18,378,924 18,285,454
----------- -----------
PROPERTY AND EQUIPMENT
Land and improvements 658,243 660,168
Buildings 4,633,937 4,312,633
Machinery and equipment 18,180,840 17,035,465
----------- -----------
23,473,020 22,008,266
Less accumulated depreciation 15,156,120 14,071,826
----------- -----------
NET PROPERTY AND EQUIPMENT 8,316,900 7,936,440
----------- -----------
INTANGIBLE PENSION ASSET (Note 8) 815,189 941,583
FUTURE INCOME TAX BENEFITS (Note 10) 5,828,923 6,234,623
-15-
<PAGE>
OTHER ASSETS (Note 2) 50,395 1,056,889
----------- -----------
$33,390,331 $34,454,989
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-16-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
<TABLE>
Consolidated Balance Sheets
===========================================================================
<CAPTION>
DECEMBER 31
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks (Note 5) $ 3,400,000 $ 3,000,000
Accounts payable 1,475,098 1,479,361
Accruals:
Compensation 494,781 446,422
Pension plan contribution (Note 8) 608,786 359,441
Taxes other than income 172,854 283,347
Miscellaneous 217,731 240,737
Current portion of postretirement
benefit obligation (Note 9) 1,110,442 1,641,040
Current maturities of long-term
debt (Note 6) 1,462,500 1,462,500
----------- -----------
TOTAL CURRENT LIABILITIES 8,942,192 8,912,848
LONG-TERM DEBT, less current
maturities (Note 6) 565,625 2,028,125
PENSION AND DEFERRED COMPENSATION
OBLIGATIONS, less current portion
(Note 8) 3,243,618 3,035,576
POSTRETIREMENT BENEFIT OBLIGATION,
less current portion (Note 9) 15,318,770 15,545,992
----------- -----------
TOTAL LIABILITIES 28,070,205 29,522,541
----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 6, 8 and 9)
-17-
<PAGE>
STOCKHOLDERS' EQUITY (Notes 6, 7, 8 and 12)
Preferred stock, $2 par value,
authorized and unissued 500,000 shares - -
Common stock, $2 par value, 1,750,000
shares authorized; 780,626 and
388,138 shares issued and
outstanding 1,561,252 780,276
Additional paid-in capital 145,788 140,206
Retained earnings 5,793,219 5,813,827
Cumulative foreign currency
translation adjustment (750,655) (611,455)
Pension liability adjustment (Note 8) (1,429,478) (1,190,406)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 5,320,126 4,932,448
----------- -----------
$33,390,331 $34,454,989
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-18-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
<TABLE>
Consolidated Statements of Operations
===========================================================================
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $35,574,954 $39,408,610 $63,228,312
COST OF SALES (Note 9) 24,285,197 29,299,141 49,965,825
----------- ----------- -----------
Gross profit 11,289,757 10,109,469 13,262,487
----------- ----------- -----------
OPERATING EXPENSES
Advertising 372,981 349,660 1,295,321
Selling 3,120,215 3,593,143 6,101,583
General and administrative
(Note 9) 5,693,175 6,320,095 8,631,503
Non-recurring restructuring
and relocation costs
(Notes 2 and 3) - 819,900 -
----------- ----------- -----------
9,186,371 11,082,798 16,028,407
----------- ----------- -----------
Operating income (loss) 2,103,386 (973,329) (2,765,920)
----------- ----------- -----------
OTHER EXPENSES (INCOME)
Interest expense 510,322 570,397 892,891
Interest income (47,062) (145,853) (121,091)
Loss on sale of filter
operations (Note 2) - - 67,254
Other, net 62,893 (160,030) 138,206
----------- ----------- -----------
526,153 264,514 977,260
----------- ----------- -----------
Income (loss) before income tax
expense (benefit) 1,577,233 (1,237,843) (3,743,180)
-19-
<PAGE>
INCOME TAX EXPENSE (BENEFIT)
(Note 10) 622,000 (353,000) (720,000)
----------- ----------- -----------
NET INCOME (LOSS) $ 955,233 $ (884,843) $(3,023,180)
=========== =========== ===========
BASIC AND DILUTED NET INCOME (LOSS) PER
SHARE OF COMMON STOCK (Note 12) $ 1.24 $ (1.15) $ (3.93)
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-20-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
<TABLE>
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, 1995 777,336 $147,384 $10,033,512 $(716,307) $(1,941,774)
Net loss - - (3,023,180) - -
Shares issued under restricted
stock plan, net of shares
forfeited 290 (28,066) - - -
Cash dividends
($.20 per share) - - (155,467) - -
Foreign currency translation
adjustment - - - 115,906 -
Pension liability adjustment
(Note 8) - - - - 15,344
--------- -------- ----------- --------- -----------
BALANCE, December 31, 1995 777,626 119,318 6,854,865 (600,401) (1,926,430)
Net loss - - (884,843) - -
Shares issued under restricted
stock plan, net of shares
forfeited 2,650 20,888 - - -
Cash dividends
($.20 per share) - - (156,195) - -
Foreign currency translation
adjustment - - - (11,054) -
Pension liability adjustment
(Note 8) - - - - 736,024
--------- -------- ----------- --------- -----------
-21-
<PAGE>
BALANCE, December 31, 1996 780,276 140,206 5,813,827 (611,455) (1,190,406)
Net income - - 955,233 - -
Shares issued under restricted
stock plan, net of shares
forfeited 350 5,582 - - -
Cash dividends
($.25 per share) - - (195,215) - -
Foreign currency translation
adjustment - - - (139,200) -
Pension liability adjustment
(Note 8) - - - - (239,072)
Two-for-one stock split
(Note 12) 780,626 - (780,626) - -
--------- -------- ----------- --------- -----------
BALANCE, December 31, 1997 1,561,252 $145,788 $ 5,793,219 $(750,655) $(1,429,478)
========= ======== =========== ========= ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-22-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
<TABLE>
Consolidated Statements of Cash Flows
===========================================================================
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
----------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 955,233 $ (884,843) $ (3,023,180)
Adjustments to reconcile net
income (loss) to net cash
from (for) operating activities:
Depreciation 1,337,100 1,255,252 1,635,753
Loss on sale of filter
operations (Note 2) - - 67,254
Gain on sale of property
and equipment - - (900)
Deferred income taxes (benefit) 591,000 (370,000) (680,000)
Change in postretirement
benefit obligation (757,820) 70,058 151,364
Changes in operating assets and
liabilities, net of effects
from 1995 sale of filter
operations:
Accounts receivable (291,894) 1,764,615 4,673,975
Refundable income taxes 51,933 159,290 99,222
Inventories (37,063) 709,006 (2,498,226)
Prepaid expenses and other
current assets 31,656 (21,651) (55,291)
Other assets 93,315 (97,240) (96,636)
Accounts payable and
accruals 156,183 (1,396,207) (1,941,240)
----------- ----------- ------------
Net cash from (for)
operating activities 2,129,643 1,188,280 (1,667,905)
----------- ----------- ------------
-23-
<PAGE>
INVESTING ACTIVITIES
Capital expenditures (1,770,302) (1,343,291) (2,053,626)
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 1,299 - 900
----------- ----------- ------------
Net cash from (for)
investing activities (1,769,003) (1,343,291) 10,368,420
----------- ----------- ------------
</TABLE>
-24-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
<TABLE>
Consolidated Statements of Cash Flows
===========================================================================
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
----------- ----------- ------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance
of notes payable
to banks $ 7,850,000 $ 9,900,000 $ 23,893,920
Principal payments on
notes payable to banks (7,450,000) (8,400,000) (28,066,710)
Principal payments on
long-term debt (1,462,500) (1,560,500) (2,951,575)
Dividends paid (195,215) (156,195) (155,467)
----------- ----------- ------------
Net cash for financing
activities (1,257,715) (216,695) (7,279,832)
----------- ----------- ------------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (2,536) (80,017) 3,789
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH (899,611) (451,723) 1,424,472
CASH, beginning of year 1,457,783 1,909,506 485,034
----------- ----------- ------------
CASH, end of year $ 558,172 $ 1,457,783 $ 1,909,506
=========== =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes, net of
refunds $ (40,793) $ (172,890) $ (129,686)
Interest 524,814 578,061 943,205
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-25-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Hastings Manufacturing Company and subsidiaries (Company) is primarily a
manufacturer of automotive and light duty truck 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. In conjunction with the sale, the Company relocated its piston
ring packaging operations from its Knoxville, Tennessee facility to its
Hastings, Michigan facility in 1996.
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
have historically been distributed primarily through one U.S. customer.
Beginning in early 1997, the Company began distributing the majority of its
export volume on a direct country basis. 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 FINANCIAL STATEMENTS
The preparation of 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
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
-26-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
REVENUE RECOGNITION
The Company recognizes revenue when its products are shipped to its
customers.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments, comprised of cash,
short-term receivables and payables, notes payable to banks (variable
interest rate) and long-term debt (variable interest rate) approximates
their carrying values. The fair value of the Company's interest rate
collar agreement, as disclosed in Note 6, is not material.
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 U.S. raw
material 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 8.
-27-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
The Company provides certain healthcare and life insurance benefits for
eligible retired employees. 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.
STOCK OPTIONS
The Company applies the provisions of Accounting Principles Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25), and related
interpretations in accounting for its stock option plan. Under APB 25,
because the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
ADVERTISING COSTS
All advertising costs are expensed in the period in which they are
incurred.
INCOME TAXES
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 10, the Company has recorded deferred tax assets
reflecting the benefit of net operating loss carryforwards expiring in 2010
and 2011, foreign tax credit carryforwards expiring through 2002, 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 carryforwards 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 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
-28-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
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 $3,757,000 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.
NET INCOME (LOSS) PER SHARE
In February 1997, Statement of Financial Accounting Standards (SFAS) No.
128, EARNINGS PER SHARE, was issued. SFAS No. 128 replaced the calculation
of "primary" and "fully diluted" earnings per share (EPS) with "basic" and
"diluted" EPS. Unlike primary EPS, basic EPS excludes any dilutive effects
of options, warrants and convertible securities. It also excludes the
dilutive effect of contingently issuable shares (such as the Company's
outstanding restricted stock plan shares described in Note 7). Basic EPS is
computed by dividing net income (loss) by the weighted average number of shares
outstanding during each year (excluding the restricted shares).
Diluted EPS is computed in a manner very similar to fully diluted EPS. Basic
and diluted EPS are retroactively adjusted for stock dividends and stock
splits. The weighted average number of shares outstanding for 1997 was
768,516 and 768,680 for basic and diluted EPS calculations, respectively,
with the 164 share difference related to the dilutive effect of the
Company's restricted shares. The weighted average number of shares
outstanding was 768,516 for both 1996 and 1995 for purposes of both basic
and diluted EPS calculations, due to the anti-dilutive effect of the
restricted shares for both years. The Company has not included the effects
of its December 1997 stock option grant in its calculation of diluted EPS
due to its anti-dilutive effect. All outstanding shares have been adjusted
for the two-for-one stock split discussed in Note 12. Basic and diluted
EPS are equal for all periods presented.
INTEREST RATE AGREEMENTS
The Company enters into interest rate swap and collar agreements to reduce
the impact of changes in interest rates on its floating rate borrowings.
Interest rate swap agreements are contracts to exchange floating rate for
fixed rate interest payments over the life of the agreements without the
exchange of the underlying notional amounts. Interest rate collar
-29-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
agreements limit the Company's interest rates on floating rate borrowings
to a range within a minimum (floor) and a maximum (cap) interest rate. The
notional amounts of interest rate agreements are used to measure interest
to be paid or received and do not represent the amount of exposure to
credit loss. The differential paid or received on interest rate agreements
is recognized as an adjustment to interest expense. The initial cost of
interest rate collar agreements is recorded in "Other assets" in the
consolidated balance sheet and is amortized over the life of the agreement.
The counterparty to the Company's interest rate agreements is a commercial
bank with which the Company has other financial relationships. While the
Company is exposed to credit loss in the event of nonperformance by the
counterparty, the Company does not anticipate nonperformance by the other
party, and no material loss would be expected from such non-performance.
The Company does not enter into interest rate agreements, or other
derivative financial instruments, for trading purposes.
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.
At December 31, 1997, "Other current assets" consisted of $958,517 held in
escrow until September 1998 to secure certain indemnification obligations
-30-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
of the Company relating to the sale. The escrow balance amounted to
$913,200 at December 31, 1996, and was included in noncurrent "other
assets." Of the total $720,400 employee severance benefits accrued and
expensed in September 1995 relating to the sale, $430,053 was paid through
December 31, 1997, with the $290,347 balance to be paid in monthly payments
through 2005. No other filter-related assets or liabilities remained at
December 31, 1997 and 1996.
The Company and CLARCOR also entered into a Transition Agreement, dated
September 3, 1995. The Transition Agreement provided 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, could be moved and set up at CLARCOR's plant
facilities. It also provided for the reimbursement of certain
administrative costs directly related to the manufacture and supply of
filters and filter components to CLARCOR. The transition period was
completed during the third quarter of 1996. Expense reimbursement included
in net sales, amounted to $736,000 and $1,153,000 in 1996 and 1995,
respectively.
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.
The Transition Agreement also included certain provisions for the continued
distribution (not manufacture) of filter products through the Company's
Canadian subsidiary, at the discretion of CLARCOR. In early November 1996,
the Company received notification from CLARCOR that this arrangement would
terminate on December 31, 1996. Related distribution revenue, included in
net sales, amounted to $1,123,000 and $421,700 in 1996 and 1995,
respectively.
Total 1996 and 1995 sales and estimated operating profit (loss) amounts for
filter operations were approximately as follows:
-31-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995
---------- -----------
<S> <C> <C> <C>
Sales $5,992,800 $28,262,500
========== ===========
Estimated operating
profit (loss) $ 525,000 $(2,786,000)
========== ===========
</TABLE>
A significant portion of the Company's filter manufacturing and
distribution operations had 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 profit (loss) amounts
reflect those operating expenses which the Company estimated would not
recur as a result of the sale. The 1996 estimated operating profit of
$525,000 includes $625,000 of reduced filter cost of sales resulting from
liquidation of LIFO inventories caused by the elimination of all remaining
filter inventory.
In 1996, during the course of the transition period, the Company relocated
its piston ring packaging operations from Knoxville, Tennessee to Hastings,
Michigan. The relocation and associated training costs are non-recurring
in nature. While these costs were directly related to the 1995 sale and
the subsequent restructuring of the Company's remaining operations, they
were expensed as incurred during 1996 as required by generally accepted
accounting standards. These costs, all of which were incurred during the
first and second quarters of 1996, totaled approximately $468,400 and are
included in "Non-recurring restructuring and relocation costs" in the
accompanying 1996 consolidated statements of operations.
NOTE 3 - RESTRUCTURING COSTS
In December 1996, management and the Board of Directors approved a
restructuring plan designed to significantly reduce operating costs and
provide for a more streamlined and efficient operating structure
concentrating on piston ring manufacturing. Operating results for 1996,
exclusive of non-recurring restructuring and relocation costs discussed
-32-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
here and in Note 2, were adversely affected by two major factors. First,
fulfilling the Company's production and administrative responsibilities
under the filter Transition Agreement, discussed in Note 2, proved more
costly than anticipated. Second, with the assistance of an outside
corporate consulting firm, management determined that staffing remained at
too high of a level throughout the remainder of 1996 based on actual and
anticipated revenues. These factors, in addition to the CLARCOR
notification discussed in Note 2, precipitated the restructuring plan.
In addition to reducing staffing levels at both the U.S. and Canadian
manufacturing facilities, the restructuring plan called for the termination
of most Canadian piston ring manufacturing effective April 30, 1997. The
Canadian subsidiary continues to distribute piston rings throughout Canada,
being sourced entirely by U.S. operations. This facility also continues to
manufacture certain piston ring parts and provide packaging operations for
tools and piston ring sets. No future impairment loss is anticipated
relating to the current Canadian facilities should management determine
that another, smaller facility is more cost beneficial in carrying out
these functions.
Total restructuring costs, all recognized in the fourth quarter of 1996,
amounted to $351,500 and are included in "Non-recurring restructuring and
relocation costs" in the accompanying 1996 consolidated statement of
operations. Of the total, $247,000 and $104,500 related to employee
severance benefits and consulting fees, respectively, and were paid during
1996 and 1997.
NOTE 4 - INVENTORIES
Inventories valued using the LIFO method were $2,272,000 and $2,744,000 at
December 31, 1997 and 1996, respectively.
If the FIFO method of inventory valuation had been used by the Company,
inventories would have been $1,387,000 and $1,380,000 higher than reported
at December 31, 1997 and 1996, respectively.
Reduction of inventory quantities in 1997, 1996 and 1995 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 $35,000,
$447,300 and $829,200 ($.05, $.58, and $1.08 per share, on a diluted basis,
as adjusted for the stock split discussed in Note 12) for 1997, 1996 and
-33-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
1995, respectively. Of the $829,200 amount for 1995, $689,200 resulted
from the filter operations sale discussed in Note 2 and was included in
determining the loss on sale. Of the $447,300 amount for 1996, $412,500
resulted from the elimination of all remaining filter inventory during
1996.
Fourth quarter 1996 gross profit was reduced by approximately $310,000
related to changes in estimates pertaining to the valuation of inventories.
These year-end adjustments relate to the level of absorbed labor in ending
inventories, overhead cost adjustments resulting from the fourth quarter
being the first period without filter operations, and other year-end
adjustments relating to normal obsolescence and quantity adjustments which
were not significant relative to annual cost of sales.
NOTE 5 - SHORT-TERM BORROWINGS
The Company maintains unsecured lines of credit with various banks
aggregating $4,700,000 and $5,000,000 at December 31, 1997 and 1996,
respectively, with interest at negotiated rates based upon prime or LIBOR.
Available borrowings under the lines of credit amounted to $1,300,000 and
$2,000,000 at December 31, 1997 and 1996, respectively. During January
1998, the Company obtained an additional $1,500,000 unsecured line of
credit with another bank. The weighted average interest rate on short-term
borrowings outstanding at December 31, 1997 and 1996, was 8.0% and 8.25%,
respectively.
-34-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---------- ----------
<S> <C> <C> <C>
(a) Term loan, unsecured $1,200,000 $2,000,000
(b) Term loan, unsecured 828,125 1,490,625
---------- ----------
2,028,125 3,490,625
Less current maturities 1,462,500 1,462,500
---------- ----------
Long-term debt,
less current maturities $ 565,625 $2,028,125
========== ==========
</TABLE>
(a) The loan calls for quarterly payments of $200,000 plus
interest based on LIBOR (effectively 7.625% at December 31,
1997) through May 1999.
(b) The loan calls for quarterly payments of $165,625 plus
interest based on LIBOR (effectively 7.56% at December 31,
1997) through January 1999.
The noncurrent portion of long-term debt at December 31, 1997 matures in
1999.
The term loan agreements referred to above require the Company to maintain
certain financial balances and ratios and limit the amount of cash
dividends. As of December 31, 1997, the Company was in compliance with
respect to all financial covenants. Unrestricted retained earnings under
the agreements amounted to $2,183,785 at December 31, 1997.
In March 1996, the Company terminated its interest rate swap agreement
related to its floating rate borrowings, receiving $204,500 from the bank
-35-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
as a result of favorable interest rates. This amount is included in
"Other, net" in the accompanying 1996 consolidated statement of operations.
At the same time, in order to continue to limit its interest rate exposure,
the Company entered into an interest rate collar agreement with a current
notional amount of $3 million. This agreement provides for a cap rate on
floating rate borrowings of 8.25% and a related floor of 6.75%.
NOTE 7 - 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
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.
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.
The Company's 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. Under terms specified in the Plan, the Company
has the right to redeem the Rights at one cent per Right.
STOCK OPTION PLAN
The Company's Stock Option And Restricted Stock Plan of 1997 permits the
grant of options to directors, officers and key employees to purchase
shares of common stock. A total of 38,000 shares (all share and option
-36-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
amounts adjusted for the two-for-one stock split discussed in Note 12) are
available for grant under the plan. During December 1997, 12,850 options
were granted at $20.125 per share (equivalent to $40.25 per share on a pre-
split basis), which represented the fair value of the common stock on the
grant date. The options may be exercised for up to ten years after the
date of the grant. Of the 12,850 options outstanding at December 1997,
none were exercisable. The plan and December 1997 grant are subject
to shareholder approval at the Company's May 5, 1998 shareholders' meeting.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, relating to its stock option plan.
Accordingly, no compensation cost has been recognized. Had compensation
cost been determined based on the fair value of the options at the December
1997 grant date consistent with the provisions of SFAS No. 123, the
Company's 1997 net income would have been reduced by approximately $83,700,
or $.11 per share on a diluted basis. The fair value of options was
estimated at the grant date using a Black-Scholes option pricing model with
the following weighted average assumptions: risk-free interest rate of
5.71%, dividend yield of 4%, stock price volatility factor of .34 and an
expected option life of five years.
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 1997, 1996 and 1995, the Company awarded 5,000, 5,600 and
3,200 shares, respectively, of its common stock valued at $68,438, $71,400
and $35,600, 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 $62,506 (4,650 shares), $47,862 (2,950 shares)
and $63,376 (2,910 shares) were forfeited during 1997, 1996 and 1995,
respectively. Share amounts have been adjusted for the stock split discussed in
Note 12.
-37-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
NOTE 8 - PENSION AND 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>
YEAR ENDED DECEMBER 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C> <C>
Service cost for benefits
earned during the year $ 14,073 $ 23,316 $ 23,321
Interest cost on projected
benefit obligation 1,187,023 1,177,904 1,220,336
Actual return on plan assets (1,815,742) (1,134,411) (1,335,309)
Net amortization and deferral 1,186,817 569,634 649,936
----------- ----------- -----------
Pension expense $ 572,171 $ 636,443 $ 558,284
=========== =========== ===========
Discount rate 7.00% 7.50% 7.25%
Expected rate of return on
assets 8.00% 8.00% 8.00%
Range of expected rates of
increase in compensation
levels, subject to maximum
amounts per participant 0-5.50% 0-5.50% 0-5.50%
=========== =========== ===========
</TABLE>
The funded status of the defined benefit pension plans and amounts included
in the consolidated balance sheets are as follows:
-38-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C> <C>
Actuarial present value of
accumulated benefit obligation:
Vested benefit obligation $(15,979,843) $(15,178,212)
Nonvested benefit obligation (1,017,171) (1,170,248)
------------ ------------
Accumulated benefit obligation $(16,997,014) $(16,348,460)
============ ============
Projected benefit obligation $(16,999,923) $(16,361,101)
Plan assets, at fair value 13,407,163 12,729,054
------------ ------------
Projected benefit obligation
in excess of plan assets (3,592,760) (3,632,047)
Unrecognized net transition
obligation 815,189 1,018,986
Unrecognized net loss 2,168,785 2,253,620
------------ ------------
Accrued pension cost $ (608,786) $ (359,441)
============ ============
</TABLE>
The excess of the accumulated benefit obligation over plan assets is
reflected in the consolidated balance sheets. This amount, less the
accrued pension plan contribution recorded in current liabilities, is
reflected in the accompanying consolidated balance sheets as an additional
noncurrent pension liability, a noncurrent intangible asset, a noncurrent
future income tax benefit, and a charge to stockholders' equity (net of
tax), representing the excess of the additional noncurrent pension
liability over the unrecognized net transition liability.
The Company's foreign subsidiary maintains a defined contribution
retirement savings plan. Due to overfunding of the plan, there were no
contributions in 1997, 1996 and 1995.
-39-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial 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 $569,000, $656,000 and $857,000 for 1997, 1996 and
1995, 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, 1997 and 1996, respectively, the deferred
compensation liability amounted to $290,347 and $315,998, of which $27,780
and $25,651 was due within one year.
NOTE 9 - 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.
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
--------- ---------- ----------
<S> <C> <C> <C> <C>
Service cost for benefits
earned during the year $ 93,153 $ 216,106 $ 209,214
Interest cost on projected
benefit obligation 851,571 1,350,383 1,440,280
Net amortization and
deferral (377,672) 49,072 -
--------- ---------- ----------
Net periodic postretirement
benefit cost $ 567,052 $1,615,561 $1,649,494
========= ========== ==========
</TABLE>
-40-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
The following table sets forth the accrued postretirement benefit cost:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 5,610,778 $ 9,997,231
Fully eligible participants 2,140,644 3,412,908
Other active participants 2,072,875 5,391,624
----------- -----------
Unfunded accumulated postretirement
benefit obligation 9,824,297 18,801,763
Unrecognized prior service benefit
relating to 1997 plan amendment 6,968,577 -
Unrecognized net loss (363,662) (1,614,731)
----------- -----------
Accrued postretirement benefit cost 16,429,212 17,187,032
Less current portion 1,110,442 1,641,040
----------- -----------
Long-term portion $15,318,770 $15,545,992
=========== ===========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0% and 7.50% at December 31, 1997
and 1996, respectively.
In early April 1997, the Company announced the amendment of its
postretirement benefit plans, principally to adjust the cost-sharing
provisions. The amendment resulted in a reduction of the Company's
accumulated postretirement benefit obligation by $7,346,249, which created
an unrecognized prior service benefit. Net periodic postretirement benefit
cost for 1997, including amortization of the unrecognized prior service
benefit over a period of 15 years, was reduced by approximately $1,050,000
(approximately $870,000 related to "Cost of Sales" and $180,000 related to
"General and Administrative" expenses) as a result of the plan amendment. In
-41-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
early 1998, the Company received a letter from legal representatives of
its bargaining unit retirees requested a meeting with Company management
and legal counsel to discuss the Company's legal obligations to provide the
postretirement benefits at the pre-amendment level. While it is reasonably
possible that a change in estimated future postretirement benefits could
occur, management strongly believes, after meeting with its legal counsel,
that it was within the Company's right to amend the postretirement benefit
plans.
Because the Company's contributions to the plans are fixed on a per active
and retired employee basis, assumed inflationary increases in health care
costs would have no impact on the accumulated postretirement benefit
obligation at December 31, 1997 or on the future annual aggregate service
and interest costs.
NOTE 10 - INCOME TAXES
The components of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C> <C>
Domestic $1,648,915 $(1,087,158) $(3,352,216)
Foreign (71,682) (150,685) (390,964)
---------- ----------- -----------
$1,577,233 $(1,237,843) $(3,743,180)
========== =========== ===========
</TABLE>
Income tax expense (benefit) is made up of the following components:
-42-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
<TABLE>
<CAPTION>
Year ended December 31, 1997
DEFERRED-
VALUATION
ALLOWANCE
CURRENT DEFERRED CHANGE TOTAL
-------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Domestic $ 39,000 $ 602,000 $ - $ 641,000
Foreign (8,000) (11,000) - (19,000)
-------- --------- --------- ---------
$ 31,000 $ 591,000 $ - $ 622,000
======== ========= ========= =========
Year ended December 31, 1996
Domestic $ 54,000 $(399,000) $ 40,000 $(305,000)
Foreign (37,000) (11,000) - (48,000)
-------- --------- --------- ---------
$ 17,000 $(410,000) $ 40,000 $(353,000)
======== ========= ========= =========
Year ended December 31, 1995
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>
-43-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
The tax effects of temporary differences that give rise to the net future
income tax benefit are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---------- ----------
<S> <C> <C> <C>
Deferred income tax assets:
Retirement and postretirement
benefit obligations $6,512,584 $6,456,831
Current asset valuation
allowances 736,138 793,936
Net operating loss carryforwards 796,643 1,308,206
Foreign tax credit carryforwards 304,659 283,723
Deferred compensation 98,718 107,439
Other 273,295 472,369
---------- ----------
Gross deferred income tax assets 8,722,037 9,422,504
Valuation allowance - foreign tax
credits (noncurrent) - (243,723)
---------- ----------
Total deferred income tax assets 8,722,037 9,178,781
---------- ----------
Deferred income tax liabilities:
Accumulated depreciation (374,306) (335,344)
Other (167,121) (194,937)
---------- ----------
Total deferred income tax liabilities (541,427) (530,281)
---------- ----------
Net deferred income tax assets 8,180,610 8,648,500
Less current portion 2,351,687 2,413,877
---------- ----------
Noncurrent portion $5,828,923 $6,234,623
========== ==========
</TABLE>
-44-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
The Company's net operating loss carryforwards for federal income tax
purposes amounted to $2,343,068 at December 31, 1997, of which $2,242,883
expires in 2010 and $100,185 in 2011, if not previously utilized. Foreign
tax credits, amounting to $304,659 at December 31, 1997, expire through
2002, if not previously utilized.
Income taxes differed from the amount computed by applying the federal
statutory rate of 34% to income before income tax expense (benefit) as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
-------- --------- -----------
<S> <C> <C> <C> <C>
Computed "expected" tax
(benefit) $536,000 $(421,000) $(1,273,000)
Increase (decrease) in
tax resulting from:
Valuation allowance change
due to foreign tax credits - 40,000 205,000
Adjustment of prior
temporary differences - - 209,000
State income taxes, net of
federal income tax
benefit 44,000 36,000 -
Other 42,000 (8,000) 139,000
-------- --------- -----------
$622,000 $(353,000) $ (720,000)
======== ========= ===========
</TABLE>
-45-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
NOTE 11 - GEOGRAPHIC SEGMENTS AND EXPORT SALES
Sales, operating profit (loss) and identifiable assets by geographic area
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES
United States $32,347,845 $35,726,283 $59,436,864
Canada 4,552,463 5,004,885 5,820,802
Eliminations (1,325,354) (1,322,558) (2,029,354)
----------- ----------- -----------
Total net sales $35,574,954 $39,408,610 $63,228,312
=========== =========== ===========
OPERATING PROFIT (LOSS)
United States $ 2,040,166 $ (969,940) $(2,528,334)
Canada (71,682) (148,926) (390,347)
Eliminations 134,902 145,537 152,761
----------- ----------- -----------
Operating profit (loss) 2,103,386 (973,329) (2,765,920)
Interest expense 510,322 570,397 892,891
Interest income (47,062) (145,853) (121,091)
Loss on sales of filter operations - - 67,254
Other, net 62,893 (160,030) 138,206
----------- ----------- -----------
Income (loss) before income tax
expense (benefit) $ 1,577,233 $(1,237,843) $(3,743,180)
=========== =========== ===========
-46-
<PAGE>
IDENTIFIABLE ASSETS
United States $30,108,712 $30,919,370 $34,140,981
Canada 3,461,456 3,736,021 4,323,670
Eliminations (129,449) (150,014) (215,789)
Investment in Canadian
affiliate (50,388) (50,388) (701,294)
----------- ----------- -----------
Total identifiable assets $33,390,331 $34,454,989 $37,547,568
=========== =========== ===========
</TABLE>
-47-
<PAGE>
Hastings Manufacturing Company and Subsidiaries
Notes to Consolidated Financial Statements
===========================================================================
Non-recurring restructuring and relocation costs, discussed in Notes 2 and
3, included in 1996 United States and Canadian operating losses amounted to
$692,234 and $127,666, respectively.
As discussed in Note 2, United States and Canadian operating losses for
1995 included the effects of the sale of filter operations and the
subsequent realignment of the organizational structure to a smaller size.
Net export sales from the Company's United States operations to
unaffiliated customers, amounted to $4,430,445, $5,421,519 and $8,412,779
in 1997, 1996 and 1995, respectively.
NOTE 12 - STOCK SPLIT
On February 17, 1998, the Board of Directors authorized a two-for-one stock
split, effected in the form of a stock dividend, effective March 23, 1998,
payable to shareholders of record on March 2, 1998. On a split basis, the
Company had 780,626 shares outstanding at December 31, 1997. An amount
equal to the par value of the common shares issued will be transferred from
retained earnings to common stock to effect the stock split. This transfer
has been reflected in the consolidated statements of stockholders' equity
at December 31, 1997. All references to number of common shares, except
shares authorized, and to all per share information have been adjusted to
reflect the stock split on a retroactive basis.
-48-
<PAGE>
Report of Independent Certified Public Accountants
Hastings Manufacturing Company
Hastings, Michigan
We have audited the accompanying consolidated balance sheets of Hastings
Manufacturing Company and subsidiaries as of December 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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, 1997 and
1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
February 27, 1998
-49-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No information is required to be disclosed under this item.
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 5, 1998.
In addition, Stephen G. Uhen, age 49, has served as Vice President of
Information Services of the Company since December 15, 1997. From November 16,
1995 through 1997, Mr. Uhen served as Information Services Manager of the
Company. From 1988 through 1995, Mr. Uhen served as Systems Programs Manager 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" in the Registrant's
definitive proxy statement relating to its Annual Meeting of Shareholders
to be held May 5, 1998.
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" in the Registrant's
definitive proxy statement relating to its Annual Meeting of Shareholders
to be held May 5, 1998.
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"
in the Registrant's definitive proxy statement relating to its Annual
Meeting of Shareholders to be held May 5, 1998.
-50-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
ITEM 14(A)1. FINANCIAL STATEMENTS.
(A) The following financial statements are filed as part of this
document in Item 8, "Financial Statements and Supplementary Data."
PAGE
Consolidated Balance Sheets as of December 31, 1997 and 1996. 13
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995. 15
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995. 16
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995. 17
Notes to Consolidated Financial Statements 19
Report of Independent Certified Public Accountants 37
(B) Financial Statement Schedule
Report of Independent Certified Public Accountants 47
Schedule II - Valuation and Qualifying Accounts 48
ITEM 14(A)2. FINANCIAL STATEMENT SCHEDULES.
The Financial Statement Schedule set forth in the Index to
Financial Statement Schedules hereto is 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 filed 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 on 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.
-51-
<PAGE>
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) 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(d) 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(e) 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, filed as an exhibit to the
Form 10-K Annual Report for the year-ended December 31,
1995, is incorporated herein by reference.
4(f) 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, filed as an exhibit
to the Form 10-K Annual Report for the year-ended
December 31, 1995, is incorporated herein by reference.
4(g) Third Amendment, dated as of May 31, 1996, to the 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, 1996, is incorporated herein by reference.
4(h) Fourth Amendment, dated as of May 31, 1997, to the NBD
Bank, N.A., $4,000,000 Credit Authorization and Master
Promissory Note, dated May 31, 1994, filed as an exhibit
to the Form 10-Q Quarterly Report for the period ended
June 30, 1997, is incorporated herein by refernece.
4(i) 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.
-52-
<PAGE>
4(j) Confirmation, dated as of March 12, 1996, regarding an
interest rate collar transaction between Hastings
Manufacturing Company and NBD Bank, filed as an exhibit
to the Form 10-K Annual Report for the year-ended
December 31, 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.<F1>
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.
10(d) Transition Agreement, dated September 3, 1995, among
Hastings Filters, Inc., Hastings Manufacturing Company
and Hastings Inc. and joined in by CLARCOR Inc., filed as
an exhibit to the Form 10-Q Quarterly Report for the
period ended September 30, 1997, is incorporated herein
by reference.
21 Subsidiaries of Hastings Manufacturing Company.
24 Powers of Attorney
27(a) Financial Data Schedule as of December 31, 1997 and for
the year then ended.
27(b) Restated Financial Data Schedule as of September 30, 1997
and for the nine months then ended.
27(c) Restated Financial Data Schedule as of June 30, 1997 and
for the six months then ended.
27(d) Restated Financial Data Schedule as of March 31, 1997 and
for the three months then ended.
27(e) Restated Financial Data Schedule as of December 31, 1996
and for the year then ended.
27(f) Restated Financial Data Schedule as of September 30, 1996
and for the nine months then ended.
-53-
<PAGE>
27(g) Restated Financial Data Schedule as of June 30, 1996 and
for the six months then ended.
27(h) Restated Financial Data Schedule as of March 31, 1996 and
for the three months then ended.
27(i) Restated Financial Data Schedule as of December 31, 1995
and for the year then ended.
[FN]
- ----------------------
<F1> Management contract or compensatory plan or arrangement.
</FN>
Exhibits 27(b) through 27(i) represent previously filed Financial
Data Schedules restated to reflect the effects of Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE, and to reflect the two-for-one
stock split discussed in Note 12 to the Consolidated Financial
Statements (included in Item 8). All amounts, except for the "Earnings per
share" amounts, are the same as previously filed.
ITEM 14(B). REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the fourth quarter of
1997.
-54-
<PAGE>
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 27, 1998 By /S/ THOMAS J. BELLGRAPH
Thomas J. Bellgraph
Its Vice President, Finance
(Principal Financial and
Accounting Officer)
-55-
<PAGE>
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 27, 1998
Andrew F. Johnson Officer, President/
Operations and
Director
*/s/ MARK R. S. JOHNSON Co-Chief Executive March 27, 1998
Mark R. S. Johnson Officer, President/
Marketing and
Director
*/s/ DALE W. KOOP Vice President/ March 27, 1998
Dale W. Koop Engineering and
Director
*/s/ MONTY C. BENNETT Vice President/ March 27, 1998
Monty C. Bennett Employee Relations,
Secretary and Director
*/s/ DOUGLAS A. DECAMP President and Chief March 27, 1998
Douglas A. DeCamp Executive Officer
FHI, Inc., Hastings,
MI and Director
*/s/ WILLIAM R. COOK President, Pidgas, March 27, 1998
William R. Cook Inc., Hastings, MI
and Director
*/s/ NEIL A. GARDNER Executive Vice March 27, 1998
Neil A. Gardner President, Hastings
City Bank, Hastings,
MI and Director
*/s/ RICHARD L. FOSTER Director March 27, 1998
Richard L. Foster
*By /s/ THOMAS J. BELLGRAPH
Thomas J. Bellgraph
Attorney In Fact
-56-
<PAGE>
HASTINGS MANUFACTURING COMPANY
AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULES
FORM 10-K ITEM 14(a)2
YEAR ENDED DECEMBER 31, 1997
-57-
<PAGE>
HASTINGS MANUFACTURING COMPANY
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES
PAGE
Report of Independent Certified Public Accountants
on Financial Statement Schedule 47
Schedule:
II - Valuation and Qualifying Accounts 48
Other schedules have been omitted because they were inapplicable or
otherwise not required.
-58-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Hastings Manufacturing Company
Hastings, Michigan
The audits referred to in our report dated February 27, 1998 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
February 27, 1998
-59-
<PAGE>
<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,
1997:
Allowance for possible
losses on receivables 215,000 36,000 -- 36,000 215,000
======= ======= ======= ======= =======
Year Ended December 31,
1996:
Allowance for possible
losses on receivables 225,000 5,300 -- 15,300 215,000
======= ======= ======= ======= =======
Year Ended December 31,
1995:
Allowance for possible
losses and receivables 415,000 316,000 -- 506,000 225,000
======= ======= ======= ======= =======
</TABLE>
-60-
<PAGE>
EXHIBIT INDEX
NUMBER
3(a) Amended Articles of Incorporation of Hastings
Manufacturing Company filed as an exhibit to the Form
8-K Current Report filed 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 on
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) 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(d) 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(e) 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, filed as an
exhibit to the Form 10-K Annual Report for the year-
ended December 31, 1995, is incorporated herein by
reference.
4(f) 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, filed as an
exhibit to the Form 10-K Annual Report for the year-
ended December 31, 1995, is incorporated herein by
reference.
-61-
<PAGE>
4(g) Third Amendment, dated as of May 31, 1996, to the 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, 1996, is incorporated herein by
reference.
4(h) Fourth Amendment, dated as of May 31, 1997, to the NBD
Bank, N.A., $4,000,000 Credit Authorization and
Master Promissory Note, dated May 31, 1994, filed
as an exhibit to the Form 10-Q Quarterly Report
for the period ended June 30, 1997, is incorporated
herein by reference.
4(i) 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.
4(j) Confirmation, dated as of March 12, 1996, regarding an
interest rate collar transaction between Hastings
Manufacturing Company and NBD Bank, filed as an exhibit
to the Form 10-K Annual Report for the year-ended
December 31, 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, is 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.
10(d) Transition Agreement, dated September 3, 1995, among
Hastings Filters, Inc., Hastings Manufacturing Company and
Hastings Inc. and joined in by CLARCOR Inc., filed as an
exhibit to the Form 10-Q Quarterly Report for the period
ended September 30, 1997, is incorporated herein by
reference.
21 Subsidiaries of Hastings Manufacturing Company.
-62-
<PAGE>
24 Powers of Attorney
27(a) Financial Data Schedule as of December 31, 1997 and for the year
then ended.
27(b) Restated Financial Data Schedule as of September 30, 1997 and for
the nine months then ended.
27(c) Restated Financial Data Schedule as of June 30, 1997 and for the
six months then ended.
27(d) Restated Financial Data Schedule as of March 31, 1997 and for the
three months then ended.
27(e) Restated Financial Data Schedule as of December 31, 1996 and for
the year then ended.
27(f) Restated Financial Data Schedule as of September 30, 1996 and for
the nine months then ended.
27(g) Restated Financial Data Schedule as of June 30, 1996 and for the
six months then ended.
27(h) Restated Financial Data Schedule as of March 31, 1996 and for the
three months then ended.
27(i) Restated Financial Data Schedule as of December 31, 1995 and for
the year then ended.
Exhibits 27(b) through 27(i) represent previously filed Financial Data
Schedules restated to reflect the effects of Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE, and to reflect the two-
for-one stock split discussed in Note 12 to the Consolidated Financial
Statements (included in Item 8). All amounts, except for the "Earnings per
share" amounts, are the same as previously filed.
-63-
<PAGE>
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF REGISTRANT
<CAPTION>
JURISDICTION OF PERCENT
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
- ------------------ --------------- ---------
<S> <C> <C>
Hastings, Inc Ontario 100%
HMC, Inc. <F1> Michigan 100%
<FN>
- ---------------------------------
<F1> Formerly Douglas Corporation
</FN>
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints ANDREW F. JOHNSON and THOMAS J.
BELLGRAPH, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign the Form 10-K of HASTINGS MANUFACTURING COMPANY for the year ended
December 31, 1997, together with any and all amendments thereto, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: WILLIAM R. COOK
Print Name: WILLIAM R. COOK
Title: DIRECTOR
-1-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints ANDREW F. JOHNSON and THOMAS J.
BELLGRAPH, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign the Form 10-K of HASTINGS MANUFACTURING COMPANY for the year ended
December 31, 1997, together with any and all amendments thereto, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: D. A. DECAMP
Print Name: D. A.DECAMP
Title: DIRECTOR
-2-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints ANDREW F. JOHNSON and THOMAS J.
BELLGRAPH, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign the Form 10-K of HASTINGS MANUFACTURING COMPANY for the year ended
December 31, 1997, together with any and all amendments thereto, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: RICHARD FOSTER
Print Name: RICHARD FOSTER
Title: DIRECTOR
-3-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints ANDREW F. JOHNSON and THOMAS J.
BELLGRAPH, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign the Form 10-K of HASTINGS MANUFACTURING COMPANY for the year ended
December 31, 1997, together with any and all amendments thereto, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: NEIL A. GARDNER
Print Name: NEIL A. GARDNER
Title: DIRECTOR
-4-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints ANDREW F. JOHNSON and THOMAS J.
BELLGRAPH, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign the Form 10-K of HASTINGS MANUFACTURING COMPANY for the year ended
December 31, 1997, together with any and all amendments thereto, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: ANDREW F. JOHNSON
Print Name: ANDREW F. JOHNSON
Title: CO-CEO AND DIRECTOR
-5-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints ANDREW F. JOHNSON and THOMAS J.
BELLGRAPH, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign the Form 10-K of HASTINGS MANUFACTURING COMPANY for the year ended
December 31, 1997, together with any and all amendments thereto, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: M. C. BENNETT
Print Name: M. C. BENNETT
Title: DIRECTOR
-6-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints ANDREW F. JOHNSON and THOMAS J.
BELLGRAPH, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign the Form 10-K of HASTINGS MANUFACTURING COMPANY for the year ended
December 31, 1997, together with any and all amendments thereto, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: MARK R. S. JOHNSON
Print Name: MARK R. S. JOHNSON
Title: CO-CEO AND DIRECTOR
-7-
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints ANDREW F. JOHNSON and THOMAS J.
BELLGRAPH, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign the Form 10-K of HASTINGS MANUFACTURING COMPANY for the year ended
December 31, 1997, together with any and all amendments thereto, and to file the
same, with all exhibits thereto, and all documents in connection therewith, with
the Securities and Exchange Commission or other regulatory authority, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature: DALE W. KOOP
Print Name: DALE W. KOOP
Title: DIRECTOR
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM 10-K
FOR THE PERIOD ENDED DECEMBER 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 558,172
<SECURITIES> 0
<RECEIVABLES> 5,148,906
<ALLOWANCES> 215,000
<INVENTORY> 9,272,498
<CURRENT-ASSETS> 18,388,924
<PP&E> 23,473,020
<DEPRECIATION> (15,156,120)
<TOTAL-ASSETS> 33,390,331
<CURRENT-LIABILITIES> 8,942,192
<BONDS> 2,028,125
<COMMON> 1,561,252
0
0
<OTHER-SE> 3,758,874
<TOTAL-LIABILITY-AND-EQUITY> 33,390,331
<SALES> 35,574,954
<TOTAL-REVENUES> 35,574,954
<CGS> 24,285,197
<TOTAL-COSTS> 24,285,197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 36,000
<INTEREST-EXPENSE> 510,322
<INCOME-PRETAX> 1,577,233
<INCOME-TAX> 622,000
<INCOME-CONTINUING> 955,233
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 955,233
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 1.24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM
10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 76,270
<SECURITIES> 0
<RECEIVABLES> 5,514,069
<ALLOWANCES> 334,000
<INVENTORY> 9,070,269
<CURRENT-ASSETS> 18,361,614
<PP&E> 23,116,284
<DEPRECIATION> (14,906,751)
<TOTAL-ASSETS> 33,288,416
<CURRENT-LIABILITIES> 8,399,518
<BONDS> 2,393,750
<COMMON> 780,626
0
0
<OTHER-SE> 4,760,517
<TOTAL-LIABILITY-AND-EQUITY> 33,288,416
<SALES> 27,193,053
<TOTAL-REVENUES> 27,193,053
<CGS> 18,519,107
<TOTAL-COSTS> 18,519,107
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 131,600
<INTEREST-EXPENSE> 385,022
<INCOME-PRETAX> 1,316,190
<INCOME-TAX> 526,000
<INCOME-CONTINUING> 790,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 790,190
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM
10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 183,958
<SECURITIES> 0
<RECEIVABLES> 5,628,742
<ALLOWANCES> 307,000
<INVENTORY> 8,880,544
<CURRENT-ASSETS> 16,761,884
<PP&E> 22,963,671
<DEPRECIATION> 14,740,334
<TOTAL-ASSETS> 33,462,580
<CURRENT-LIABILITIES> 8,090,808
<BONDS> 2,759,375
<COMMON> 780,626
0
0
<OTHER-SE> 4,608,139
<TOTAL-LIABILITY-AND-EQUITY> 33,462,580
<SALES> 18,354,389
<TOTAL-REVENUES> 18,354,389
<CGS> 12,528,797
<TOTAL-COSTS> 12,528,797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 88,200
<INTEREST-EXPENSE> 257,123
<INCOME-PRETAX> 930,841
<INCOME-TAX> 373,000
<INCOME-CONTINUING> 557,841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 557,841
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM
10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 91,218
<SECURITIES> 0
<RECEIVABLES> 4,946,899
<ALLOWANCES> 262,000
<INVENTORY> 9,198,775
<CURRENT-ASSETS> 16,701,479
<PP&E> 22,782,167
<DEPRECIATION> (14,408,973)
<TOTAL-ASSETS> 33,388,350
<CURRENT-LIABILITIES> 8,146,163
<BONDS> 3,125,000
<COMMON> 780,276
0
0
<OTHER-SE> 4,299,815
<TOTAL-LIABILITY-AND-EQUITY> 33,388,350
<SALES> 8,752,157
<TOTAL-REVENUES> 8,752,157
<CGS> 5,929,257
<TOTAL-COSTS> 5,929,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 43,400
<INTEREST-EXPENSE> 123,103
<INCOME-PRETAX> 355,075
<INCOME-TAX> 142,000
<INCOME-CONTINUING> 213,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 213,075
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE YEAR END 1996 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,457,783
<SECURITIES> 0
<RECEIVABLES> 4,893,200
<ALLOWANCES> 215,000
<INVENTORY> 9,301,120
<CURRENT-ASSETS> 18,285,454
<PP&E> 22,008,266
<DEPRECIATION> (14,071,826)
<TOTAL-ASSETS> 34,454,989
<CURRENT-LIABILITIES> 8,912,848
<BONDS> 3,490,625
<COMMON> 780,276
0
0
<OTHER-SE> 4,152,172
<TOTAL-LIABILITY-AND-EQUITY> 34,454,989
<SALES> 39,408,610
<TOTAL-REVENUES> 39,408,610
<CGS> 29,299,141
<TOTAL-COSTS> 29,299,141
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,300
<INTEREST-EXPENSE> 570,397
<INCOME-PRETAX> (1,237,843)
<INCOME-TAX> (353,000)
<INCOME-CONTINUING> (884,843)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (884,843)
<EPS-PRIMARY> (1.15)
<EPS-DILUTED> (1.15)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM
10-Q FOR THE NINE MONTHS ENDED SEPTMEBER 30, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 842,542
<SECURITIES> 0
<RECEIVABLES> 5,168,352
<ALLOWANCES> 435,000
<INVENTORY> 9,989,930
<CURRENT-ASSETS> 18,404,576
<PP&E> 22,109,208
<DEPRECIATION> 13,961,282
<TOTAL-ASSETS> 35,357,869
<CURRENT-LIABILITIES> 7,872,984
<BONDS> 3,954,250
<COMMON> 780,946
0
0
<OTHER-SE> 4,204,241
<TOTAL-LIABILITY-AND-EQUITY> 35,357,869
<SALES> 31,262,856
<TOTAL-REVENUES> 31,262,856
<CGS> 22,872,877
<TOTAL-COSTS> 22,872,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 128,000
<INTEREST-EXPENSE> 304,473
<INCOME-PRETAX> (250,261)
<INCOME-TAX> (85,000)
<INCOME-CONTINUING> (165,261)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165,261)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM
10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 572,434
<SECURITIES> 0
<RECEIVABLES> 5,966,246
<ALLOWANCES> 410,000
<INVENTORY> 10,124,841
<CURRENT-ASSETS> 18,952,765
<PP&E> 21,829,352
<DEPRECIATION> 13,607,218
<TOTAL-ASSETS> 36,004,486
<CURRENT-LIABILITIES> 7,947,914
<BONDS> 4,319,875
<COMMON> 780,946
0
0
<OTHER-SE> 4,291,589
<TOTAL-LIABILITY-AND-EQUITY> 36,004,486
<SALES> 22,142,035
<TOTAL-REVENUES> 22,142,035
<CGS> 16,256,875
<TOTAL-COSTS> 16,256,875
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 103,000
<INTEREST-EXPENSE> 171,443
<INCOME-PRETAX> (185,840)
<INCOME-TAX> (75,000)
<INCOME-CONTINUING> (110,840)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (110,840)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM
10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 874,859
<SECURITIES> 0
<RECEIVABLES> 5,927,742
<ALLOWANCES> 225,000
<INVENTORY> 10,298,163
<CURRENT-ASSETS> 19,432,858
<PP&E> 21,477,162
<DEPRECIATION> 13,274,022
<TOTAL-ASSETS> 36,461,015
<CURRENT-LIABILITIES> 7,885,990
<BONDS> 4,685,500
<COMMON> 777,626
0
0
<OTHER-SE> 4,575,227
<TOTAL-LIABILITY-AND-EQUITY> 36,461,015
<SALES> 11,364,412
<TOTAL-REVENUES> 11,364,412
<CGS> 8,302,914
<TOTAL-COSTS> 8,302,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 55,000
<INTEREST-EXPENSE> 138,384
<INCOME-PRETAX> 243,163
<INCOME-TAX> 84,000
<INCOME-CONTINUING> 159,163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 159,163
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</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
<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> (3.93)
<EPS-DILUTED> (3.93)
</TABLE>
