FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended July 31, 1995
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-4615
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HOWELL INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Michigan 38-0479830
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
17515 West Nine Mile Road,
Suite 650, Southfield, Michigan 48075
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 424-8220
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common stock, no par value American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: NONE
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant as of October 18, 1995, computed by reference
to the closing price on the American Stock Exchange on such date, was
$10,284,267.
The number of outstanding shares of the Registrant's common stock as
of October 19, 1995 was 622,738.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents (or portions thereof) have been incorporated
by reference in this Annual Report on Form 10-K: the Proxy Statement for the
1995 Annual Meeting of Shareholders (Part III) and the 1995 Annual Report to
Shareholders (Part II).
PART I
Item 1. Business
Howell Industries, Inc., a Michigan corporation (the "Company")
organized on July 9, 1934, is engaged in one industry segment, the original
manufacture of structural components for the automotive industry.
Products.
The Company's principal products are steel automotive and truck
structural supports and other stampings and assemblies. The products
manufactured by the Company and the sales and profitability of individual
products vary from year to year in accordance with the requirements of vehicle
manufacturing demand. For the fiscal years ended July 31, 1993, July 31, 1994
and July 31, 1995, structural components accounted for 91%, 97% and 99%,
respectively, of the Company's total sales.
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
The Company manufactures underbody structural parts and miscellaneous
steel stampings in its Masury, Ohio and Lapeer, Michigan plants. These
products are used primarily in light duty trucks and also in automobiles. In
1995, the Company substantially completed the consolidation of the majority of
its manufacturing operations into its Masury, Ohio plant.
Suspension control arms are also manufactured in the Masury, Ohio
plant and are used primarily in light duty trucks and automobiles. Suspension
control arms consist of metal stampings assembled with bushings and ball
joints, which provide support between the vehicle frame and axle.
The Company's sales are usually made pursuant to purchase orders and
releases which are subject to cancellation and change by the customers. The
amount of such sales is thus largely dependent upon the volume of production
of the Company's customers.
Customers and Methods of Distribution. For the fiscal year ended July 31,
1995, sales to Chrysler Motors Corporation, Ford Motor Company and General
Motors Corporation amounted to approximately 55%, 42% and 1% of total sales,
respectively. The Company ships primarily by commercial carrier to its
customers.
Competition. The metal stamping industry is highly competitive. There are
numerous suppliers of the same steel products and some of these competitors
have financial resources greater than those of the Company. In addition, some
automobile and truck manufacturers produce a portion of their own requirements
of the products manufactured by the Company. The Company does not produce a
significant portion of the metal stampings and assemblies used by automobile
and truck manufacturers.
Raw Materials. The principal raw material required by the Company is steel.
The Company also uses rubber and miscellaneous other supplies. All raw
materials are readily available in an adequate supply.
Employees. The Company employs about 365 persons, of whom about 275 are
factory production employees and about 90 are in office, executive,
supervisory or administrative positions. All factory employees are covered by
union contracts.
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
Item 2. Properties
The following is a brief description of the plant and properties owned
and leased by the Company.
Southfield, Michigan - The Company leases its executive and
administrative office facilities located at 17515 West Nine Mile Road, Suite
650, Southfield, Michigan. These offices contain approximately 8,092 square
feet of floor space in a modern office building. The lease is at an annual
rental of $99,480 and terminates on June 30, 1996.
Masury, Ohio - The Company owns a plant in Masury, Ohio located on
approximately 6.5 acres. The plant consists of approximately 150,000 square
feet of floor space, all constructed since 1965. The plant is used for the
manufacture of underbody plate parts, suspension control arms and other
structural supports. The approximate average percentage utilization on a two
shift basis during the fiscal year was 90%. The Company leases an additional
44,000 square feet of manufacturing space at an annual rental of $78,000 and
the lease terminates on March 14, 1997. The approximate average percentage
utilization for this additional space on a one shift basis during the fiscal
year was 90%.
Lapeer, Michigan - The Company owns a plant in Lapeer, Michigan
located on approximately 10 acres of land in two parcels. The plant is used
for the manufacture of miscellaneous steel stampings and has approximately
85,000 square feet of floor space. The approximate average percentage
utilization on a one shift basis during the fiscal year was 50%, primarily due
to the consolidation of a majority of the Company's production to the Masury,
Ohio plant.
Warren, Michigan - The Company leases a facility at 3161 E. Nine Mile
Road, Warren, Michigan. The facility is used primarily in connection with the
Company's manufacture and repair of dies for automobile parts. The facility
consists of approximately 4,250 square feet. The annual rental is $36,000.
All real and personal property of the Company is deemed by the Company
to be in satisfactory condition for the operation of its business.
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
Item 3. Legal Proceedings
In June, 1994, Wilkie Brothers Conveyors, Inc. filed a civil action
against the Company in the Michigan Circuit Court for the County of St. Clair
(No. 94-001603) to recover past and future response costs and for declaratory
relief in connection with alleged environmental contamination at a plant
formerly owned by the Company in Marysville, Michigan. The Company sold the
plant to the plaintiff in 1984. The Company has denied liability to the
plaintiff and has engaged a consultant to investigate the contamination. No
specified amount of damages is claimed. In September, 1995, the City of
Marysville filed a civil action against the Company and Wilkie Bros.
Conveyors, Inc. in the Michigan Circuit Court for the County of St. Clair (No.
95-002693) to require the Company and Wilkie Bros. to take certain clean-up
and remediation actions in connection with the contamination at the plant. The
Company is in the process of responding to this lawsuit.
The Company is also involved in various ordinary routine litigation
incidental to its business, which in the opinion of management is not deemed
to be material.
Item 4. Submission of Matters to
a Vote of Security Holders
None.
PART II
Item 5. Market For The Registrant's Common
Stock and Related Security Matters
Incorporated by reference pursuant to Rule 12b-23 from "Common Stock
Prices," page 2 of the Registrant's 1995 Annual Report to Shareholders, which
section is hereby incorporated into this Form 10-K.
Item 6. Selected Financial Data
Incorporated by reference pursuant to Rule 12b-23 from "Selected
Financial Data," page 14 of the Registrant's 1995 Annual Report to
Shareholders, which section is hereby incorporated into this Form 10-K.
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Incorporated by reference pursuant to Rule 12b-23 from "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
page 15 of the Registrant's 1995 Annual Report to Shareholders, which
section is hereby incorporated into this Form 10-K.
Item 8. Financial Statements and Supplementary Data
Partially incorporated by reference pursuant to Rule 12b-23 from pages
4-13 and page 14 of the Registrant's 1995 Annual Report to Shareholders,
which pages are hereby incorporated into this Form 10-K. The Independent
Auditor's signed report appears on page 13 of the Annual Report attached to
originally executed copies of this Form 10-K.
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive
Officers of the Registrant
Partially incorporated by reference pursuant to Rule 12b-23 from pages
2-3 of the Registrant's 1995 Proxy Statement furnished in connection with
the 1995 Annual Meeting of Shareholders. All officers serve at the discretion
of the Board of Directors.
NAME AGE POSITION
Morton Schiff 61 President, Chief Executive Officer and Treasurer
Ronald Sakuta (1) 59 Vice President and Chief Operating Officer
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
(1) Mr. Sakuta began employment with the Company on May 1, 1991.
Prior to 1991, Mr. Sakuta was the President of Hillman Manufacturing Company.
Hillman Manufacturing Company was engaged in the business of manufacturing
dies for automobile parts.
Additional information concerning Messrs. Schiff and Sakuta is
incorporated by reference from pages 3-5 of the Registrant's 1995 Proxy
Statement furnished in connection with the 1995 Annual Meeting of
Shareholders.
Item 11. Executive Compensation
Incorporated by reference pursuant to Rule 12b-23 from pages 3-5 of
the Registrant's 1995 Proxy Statement furnished in connection with the 1995
Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Incorporated by reference pursuant to Rule 12b-23 from page 2 of the
Registrant's 1995 Proxy Statement furnished in connection with the
Registrant's 1995 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
Incorporated by reference pursuant to Rule 12b-23 from pages 6-7
of the Registrant's 1995 Proxy Statement furnished in connection with the
Registrant's 1995 Annual Meeting of Shareholders.
7
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
14(a)(1) Financial Statements
All financial statements are incorporated by reference from the
Registrant's Annual Report to Shareholders.
Independent Auditors' Report of Deloitte & Touche LLP
Balance Sheets as of July 31, 1995 and July 31, 1994
Statements of Operations for the years ended July 31, 1995,
July 31, 1994 and July 31, 1993
Statements of Cash Flows for the years ended July 31, 1995,
July 31, 1994 and July 31, 1993
Statements of Shareholders' Investment for the years ended July
31, 1995, July 31, 1994 and July 31, 1993
Notes to Financial Statements for the years ended July 31,
1995, July 31, 1994 and July 31, 1993
14(a)(2) Financial Statement Schedules
Schedules are omitted because of the absence of the conditions
under which they are required or because the information called
for is included in financial statements or notes thereto.
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
14(a)(3) Exhibits
Each management contract or compensatory plan or arrangement
filed as an exhibit to this Report is identified in the
following list with an asterisk before the exhibit number.
(3)(a) Restated Articles of Incorporation, as amended to
date.
(3)(b) By-laws, as amended to date, incorporated by
reference from Exhibit (3)(b) of Registrant's Form
10-Q for the quarter ended April 30, 1993.
(10) Material contracts:
* (i) Executive Employment Agreement for Morton
Schiff, dated August 18, 1994, incorporated by
reference from Exhibit 10(i) to the Registrant's
Annual Report on Form 10-K for the year ended July
31, 1994.
* (ii) Executive Employment Agreement for Ronald
Sakuta, dated August 18, 1994, incorporated by
reference from Exhibit 10(ii) to the Registrant's
Annual Report on Form 10-K for the year ended July
31, 1994.
(iii) Indemnification Agreements for Alan E.
Schwartz and Richard H. Cummings, dated March 30,
1993, incorporated by reference from Exhibit
(10)(ii) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended April 30, 1993.
* (iv) Indemnification Agreement for Morton Schiff,
dated July 19, 1993, incorporated by reference from
Exhibit 10(iii) to the Registrant's Annual Report on
Form 10-K for the year ended July 31, 1993.
(v) Stock Purchase Agreement, dated September 22,
1994, between NBD Bank, N.A., as Co-Trustee, and
Howell Industries, Inc., incorporated by reference
from Exhibit 10(v) to the Registrant's Annual Report
on Form 10-K for the year ended July 31, 1994.
9
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
* (vi) Howell Industries, Inc. Retirement Plan for
Non-Employee Directors.
(13) Annual report to security holders.
(27) Financial Data Schedule.
14(b) The Company did not file any reports on Form 8-K during
the last quarter of the fiscal year covered by this
Report.
14(d)(5) Schedules
(Pages following the signature page of this Form 10-K)
10
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on October 25, 1995.
HOWELL INDUSTRIES, INC.
(Registrant)
By: /s/ Morton Schiff
-------------------------
Morton Schiff, President,
Chief Executive Officer
and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on October 25, 1995.
Signature Capacity
/s/ Morton Schiff President, Chief Executive Officer,
- ----------------------- Treasurer and Director (principal
Morton Schiff executive, financial and accounting
officer)
/s/ Richard H. Cummings Director
- -----------------------
Richard H. Cummings
/s/ Alan E. Schwartz Director
- -----------------------
Alan E. Schwartz
11
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
INDEX TO EXHIBITS
Each management contract or compensatory plan or arrangement filed as an
exhibit to this Report is identified in the following list with an asterisk
before the exhibit number.
Exhibit No. Page
(3)(a) Restated Articles of Incorporation, ____
as amended to date
(3)(b) By-laws, as amended to date, incorporated --
by reference
(10) Material Contracts:
* (i) Executive Employment Agreement of --
Morton Schiff, dated August 18, 1994,
incorporated by reference
* (ii) Executive Employment Agreement of --
Ronald Sakuta, dated August 18, 1994,
incorporated by reference
(iii) Indemnification Agreements for --
Alan E. Schwartz and Richard H.
Cummings, dated March 30, 1993,
incorporated by reference
* (iv) Indemnification Agreement for --
Morton Schiff, dated July 19, 1993,
incorporated by reference
(v) Stock Purchase Agreement, dated --
September 22, 1994, between NBD Bank,
N.A. as Co-Trustee, and Howell
Industries, Inc., incorporated by
reference
* (vi) Howell Industries, Inc. Retirement ____
Plan for Non-Employee Directors.
12
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Year ended
Form 10-K HOWELL INDUSTRIES, INC. July 31, 1995
(13) Annual Report to Shareholders for the ____
year ended July 31, 1995
(27) Financial Data Schedule ____
13
Exhibit 3(a)
C&S-510 (Rev. 1-84)
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MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
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(For Bureau Use Only) Date Received
Oct 12 1988
FILED
Oct 12 1988
Administrator
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
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RESTATED ARTICLES OF INCORPORATION
For Use by Domestic Profit Corporations
Pursuant to the provisions of Act 284, Public Acts of 1972, as
amended, the undersigned corporation executes the following Articles:
1. The present name of the corporation is:
Howell Industries, Inc.
2. The corporation identification number (CID) assigned by the Bureau is:
184-966
3. All former names of the corporation are:
Detroit Macoid Corporation
Macoid Industries, Inc.
4. The date of filing the original Articles of Incorporation was:
July 9, 1934
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The following Restated Articles of Incorporation supersede the
Articles of Incorporation as amended and shall be the Articles of
Incorporation for the corporation:
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ARTICLE I
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The name of the corporation is:
Howell Industries, Inc.
1
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ARTICLE II
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The purpose or purposes for which the corporation is organized are:
To manufacture, purchase, distribute, compound, sell at retail
and wholesale and generally deal in plastic materials and plastic
products.
To manufacture, purchase or otherwise acquire goods, wares,
merchandise, and personal property of every class and description, and
to hold, own, sell or otherwise dispose of, trade, deal in and deal
with the same.
To buy, sell, deal in, lease, hold or improve real estate, and
the fixtures and personal property incidental thereto or connected
therewith, and with that end in view, to acquire by purchase, lease,
hire, or otherwise, lands, tenements, hereditaments, or any interest
therein, and to improve the same, and generally to hold, manage, deal
with, and improve the property of the corporation; and to sell, lease,
mortgage, pledge or otherwise dispose of the lands, tenements and
hereditaments or other property of the corporation.
To borrow or raise moneys for any of the purposes of the
corporation and from time to time, without limit as to amount, to
draw, make, accept, endorse, execute and issue promissory notes,
drafts, bills of exchange, warrants, bonds, debentures and other
negotiable and non-negotiable instruments and evidence of
indebtedness, and to secure the payment of any thereof and of the
interest thereon by mortgage, pledge, conveyance or assignment in
trust of the whole or any part of the property of the corporation,
whether at the time owned or thereafter acquired, and to sell, pledge,
or otherwise dispose of such bonds or other obligations of the
corporation for its corporate purposes.
In general, to carry on any business in connection therewith and
incidental thereto not forbidden by the laws of the State of Michigan,
and with all the powers conferred upon corporations by the laws of the
State of Michigan.
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ARTICLE III
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The total authorized capital stock is:
1. Common Shares N/A Par Value Per Share $
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Preferred Shares 250,000 Par Value Per Share $ 1.00
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and/or shares without par value as follows:
2
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2. Common Shares 2,500,000 Stated Value Per Share $ 1.87
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Preferred Shares N/A Stated Value Per Share $
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3. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
The holders of shares of Common Stock, and the holders of shares
of Preferred Stock, shall be entitled to one (1) vote for each share
held without distinction between classes except as required by law.
All shares of Preferred Stock shall be identical, except that the
Board of Directors shall have authority to divide the shares of
Preferred Stock into series and fix from time to time before issuance,
the number of shares to be included in any series and the designation,
relative rights, preferences and limitations of all shares of such
series. The authority of the Board of Directors with respect to each
series shall include the determination of any or all of the following,
and the shares of each series may vary from the shares of any other
series in the following respects:
(a) the number of shares constituting such series and the
designation thereof to distinguish the shares of such series from
the shares of all other series;
(b) the rate of dividend and the extent of further
participation in dividend distribution, if any;
(c) the price at and the terms and conditions on which the
shares are redeemable;
(d) the amount payable upon shares in event of voluntary or
involuntary liquidation;
(e) the terms and conditions upon which the shares are
convertible into other classes of stock of the corporation, if
such shares are to be convertible.
Dividends on all outstanding shares of Preferred Stock must be
declared and paid, or set aside for payment, before any dividends can
be declared and paid, or set aside for payment, on the shares of
Common Stock with respect to the same dividend period.
In the event of voluntary or involuntary dissolution,
liquidation, or winding up of the corporation, the holders of shares
of Preferred Stock of each series shall be entitled to be paid from
the assets of the corporation such amounts as shall have been fixed
and determined by the Board of Directors when such shares of Preferred
Stock are issued, plus an amount equivalent to all dividends accrued
thereon, before any amount shall be paid to the holders of Common
Stock.
3
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Each share of Common Stock shall be equal in all respects to all
other shares of Common Stock.
No holders of shares of capital stock shall be entitled as such
as a matter of right to subscribe for or purchase any part of any new
or additional issue of stock, or securities convertible into stock, of
any class whatsoever, whether now or hereafter authorized and whether
issued for cash, property, services, by way of dividends or otherwise.
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ARTICLE IV
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1. The address of the current registered office is:
17515 West Nine Mile Road, Suite 650
Southfield, Michigan 48075
2. The mailing address of the current registered office if different than
above:
N/A
3. The name of the current resident agent is:
Herbert Freedland
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ARTICLE V
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The term of existence of the corporation will expire on July 9, 1994.
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ARTICLE VI
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When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any
class of them or between this corporation and its shareholders or any class
of them, a court of equity jurisdiction within the state, on application of
this corporation or of a creditor or shareholder thereof, or on application
of a receiver appointed for the corporation, may order a meeting of the
creditors or class of creditors or of the shareholders or class of
shareholders to be affected by the proposed compromise or arrangement or
reorganization, to be summoned in such manner as the court directs. If a
majority in number representing 3/4 in value of the creditors or class of
creditors, or of the shareholders or class of shareholders to be affected
by the proposed compromise or arrangement or a reorganization, agree to a
compromise or arrangement or a reorganization of this corporation as a
consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if
4
<PAGE>
sanctioned by the court to which the application has been made, shall be
binding on all the creditors or class of creditors, or on all the
shareholders or class of shareholders and also on this corporation.
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ARTICLE VI
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A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of the
director's fiduciary duty. However, this Article shall not eliminate or
limit the liability of a director for any of the following.
(1) A breach of the director's duty of loyalty to the corporation
or its shareholders.
(2) Acts or omissions not in good faith or that involve
intentional misconduct or knowing violation of law.
(3) A violation of Section 551(1) of the Michigan Business
Corporation Act.
(4) A transaction from which the director derived an improper
personal benefit.
(5) An act or omission occurring before March 1, 1987.
Any repeal or modification of this Article VI by the shareholders of
the corporation shall not adversely affect any right or protection of any
director of the corporation existing at the time of, or for or with respect
to, any acts or omissions occurring before such repeal or modification.
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These Restated Articles of Incorporation were duly adopted on the 23rd
day of September, 1988, in accordance with the provisions of Section 642 of
the Act and were duly adopted by the Board of Directors without a vote of
the shareholders. These Restated Articles of Incorporation only restate and
integrate and do not further amend the provisions of the Articles of
Incorporation as heretofore amended and there is no material discrepancy
between those provisions and the provisions of these Restated Articles.
Signed this 23rd day of September, 1988.
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By /s/ Herbert Freedland
--------------------------------------------
Herbert Freedland, Chairman of the Board
--------------------------------------------
(Print or type name and title)
5
<PAGE>
C&S-510 (Rev 1-84)
DOCUMENT WILL BE RETURNED TO NAME AND Name of person or organization
MAILING ADDRESS INDICATED IN THE BOX remitting fees:
BELOW. Include name, street and number
(or P.O. box), city, state and ZIP code. Honigman Miller Schwartz
and Cohn
- ----------------------------------------
Jeanette M. Sermo Preparer's name and business
Honigman Miller Schwartz and Cohn telephone number:
2290 First National Building
Detroit, Michigan 48226 Jeanette M. Sermo
- ---------------------------------------- (313) 256-7634
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INFORMATION AND INSTRUCTIONS
1. This form is issued under the authority of Act 284, P.A. of 1972, as
amended. The articles of incorporation cannot be restated until this
form, or a comparable document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm
copy will be prepared for the records of the Corporation and
Securities Bureau. The original copy will be returned to the address
appearing in the box above as evidence of filing.
Since this document must be microfilmed, it is important that the
filing be legible. Documents with poor black and white contrast, or
otherwise illegible, will be rejected.
3. This document is to be used pursuant to sections 641 through 643 of
the Act for the purpose of restating the articles of incorporation of
a domestic profit corporation. Restated articles of incorporation are
an integration into a single instrument of the current provisions of
the corporation's articles of incorporation, along with any desired
amendments to those articles.
4. Restated articles of incorporation which do not amend the articles of
incorporation may be adopted by the board of directors without a vote
of the shareholders. Restated articles of incorporation which amend
the articles of incorporation require adoption by the shareholders.
Restated articles of incorporation submitted before the first meeting
of the board of directors require adoption by all of the
incorporators.
5. Item 2 -- Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
6. The duration of the corporation should be stated in the restated
articles of incorporation only if it is not perpetual.
7. This document is effective on the date approved and filed by the
Bureau. A later effective date, no more than 90 days after the date of
delivery, may be stated.
8. If the restated articles are adopted before the first meeting of the
board of directors, this document must be signed in ink by all of the
incorporators. If the restated articles merely restate and integrate
the articles, but do not amend, this document must be signed in ink by
an authorized officer or agent of the corporation. If the restated
articles amend the articles of incorporation, this document must be
signed in ink by the president, vice-president, chairperson, or vice-
chairperson.
9. FEES: Filing fee (Make remittance payable to State of
Michigan).........................................$10.00
Franchise fee (payable only if authorized capital stock has
increased) -- 1/2 mill (.0005) on each dollar of increase
over highest previous authorized capital stock.
10. Mail form and fee to:
Michigan Department of Commerce, Corporation and Securities
Bureau, Corporation Division, P.O. Box 30054, Lansing, MI 48909,
Telephone (517) 373-0493.
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6
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C&S-520 (10/89)
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MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
- ---------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
The certificate must reflect FILED DEC 23 1991
the registered office and/or
resident agent on record JAN 07 1992
prior to this change. We
have adjusted the certi- Administrator
ficate accordingly. MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau
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CERTIFICATE OF CHANGE OF REGISTERED OFFICE AND/OR CHANGE OF RESIDENT AGENT
For use by Domestic and Foreign Corporations
(Please read information and instructions on reverse side)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public acts of 1982 (nonprofit corporations),
the undersigned corporation executes the following Certificate:
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1. The name of the corporation is: Howell Industries, Inc.
2. The corporation identification number (CID) assigned by the Bureau is:
----------------
1 8 4 - 9 6 6
----------------
3. a. The address of the registered office as currently on file with
the Bureau is:
____________________________________________ , Michigan _____________
(Street Address) (City) (Zip Code)
b. The mailing address of the above registered office, if different,
is:
____________________________________________ , Michigan _____________
(P.O. Box) (City) (Zip Code)
c. The name of the resident agent as currently on file with the
Bureau is: Herbert Freedland
-----------------
- ---------------------------------------------------------------------------
COMPLETE THE APPROPRIATE ITEMS FOR ANY INFORMATION THAT HAS CHANGED
- ---------------------------------------------------------------------------
4. The address of the registered office is changed to:
____________________________________________ , Michigan _____________
(Street Address) (City) (Zip Code)
The mailing address of the above registered office, if different, is:
____________________________________________ , Michigan _____________
(P.O. Box) (City) (Zip Code)
5. The name of the successor resident agent is: Morton Schiff
-------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
6. The corporation further states that the address of its registered
office and the address of its resident agent, as changed, are
identical.
7. a. The above changes were authorized by resolution duly adopted by
its board of directors or trustees, except when this form is
being filed by the resident agent of a profit corporation to
change the address of the registered office.
b. A copy of this statement has been mailed to the corporation.
- ---------------------------------------------------------------------------
Signed this 19th day of December, 1991
---- -------- --
By /s/ Cyril Moscow
---------------------------------------------
(Signature)
Cyril Moscow Secretary
------------------------------------------------
(Type or Print Name) (Type or Print Title)
<PAGE>
DOCUMENT WILL BE RETURNED TO NAME AND MAILING Name of person or
ADDRESS INDICATED IN THE BOX BELOW. Include organization remitting
name, street and number (or P.O. box), city, fees:
state and ZIP code.
Cyril Moscow
- -------------------------------------------- ----------------------
Cyril Moscow
Honigman Miller Schwartz and Cohn Preparer's name and
2290 First National Building business telephone
Detroit, Michigan 48226 number:
- --------------------------------------------
Cyril Moscow
----------------------
(313) 256-7718
----------------------
- ---------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. The certificate of change of registered office and/or change of
resident agent cannot be filed until this form, or a comparable
document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm
copy will be prepared for the records of the Corporation and
Securities Bureau. The original copy will be returned to the address
appearing in the box above as evidence of filing.
Since this document must be microfilmed, it is important that the
filing be legible. Documents with poor black and white contrast, or
otherwise illegible, will be rejected.
3. This document is to be used pursuant to section 242 of the Act by
domestic and foreign corporations for the purpose of changing their
registered office or resident agent, or both.
4. Item 2 -- Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
5. Item 3 -- The address of the registered office and the name of the
resident agent must be the same as are designated in the articles of
incorporation or subsequent change filed with the Bureau.
6. Item 4 -- A post office box may not be designated as the address of
the registered office. The resident agent can change the registered
office by filing this form only if this is a profit corporation.
------
7. This certificate must be signed in ink by the president, vice-
president, chairperson, vice-chairperson, secretary or assistant
secretary of the corporation. (Profit corporations only): If only the
registered office address is changed, it may be signed by the resident
agent without addressing Item 5 or Item 7(a).
8. FEES: (Make remittance payable to State of Michigan. Include
corporation name and CID number on check or money order)...... $5.00
9. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Box 30054
6546 Mercantile Way
Lansing, Michigan 48909
Telephone: (517) 334-6302
- ---------------------------------------------------------------------------
<PAGE>
C&S-515 (Rev. 2-92)
- -------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
- -------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
Nov 30, 1993
FILED
NOV 30 1993
Name Gayle Aiken
Honigman Miller Schwartz and Cohn Administrator
MICHIGAN DEPARTMENT
Address 2290 First National Building OF COMMERCE
Corporation & Securities
City State Zip Code Bureau
Detroit MI 48226
EFFECTIVE DATE:
- -------------------------------------------------------------------------
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations),
the undersigned corporation executes the following Certificate:
- -------------------------------------------------------------------------
1. The present name of the corporation is: Howell Industries,Inc.
2. The corporation identification number (CID) assigned by the Bureau is:
-----------------
1 8 4 - 9 6 6
-----------------
3. The location of its registered office is:
17515 West Nine Mile Road, Suite 650 Southfield, Michigan 48075
------------------------------------------------ ---------
(Street Address) (City) (Zip Code)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
4. Article V of the Articles of Incorporation is hereby amended to read as
follows:
The term of existence of the corporation is perpetual.
- -------------------------------------------------------------------------
<PAGE>
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE
BOARD OF DIRECTORS OR TRUSTEES; OTHERWISE, COMPLETE SECTION (b)
a. / / The foregoing amendment to the Articles of Incorporation was duly
adopted on the ____ day of ______________ , 19 ___ , in accordance with
the provisions of the Act by the unanimous consent of the
incorporator(s) before the first meeting of the board of directors
or trustees.
Signed this ___________ day of __________________________ , 19 ____.
_________________________________ _________________________________
(Signature) (Signature)
_________________________________ _________________________________
(Type or Print Name) (Type or Print Name)
_________________________________ _________________________________
(Signature) (Signature)
_________________________________ _________________________________
(Type or Print Name) (Type or Print Name)
b. /X/ The foregoing amendment to the Articles of Incorporation was duly
adopted on the 24th day of November, 1993. The amendment: (check
one of the following)
/X/ was duly adopted in accordance with Section 611(2) of the Act by
the vote of the shareholders if a profit corporation, or by the
vote of the shareholders or members if a nonprofit corporation, or
by the vote of the directors if a non-profit corporation organized
on a nonstock directorship basis. The necessary votes were cast in
favor of the amendment.
/ / was duly adopted by the written consent of all the directors
pursuant to Section 525 of the Act and the corporation is a
nonprofit corporation organized on a nonstock directorship basis.
/ / was duly adopted by the written consent of the shareholders
or members having not less than the minimum number of votes
required by statute in accordance with Section 407(1) and
(2) of the Act if a non-profit corporation, and Section 407(1)
of the Act if a profit corporation. Written notice to shareholders
or member who have not consented in writing has been given.
(Note: Written consent by less than all of the shareholders
or members is permitted only if such provision appears in the
Articles of Incorporation.)
/ / was duly adopted by the written consent of all the shareholders
or members entitled to vote in accordance with Section 407(3) of
the Act if a non-profit corporation, and Section 407(2) of the Act
if a profit corporation.
Signed this 24th day of November , 1993
---- --------- --
By /s/ Morton Schiff
---------------------------------------------
(Only signature of: President, Vice-President,
Chairperson and Vice-Chairperson)
Morton Schiff President
---------------------------------------------
(Type or Print Name) (Type or Print Title)
<PAGE>
Name of person or
organization remitting
fees:
Honigman Miller Schwartz
and Cohn
Preparer's name and
business telephone
number:
Gayle Aiken
----------------------
(313) 256-7595
----------------------
- ---------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. The amendment cannot be filed until this form, or a comparable
document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm
copy will be prepared for the records of the Corporation and
Securities Bureau. The original copy will be returned to the address
appearing in the box on the front as evidence of filing.
Since this document must be microfilmed, it is important that the
filing be legible. Documents with poor black and white contrast, or
otherwise illegible, will be rejected.
3. This document is to be used pursuant to the provisions of section 631
of the Act for the purpose of amending the articles of incorporation
of a domestic profit or nonprofit corporation. Do not use this form
for restated articles. A nonprofit corporation is one incorporated to
carry out any lawful purpose or purposes not involving pecuniary
profit or gain for its directors, officers, shareholders, or members.
A nonprofit corporation formed on a nonstock directorship basis, as
authorized by Section 302 of the Act, may or may not have members, but
if it has members, the members are not entitled to vote.
4. Item 2 -- Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
5. Item 4 -- The article being amended must be set forth in its entirety.
However, if the article being amended is divided into separately
identifiable sections, only the sections being amended need be
included.
6. This document is effective on the date approved and filed by the
Bureau. A later effective date, no more than 90 days after the date of
delivery, may be stated.
7. If the amendment is adopted before the meeting of the board of
directors, item 5(a) must be completed and signed in ink by a majority
of the incorporators if more than one listed in Article V of the
Articles of Incorporation if a profit corporation, and all the
incorporators if a non-profit corporation. If the amendment is
otherwise adopted, item 5(b) must be completed and signed in ink by
the president, vice-president, chairperson or vice-chairperson of the
corporation.
8. NON-REFUNDABLE FEE: ........................................ $10.00
(Make remittance payable to the State of Michigan. Include corporation
name and CID Number on check or money order)
Franchise fee for profit corporations (payable only if authorized
shares have increased): each additional 20,000 authorized shares or
portion thereof ............................................ $30.00
9. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Box 30054
6546 Mercantile Way
Lansing, MI 48909
Telephone: (517) 334-6302
- ---------------------------------------------------------------------------
Exhibit 10(vi)
HOWELL INDUSTRIES, INC.
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
PURPOSE
This Plan is to provide a retirement allowance for non-employee
directors.
ADMINISTRATION
This Plan shall be administered by the President of the Company, who
shall have full power to make each determination provided for in the Plan, to
interpret the Plan, and to establish rules and procedures for carrying out its
purpose.
This Plan is a non-contributory, non-qualified and unfunded plan and
represents only an unsecured general obligation of the Company.
ELIGIBILITY
The Plan provides a quarterly retirement allowance to each director
(participant) who (a) has never served as an officer of the Company, (b) has
served on the board as a non-employee director five or more years, and (c) is
a director at any time on or after December 1, 1994.
AMOUNT OF DISTRIBUTION
The quarterly retirement allowance will be equal to 18.75% (75%
annually) of the annual retainer (not including meeting fees) in effect on the
date of the participant's termination of service on the board.
Payments shall be made quarterly commencing with the month following
such participant's termination of service on the board.
DURATION
The quarterly retirement allowance payments will continue for a period
equal to the number of calendar quarters served on the board, or until the
participant's death, whichever occurs first. In the event of death prior to
the conclusion of scheduled payments under this Plan, all liability of the
Company under the Plan is terminated. The participant's estate, surviving
spouse or other beneficiary shall have no rights under the Plan.
SUSPENSION OF PAYMENTS
Payment of the retirement allowance to a participant who is again
elected to the board will be suspended. Any future allowance will be
recalculated based on the annual retainer in effect at the time of the
participant's subsequent termination of service on the board. The duration of
<PAGE>
payments will be determined by the cumulative number of whole quarters served
on the board minus the number of quarters covered by retirement allowance
payments received prior to re-election to the board.
NONALIENATION OF BENEFITS
The right of a participant to payment of a retirement allowance
hereunder shall not be transferred or encumbered and shall not be subject to
attachment or similar process. Any attempted transfer, encumbrance, attachment
or similar process shall be ineffective.
CONSULTING
Retired participants shall provide consulting services (not exceeding
8 hours per quarter) to the executive officers and directors of the Company
upon written request at times and places convenient to the retired
participant.
AMENDMENT AND TERMINATION
The Company reserves the right to amend or terminate the Plan at any
time, provided, however, that no such amendment or termination shall reduce
the retirement allowance payable to any participant who is receiving an
allowance or is eligible to receive an allowance upon his immediate
retirement.
EFFECTIVE DATE
This Plan shall be effective December 1, 1994.
Exhibit 13
Common Stock Prices
The Company's common stock is traded on the American Stock Exchange. The
following table sets forth the high and low sales prices on the American Stock
Exchange for each quarterly period during fiscal 1995 and 1994. As of October
2, 1995, there were 304 shareholders of record of the Company.
The Company declared dividends of $1.00 per share in each of fiscal 1995 and
fiscal 1994.
<TABLE>
<CAPTION>
High/Low High/Low
1995/1994 Price Range 1994/1993 Price Range
<C> <C> <C> <C>
1st Qtr. ended 10/31/94 30-1/4 - 27-1/4 1st Qtr. ended 10/31/93 28-1/2 - 23-1/4
2nd Qtr. ended 1/31/95 28 - 26-1/4 2nd Qtr. ended 1/31/94 32-1/2 - 25
3rd Qtr. ended 4/30/95 30 - 26 3rd Qtr. ended 4/30/94 33-1/4 - 27
4th Qtr. ended 7/31/95 31 - 26-1/2 4th Qtr. ended 7/31/94 28-1/2 - 26-3/4
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Balance Sheets
As of July 31, 1995 and 1994
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (including interest
bearing instruments of $2,465,471 in 1995
and $9,343,004 in 1994) $ 2,979,374 $ 9,661,018
Marketable securities, at cost (approximates market) 850,066 2,045,034
Accounts receivable 7,789,259 7,291,663
Unbilled die costs 296,113 69,001
Inventories (Note 2):
Work in process and finished goods 3,889,090 5,674,436
Raw materials 1,378,131 1,181,497
Total 5,267,221 6,855,933
Prepaid expenses and other assets 746,051 790,143
Deferred tax asset - current (Note 3) 4,000 751,000
Total current assets 17,932,084 27,463,792
Marketable Securities - Noncurrent 850,000
Property, Plant and Equipment:
Land 76,200 76,200
Buildings and improvements 3,384,684 3,051,396
Machinery and equipment 18,073,621 15,844,523
Total 21,534,505 18,972,119
Less accumulated depreciation 13,920,608 13,552,759
Net property, plant and equipment 7,613,897 5,419,360
Total Assets $25,545,981 $33,733,152
<FN>
See notes to financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Balance Sheets
As of July 31, 1995 and 1994
1995 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable $ 3,420,655 $ 2,864,351
Accrued wages and benefits 769,973 1,124,156
Accrued expenses 499,816 514,732
Accrued insurance 376,660 461,971
Taxes on income 30,199 229,457
Reserve for plant consolidation 97,855 1,462,713
Total current liabilities 5,195,158 6,657,380
Other Long-Term Liabilities (Note 7) 1,136,424 1,184,953
Deferred Tax Liability - Noncurrent (Note 3) 106,000 396,000
Shareholders' Investment:
Preferred stock, $1 par value; 250,000 shares
authorized, none outstanding
Common stock, no par value; authorized 2,500,000 shares;
622,738 shares and 864,738 shares outstanding as of
July 31, 1995 and 1994, respectively 593,584 824,255
Retained earnings 18,514,815 24,670,564
Total shareholders' investment 19,108,399 25,494,819
Total Liabilities and Shareholders' Investment $25,545,981 $33,733,152
<FN>
See notes to financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Statements of Operations
Years Ended July 31, 1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
Net Sales (Note 8) $ 62,635,405 $ 63,004,461 $ 45,385,637
Cost and Expenses:
Cost of products sold, other than items listed below 55,856,885 53,667,625 38,165,826
Depreciation 1,231,295 1,103,032 1,068,054
Pension expense (Note 4) 311,896 183,926 111,074
Selling and administrative expenses 4,121,134 4,056,140 3,660,349
Provision for plant consolidation (Note 9) (800,000) 1,900,000
Total cost and expenses 60,721,210 60,910,723 43,005,303
Operating earnings 1,914,195 2,093,738 2,380,334
Interest income - net 285,010 495,275 530,865
Other income 77,613 101,939 194,716
Earnings Before Income Taxes 2,276,818 2,690,952 3,105,915
Taxes on Income (Note 3) (720,000) (882,000) (885,000)
Earnings after Income Taxes, before Cumulative Effect of
Change in Method of Accounting for Income Taxes 1,556,818 1,808,952 2,220,915
Cumulative Effect of Change in Method of Accounting for
Income Taxes 240,000
Net Earnings $ 1,556,818 $ 2,048,952 $ 2,220,915
Earnings per Share after Income Taxes, before Cumulative
Effect of Change in Method of Accounting for Income Taxes $ 2.21 $ 2.09 $ 2.56
Earnings per Share on Cumulative Effect of Change in
Method of Accounting for Income Taxes 0.28
Net Earnings per Common Share (Note 11) $ 2.21 $ 2.37 $ 2.56
Average Common Shares Outstanding 704,443 864,738 868,860
<FN>
See notes to financial statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows
Years Ended July 31,1995, 1994 and 1993
1995 1994 1993
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Earnings after income taxes, before cumulative effect of change
in method of accounting for income taxes $ 1,556,818 $ 1,808,952 $ 2,220,915
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation 1,231,295 1,103,032 1,068,054
Gain on sale of equipment (35,661) (32,415) (78,005)
Provision for deferred taxes 457,000 (794,000) (4,000)
Change in operating assets and liabilities:
Accounts receivable (497,596) (1,032,401) (1,947,380)
Unbilled die costs (227,112) 404,829 486,071
Inventories 1,588,712 (1,102,691) (2,814,393)
Prepaid expenses 44,092 (160,925) 59,421
Accounts payable and accrued expenses 53,365 779,856 (85,562)
Taxes on income (199,258) 205,898 (251,801)
Reserve for plant consolidation (1,364,858) 1,862,713
Net cash provided by (used in)
operating activities 2,606,797 3,042,848 (1,346,680)
Cash Flows from Investing Activities:
Purchases of marketable securities (3,749,094)
Proceeds from sale of marketable securities 4,485,879 4,619,862
Maturity of marketable securities 2,044,968
Proceeds from sale of equipment 88,900 97,140 110,701
Capital expenditures (3,479,071) (1,186,516) (1,470,120)
Net cash provided by (used in)
investing activities (1,345,203) 3,396,503 (488,651)
Cash Flows from Financing Activities:
Repurchase of stock (7,260,000) (779,056)
Dividends paid (683,238) (864,738) (864,738)
Net cash used in financing activities (7,943,238) (864,738) (1,643,794)
Increase (Decrease) in Cash and Cash Equivalents (6,681,644) 5,574,613 (3,479,125)
Cash and Cash Equivalents at Beginning of Year 9,661,018 4,086,405 7,565,530
Cash and Cash Equivalents at End of Year $ 2,979,374 $ 9,661,018 $ 4,086,405
<FN>
See notes to financial statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Statements of Shareholders' Investment
Years Ended July 31, 1995, 1994 and 1993
Common Stock Issued
and Outstanding Retained
Shares Amount Earnings
<S> <C> <C> <C>
Balance, August 1, 1992 891,602 $ 849,862 $ 22,883,623
Cash dividends ($1.00 per share) (864,738)
Net earnings 2,220,915
Repurchase of stock (26,864) (25,607) (753,450)
Balance, July 31, 1993 864,738 824,255 23,486,350
Cash dividends ($1.00 per share) (864,738)
Net earnings 2,048,952
Balance, July 31, 1994 864,738 824,255 24,670,564
Cash dividends ($1.00 per share) (683,238)
Net earnings 1,556,818
Repurchase of stock (242,000) (230,671) (7,029,329)
Balance, July 31, 1995 622,738 $ 593,584 $ 18,514,815
<FN>
See notes to financial statements.
</TABLE>
8
<PAGE>
Notes to Financial Statements
Years ended July 31, 1995, 1994 and 1993
Note 1. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by
Howell Industries, Inc. (the "Company") in the preparation of the financial
statements.
Inventories are stated at the lower of cost or market. The cost of raw
material and the material content of work-in-process and finished goods is
determined by the last-in, first-out method (LIFO). The cost of the remaining
components of inventory, approximately 36% and 31% as of July 31, 1995 and
1994, respectively, is determined by the first-in, first-out method (FIFO).
Property, Plant, and Equipment are recorded at cost. The Company provides
depreciation and amortization of plant and equipment by annual charges against
earnings, generally on the straight-line method at rates based on the
estimated useful lives of the respective depreciable assets. Estimated useful
lives are generally as follows:
<TABLE>
<CAPTION>
Years
<S> <C>
Buildings and improvements 10-25
Machinery and equipment 5-25
Automobiles and trucks 3-5
</TABLE>
Taxes on Income - Effective August 1, 1993, the Company adopted on a
prospective basis the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," which requires an
asset liability approach and reporting for income taxes. Deferred income tax
assets and liabilities are recorded for differences between the financial
statement and tax bases of assets and liabilities that will result in taxable
or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. The effect of the
adoption of this statement was to increase earnings by approximately $240,000,
shown as a cumulative effect of an accounting change. The prior years results
of operations are accounted for using the provisions of Accounting Principles
Board Opinion No. 11.
Statements of Cash Flows - For purposes of the statements of cash flows, the
Company considers all highly liquid investments with an original maturity of
three months or less from the date of purchase to be cash equivalents.
Reclassifications have been made to the 1994 financial statements to conform
to the presentation in 1995.
Note 2. Inventories
On a supplemental basis, if all inventories had been valued on the FIFO
method, the inventory balance would have been higher by approximately
$1,936,000 in 1995 and $1,608,000 in 1994.
Note 3. Taxes on Income
Taxes on income are comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $ 253,000 $ 1,510,000 $ 782,000
State and local 10,000 166,000 107,000
Deferred debit (credit) 457,000 (794,000) (4,000)
Total $ 720,000 $ 882,000 $ 885,000
</TABLE>
A reconciliation of the income tax provision to that which would result by
applying the United States statutory tax rate (34%) to earnings before taxes
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Tax based on statutory tax rate $ 774,000 $ 915,000 $ 1,056,000
Tax-exempt income (86,000) (96,000) (90,000)
Tax deductible ESOP dividend (30,000) (33,000) (39,000)
State and local income taxes,
net of federal income tax benefit (7,000) 110,000 71,000
Permanent differences relating to amended returns (56,000)
Other 69,000 (14,000) (57,000)
Taxes on income $ 720,000 $ 882,000 $ 885,000
</TABLE>
9
<PAGE>
Note 3. Taxes on Income, continued
Temporary differences and carryforwards which give rise to significant
deferred tax assets and liabilities at July 31, 1995 and 1994 are:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Reserves recorded for financial accounting purposes,
not deductible for tax purposes until paid $ 382,000 $ 831,000
Employee benefits and payroll related deferrals 195,000 176,000
Total deferred tax assets 577,000 1,007,000
Current portion 23,000 774,000
Noncurrent portion - deferred tax assets $ 554,000 $ 233,000
Deferred tax liabilities:
Employee benefits and payroll related deferrals $ 28,000 $ 23,000
Use of straight-line depreciation for book
purposes and accelerated methods
for tax purposes 632,000 615,000
Other 19,000 14,000
Total deferred tax liabilities 679,000 652,000
Current portion 19,000 23,000
Noncurrent portion - deferred tax liabilities $ 660,000 $ 629,000
</TABLE>
Note 4. Employee Benefit Plans
The Company has three noncontributory defined benefit pension plans covering
substantially all of its employees and an unfunded noncontributory defined
contribution plan for certain officers. Benefits, which differ by plan, are
based on years of service and/or the employee's five-year average
compensation. The Company's funding policy, for its defined benefit plans, is
to contribute annually an amount necessary to meet or exceed the Employee
Retirement Income Security Act's (ERISA) minimum funding standards.
As a result of the plant consolidation (see Note 9), the Company recognized a
curtailment in one of its pension plans. The curtailment approximated $80,000
and was accrued in 1994 as part of the plant consolidation reserve. This
amount was reclassified in 1995 from plant consolidation reserve to net
pension liability and is reflected in the funded status table below.
The components of net pension cost for 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Year Ended July 31 1995 1994 1993
<S> <C> <C> <C>
Defined benefit plans:
Service cost - benefits earned during the year $ 192,459 $ 159,944 $ 149,451
Interest cost on projected benefit obligation 251,724 236,258 227,880
Actual return on plan assets (372,711) (54,517) (321,069)
Net amortization and deferral and other 194,711 (183,448) 29,419
Total 266,183 158,237 85,681
Defined contribution plan 45,713 25,689 25,393
Net pension costs $ 311,896 $ 183,926 $ 111,074
</TABLE>
10
<PAGE>
The following table sets forth the funded status and amounts recognized in the
balance sheets for the defined benefit plans:
<TABLE>
<CAPTION>
Assets Accumulated
Exceed Benefits
Accumulated Exceed
July 31, 1995 Benefits Assets
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation $ 1,010,422 $ 2,086,999
Unvested benefit obligation 77,729 89,494
Accumulated benefit obligation 1,088,151 2,176,493
Effect of future salary increases 785,716
Projected benefit obligation for services rendered to date 1,873,867 2,176,493
Plan assets at fair value 1,854,509 1,969,793
Plan assets less than projected benefit obligation (19,358) (206,700)
Items not recognized in earnings:
Unrecognized net loss (gain) 33,879 (47,381)
Prior service cost not yet recognized in net periodic pension 169,339 129,342
Unrecognized net (asset) obligation at July 31, 1995 (143,502) 110,980
Adjustment required to recognize minimum liability (192,941)
Net prepaid pension cost/(pension liability)
recognized in the balance sheet $ 40,358 $ (206,700)
</TABLE>
<TABLE>
<CAPTION>
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets
<S> <C> <C>
July 31, 1994
Actuarial present value of benefit obligation:
Vested benefit obligation $ 998,822 $ 1,520,017
Unvested benefit obligation 58,825 109,174
Accumulated benefit obligation 1,057,647 1,629,191
Effect of future salary increases 705,397
Projected benefit obligation for services rendered to date 1,763,044 1,629,191
Plan assets at fair value 1,627,476 1,103,395
Plan assets less than projected benefit obligation (135,568) (525,796)
Items not recognized in earnings:
Unrecognized net loss 16,176 205,440
Prior service cost not yet recognized in net periodic pension 188,582 171,668
Unrecognized net (asset) obligation at July 31, 1994 (168,244) 173,838
Adjustment required to recognize minimum liabilities -- (550,946)
Net pension liability recognized in the balance sheets $ (99,054) $ (525,796)
</TABLE>
The actuarial assumptions used in determining the present value of the
projected benefit obligations are:
<TABLE>
<CAPTION>
Year Ended July 31 1995 1994 1993
<S> <C> <C> <C>
Weighted average discount rate 7.6% 7.5% 7.5%
Increase in future compensation levels 5.0 5.0 5.0
</TABLE>
The expected long-term rate of return on assets ranged from 7.50% to 7.25% in
1995, 1994 and 1993. Plan assets are invested in a portfolio of cash, income
and equity securities and a diversified fund with guaranteed returns.
The Company also maintains an Employee Stock Ownership Plan (ESOP) and an
Employee Savings Plan (401(k) plan) covering substantially all employees not
covered by a collective bargaining agreement.
At July 31, 1995 and 1994, the ESOP owned 85,933 shares and 91,827 shares of
common stock, respectively, all of which had been allocated to individual
participants.
11
<PAGE>
Note 4. Employee Benefit Plans, continued
Contributions to the ESOP are authorized at the discretion of the Board of
Directors. No contributions were charged to expense during 1995, 1994 or 1993.
There were no amounts accrued at July 31, 1995, 1994 or 1993 for such
contributions.
The Employee Savings Plan provides for participants to contribute up to 10% of
their annual compensation each year. In addition, the Company contributes an
amount equal to 25% of the first $1,000 contributed by the employee, plus
$200. Company contributions amounted to approximately $24,200 in 1995, $27,300
in 1994, and $25,800 in 1993.
Note 5. Supplemental Cash Flows Disclosure
Cash paid for income taxes was $768,000 in 1995, $1,494,664 in 1994 and
$1,134,239 in 1993.
Note 6. Line of Credit
In 1995, the Company converted its $2,000,000 unsecured line of credit into a
$4,000,000 unsecured line of credit with a 5% compensating balance agreement.
The Company did not borrow under either of these lines of credit in 1995, 1994
or 1993.
Note 7. Other Long-term Liabilities
Other long-term liabilities are comprised of the following at July 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Reserve for plant consolidation $ 119,599 $ 400,000
Environmental reserve 706,045 500,000
Other 310,780 284,953
Total $1,136,424 $1,184,953
</TABLE>
Note 8. Segment Information
The Company is an original equipment manufacturer of structural components for
the automotive industry. Sales to the Company's major customers were
$34,161,216 and $26,616,697 in 1995, $31,160,608 and $28,483,970 in 1994; and
$28,070,687, $11,499,092 and $4,690,487 in 1993.
Note 9. Plant Consolidation
In 1995, the Company substantially completed the consolidation of its
manufacturing operations which resulted in moving the majority of production
from the Lapeer, Michigan plant to the Masury, Ohio plant. The estimated costs
of this process including severance pay, increased medical and other fringe
benefits, increased pension costs due to a curtailment of one of the hourly
pension plans, press moves and consulting fees, were accrued during the third
quarter of 1994. Total expense of $1,900,000 was recorded (tax effect of
$646,000). During 1995, $800,000 of these costs were returned to income after
a determination that they would not be incurred. Approximately $765,000 was
paid during 1995 primarily for severance pay and the press moves and $37,000
was paid during 1994 related to the consolidation of the manufacturing plants.
Note 10. Contingencies
At July 31, 1995, the Company had an accrued liability of approximately
$706,000 relating to environmental matters. The Company has been identified by
a group of companies as a potentially responsible party related to a
contaminated landfill along with numerous other potentially responsible
parties. The Company also is defendant in lawsuits brought in July 1994 by a
purchaser of a plant site, previously owned by the Company, and in September
1995 by the city in which the plant was located, alleging that the site was
contaminated. Although it is difficult to estimate the liability to the
Company related to these matters, management believes that the amount accrued
is reasonable based upon the information currently available and that eventual
amounts paid for these matters will not have a materially adverse effect upon
its financial condition.
12
<PAGE>
Note 11. Stock Repurchase
In fiscal 1995, the Company repurchased and retired 242,000 shares of common
stock from certain major shareholders at a total cost of $7,260,000.
Note 12. Operating Leases
The Company rents its corporate headquarters and a warehouse under
noncancelable operating leases. Total rent expense under these leases was
$114,000 in 1995, $92,000 in 1994 and $93,000 in 1993. The aggregate minimum
rental commitments under existing leases as of July 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year Ending July 31 Amount
<S> <C>
1996 $82,000
1997 51,000
</TABLE>
Note 13. Research and Development Expense
The Company performs research and development for the design of new products.
Total research and development expense was $162,000 in 1995, $142,000 in 1994
and $135,000 in 1993.
Independent Auditors' Report
Shareholders and Board of Directors
Howell Industries, Inc.
Southfield, Michigan
We have audited the accompanying balance sheets of Howell Industries, Inc. as
of July 31, 1995 and 1994, and the related statements of operations,
shareholders' investment, and cash flows for each of the three years in the
period ended July 31, 1995. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Howell Industries, Inc. as of July 31,
1995 and 1994, and the results of its operations and its cash flows for each
of the three years in the period ended July 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, effective August 1, 1993
Howell Industries, Inc. changed its method of accounting for income taxes.
/s/ Deloitte & Touche LLP
Detroit, Michigan
September 15, 1995
13
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
Years ended July 31 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net sales $ 62,635,404 $63,004,461 $ 45,385,637 $ 39,434,334 $ 36,466,937
Cost of products sold 55,856,884 53,667,625 38,165,826 32,781,437 30,808,838
Depreciation 1,231,295 1,103,032 1,068,054 1,066,812 958,602
Provision for plant consolidation (800,000) 1,900,000 -- -- --
Interest income 287,498 496,286 573,632 845,923 942,482
Interest expense 2,488 1,011 42,767 -- 9,942
Taxes on income 720,000 882,000 885,000 848,000 472,000
Earnings after income taxes, before
cumulative effect of change in method
of accounting for income taxes 1,556,818 1,808,952 2,220,915 2,032,387 1,538,062
Cumulative effect of change in method
of accounting for income taxes -- 240,000 -- -- --
Net earnings 1,556,818 2,048,952 2,220,915 2,032,387 1,538,062
Earnings per share after income taxes,
before cumulative effect of change in
method of accounting for income taxes 2.21 2.09 2.56 2.28 1.72
Earnings per share on cumulative effect
of change in method of accounting for
income taxes -- 0.28 -- -- --
Net earnings per common share 2.21 2.37 2.56 2.28 1.72
Total assets 25,545,981 33,733,152 29,983,471 29,747,713 28,432,988
Dividends per share 1.00 1.00 1.00 1.00 1.00
</TABLE>
<TABLE>
<CAPTION>
Quarterly Earnings Data
Quarter ended October 31, Quarter ended January 31,
1994 1993 1995 1994
<S> <C> <C> <C> <C>
Net sales $17,465,568 $15,210,401 $14,465,928 $15,342,737
Gross profit 1,772,373 1,807,091 1,486,489 1,903,815
Provision for plant consolidation -- -- (300,000) --
Earnings after income taxes, before cumulative
effect of change in method of accounting
for income taxes 574,221 601,607 479,247 646,813
Cumulative effect of change in method of
accounting for income taxes -- 240,000 -- --
Net earnings 574,221 841,607 479,247 646,813
Earnings per share after income taxes, before
cumulative effect of change in method of
accounting for income taxes 0.66 0.69 0.74 0.75
Earnings per share on cumulative effect of change
in method of accounting for income taxes -- 0.28 -- --
Earnings per share 0.66 0.97 0.74 0.75
</TABLE>
<TABLE>
<CAPTION>
Quarter ended April 30, Quarter ended July 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 15,929,143 $ 18,062,608 $ 14,774,766 $ 14,388,715
Gross profit 1,363,501 2,640,712 995,805 1,957,435
Provision for plant
consolidation -- 1,900,000 (500,000) --
Net earnings (loss) 231,317 (219,020) 272,033 779,552
Earnings (loss) per share 0.37 (0.25) 0.44 0.90
</TABLE>
14
<PAGE>
Financial Review
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
1995 versus 1994: The Company reported net earnings of $1,556,818 ($2.21 per
share) for the year ended July 31, 1995 compared to net earnings of $2,048,952
($2.37 per share) for the year ended July 31, 1994. Net earnings for 1995
includes $800,000 returned to income representing the reversal of previously
recorded restructuring costs. The reduction in net earnings is primarily a
result of manufacturing inefficiencies at the Masury plant stemming from the
consolidation efforts and increases in raw material costs. The operating
inefficiencies and increased material costs resulted in a 4% increase in cost
of products sold as a percentage of net sales in fiscal 1995 compared to fiscal
1994. Net sales were approximately the same in 1995 as in 1994.
Selling and administrative expenses increased only slightly during the
year ended 1995 compared to the year ended July 31, 1994. The dollar increase
was due to general salary and miscellaneous cost increases. The decrease in
interest income of $210,000 results from the lower average balance of
investments which was the result of the purchase and retirement of Company
stock during the second quarter of 1995. Other income decreased due to
additional charges for environmental matters.
The reversal of the plant consolidation reserves of $800,000 included
$550,000 for estimated workers' compensation claims which was determined to be
unnecessary due to fewer claims being filed than had been expected. The
remainder of the reversal is primarily attributable to lower severance costs as
a result of several employees voluntarily terminating their employment prior to
the layoff date. Management estimates that approximately $100,000 of the
remaining accrual for plant consolidation will result in cash outflows during
fiscal 1996, with the remaining cash outflows occurring in fiscal 1997.
The Company's cash and marketable securities of $3.8 million as of
July 31, 1995 reflect a decrease of $8.7 million from July 31, 1994. This
change in liquidity is primarily the result of $2.6 million in cash generated
from operations being offset by use of $7.3 million for the stock repurchase,
$3.5 million for capital expenditures and $.7 million related to the plant
consolidation. The capital expenditures were primarily at the Masury plant in
preparation for a new vehicle part. The decrease in inventory at July 31, 1995
represents a return to normal inventory levels. The July 31, 1994 inventory
balance included a build-up of work in process at the Lapeer plant in
preparation for the plant consolidation.
1994 versus 1993: The decrease in net earnings in fiscal 1994 over fiscal 1993
was primarily the result of higher net sales in fiscal 1994 offset by the
provision for plant consolidation. Net sales increased approximately 39% in
1994 due to an overall increase in light duty truck sales and the introduction
of a new vehicle part. The cost of products sold as a percentage of sales in
1994 increased slightly as a result of higher material costs.
The increase in selling and administration expenses in 1994 from 1993 is
primarily the result of general salary and miscellaneous cost increases.
Interest income decreased as a result of the movement of funds from long-term
investments to short-term investments, which have lower rates. Other income
decreased due to additional charges for environmental matters.
The plant consolidation charge of $1,900,000 in the year ended July 31,
1994 included the estimated costs to consolidate the significant portion of the
manufacturing operations from the Lapeer, Michigan plant to the Masury, Ohio
plant, including the recognition of pension curtailment costs, press moves,
severance pay, workers' compensation claims and other related costs for
separated employees.
Liquidity and Capital Resources
In fiscal 1995, the Company provided cash from operating activities of
$2,600,000. The components of working capital primarily offset each other,
decreases in inventory were offset by increases in accounts receivable and
decreases in the plant consolidation accruals. The Company used cash for the
payment of dividends of approximately $683,000 and made capital expenditures of
approximately $3,500,000. In November 1994, the Company repurchased 242,000
shares at $30 per share from certain major shareholders for $7,260,000. The
Company used available cash to fund the purchase. The Company also has
available a $4,000,000 unused bank line of credit. The Company expects to meet
the current obligations of its manufacturing operations through cash generated
by operating activities.
General
Along with other parts suppliers, the Company faces increasing price pressure,
stringent quality standards, the need to supply more engineering services, and
the possible loss of bidding opportunities as automotive manufacturers reduce
the number of their suppliers. Although there are uncertainties, potential
customer changes are not expected to materially affect the Company's overall
sales level. At July 31, 1995, the Company has reserved approximately $700,000
relating to environmental matters. The Company has been identified as a
potentially responsible party related to a contaminated landfill along with
numerous other potentially responsible parties. The Company also is a defendant
in lawsuits, brought in July 1994 by a purchaser of a plant and in September
1995 by the city in which the plant site was located, alleging that the site
was contaminated. Although it is difficult to estimate the liability to the
Company related to these matters or the expenses that will be incurred,
management believes that the disposition of these matters will not have a
materially adverse effect upon its financial condition.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE HOWELL INDUSTRIES, INC. FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JUL-31-1995
<CASH> $ 2,979,374
<SECURITIES> 850,066
<RECEIVABLES> 7,789,259
<ALLOWANCES> 0
<INVENTORY> 5,267,221
<CURRENT-ASSETS> 17,932,084
<PP&E> 21,534,505
<DEPRECIATION> (13,920,608)
<TOTAL-ASSETS> 25,545,981
<CURRENT-LIABILITIES> 5,195,158
<BONDS> 0
<COMMON> 593,584
0
0
<OTHER-SE> 18,514,815
<TOTAL-LIABILITY-AND-EQUITY> 25,545,981
<SALES> 62,635,405
<TOTAL-REVENUES> 62,635,405
<CGS> 55,856,885
<TOTAL-COSTS> 57,400,076
<OTHER-EXPENSES> (800,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,276,818
<INCOME-TAX> (720,000)
<INCOME-CONTINUING> 1,556,818
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,556,818
<EPS-PRIMARY> 2.21
<EPS-DILUTED> 2.21
</TABLE>
