SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT
For the fiscal year ended
December 31, 1993 Commission File Number: 1-8684
EXCEL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Indiana 35-1551685
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification Number)
1120 North Main Street, P.O. Box 3118, Elkhart, Indiana 46515-3118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (219) 264-2131
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Shares, without
par value American Stock Exchange
Securities registered under 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)
The number of shares of the Registrant's Common Shares, no par value,
outstanding on March 4, 1994 was 10,577,936. The aggregate market value of
the Registrant's Common Shares held by nonaffiliates on March 4, 1994 was
$148,365,553.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Excel Industries, Inc. proxy statement for the 1994
annual meeting of shareholders are incorporated by reference into Part
III of this report.
PART I.
ITEM 1. BUSINESS
GENERAL
The registrant, an Indiana corporation (hereinafter, the "Company"), is the
leading independent designer, manufacturer and supplier of window systems to
the combined automobile, light truck and van, bus, heavy truck and
recreational vehicle markets in North America. The Company's window systems
include various types of automotive windshields; rear, vent, quarter, push out
and sliding windows; and window regulator systems, latches, door frames and
related components. The Company also manufactures door systems for military
and recreational vehicles and injection molded thermoplastic products and
other products primarily for sale to the automotive industry. The Company's
products are sold to major North American transportation original equipment
manufacturers ("OEMs") including Ford, Chrysler, General Motors, AutoAlliance
International, Inc. (a joint venture between Ford and Mazda), Mitsubishi,
Nissan, Fleetwood, Winnebago, Navistar, Paccar (Peterbilt and Kenworth trucks)
and the manufacturers of virtually all of the intra and intercity buses in the
United States and Canada.
BUSINESS STRATEGY
The Company's business objective is to expand profitably its position as the
leading independent supplier of window systems to the combined automotive,
light truck and van, bus, heavy truck and recreational vehicle markets in
North America. It also intends to broaden its product offerings to these
markets, as well as expand its capabilities to complementary markets.
Continued focus on achieving recognition as a world class manufacturer is a
key component of this strategy. The Company continually strives for world
class status through technical innovation, quality excellence, cost
competitiveness and strategic alliances and acquisitions.
Technical Innovation. The Company's most significant innovative achievement
has been the development of reaction injection molded ("RIM") modular windows
in the mid-1980's. This value-added product resulted from a long internal
development effort and accounted for 35% of net sales in 1993. In recent
years, as automotive OEMs increasingly shifted design, innovation, quality and
product improvement responsibility to their suppliers, the Company increased
its research, engineering and development expenditures (from $2.7 million in
1989 to $7.9 million in 1993), including the addition of an advanced design
group and Company-wide computer-aided design capability. The Company has also
added more sophisticated program management and complex manufacturing
information systems. The Company's capabilities now include prototype and
product development, specification testing and manufacturing engineering
assistance. This has resulted in increased opportunities for the Company to
participate earlier in the product planning process and to add value by
furnishing engineering and design services and providing a broader range of
parts required for vehicle assembly.
Quality Excellence. The Company emphasizes a continuous improvement
philosophy to its employees on all facets of operations including product
quality. As a result of its commitment to quality, the Company has achieved
Q1 and Pentastar quality ratings at its key manufacturing plants from Ford and
Chrysler, respectively, and has received quality awards from Fleetwood (a
recreational vehicle OEM), Nissan and other OEMs. At the corporate technical
center, engineers examine the Company's and its competitors' products to
evaluate alternative designs, suggest marketing opportunities and solve
potential production problems, all of which serve to improve and maintain the
Company's stringent quality standards.
Competitive Cost. The Company strives to achieve a competitive cost to its
customers through its emphasis on quality excellence and its involvement in
the early stages of product development. The Company is a highly reliable and
timely supplier able to meet its customers' demanding delivery requirements,
while constantly focusing on reducing OEM inventory levels.
Strategic Alliances. In 1986, Ford entered into a supply agreement (the
"Supply Agreement") with the Company. Pursuant to the Supply Agreement, Ford
agreed to purchase from the Company at least 70% of the requirements by dollar
volume of Ford and Ford Canada for modular framed glass parts using RIM and
polyvinyl chloride ("PVC") technology, commencing with the 1990 model year.
Ford's purchase obligations are contingent upon the Company being competitive
as to technology, quality, service, price and delivery. The Supply Agreement,
which is currently scheduled to expire at the end of the 1998 model year, has
been complemented by a supply agreement between Ford and the Company dated
January 31, 1994 (the "1994 Supply Agreement"), which extends through the 1998
calendar year and which provides for Ford to purchase 100% of its requirements
for those parts currently supplied by the Company (including parts other than
modular windows), subject to specified annual price reductions. Since 1990,
the Company has and is continuing to supply at least 70% of Ford's
requirements for modular framed glass, which have predominately been modular
windows using RIM technology. The Company works closely with Ford during the
development and production by Ford of new products utilizing parts supplied by
the Company, and net sales to Ford have increased from $26.7 million in 1985
to $373.1 million in 1993.
The Company also benefits from an exclusive purchase and supply agreement with
H.S. Die & Engineering of Grand Rapids, Michigan. H.S. Die supplies the molds
(i.e., tooling) to the Company necessary to manufacture modular windows.
Working closely with OEMs and H.S. Die, the Company is able to move rapidly
from design to finished tooling for modular windows. As a result of this
alliance, preproduction lead-times on new programs have been decreased by more
than a year, which was demonstrated in Ford's development of the recently
introduced Mustang model.
Another strategic alliance links the Company with Schade KG, a modular and
conventional window and door systems supplier located in Plettenberg, Germany.
Pursuant to a Reciprocal Technology License and Cooperative Venture Agreement,
both companies have cooperated in developing new business proposals. Schade
helped the Company develop technical capabilities in PVC modular windows. The
Company produces PVC windows for the Chrysler New Yorker at its Kentucky
manufacturing facility and has been sourced to supply PVC windows for certain
1995 Mitsubishi and Nissan models. In addition, technology acquired from the
Company's alliance with Schade has enabled the Company to supply door frames
for General Motors's 1994 Saturn Coupe.
In 1992, the Company formed a joint venture with Pollone S.A., a Brazilian
automotive parts supplier, for the purpose of supplying encapsulated window
assemblies to South American automakers. Located near Sao Paulo, Brazil, the
joint venture, Pollexco, is owned 49% by the Company and 51% by Pollone, S.A.
Production of products for Autolatina, a joint venture between Ford and
Volkswagen, began in late 1993.
Strategic Acquisitions. In acquisitions, the Company seeks processes,
products or markets which complement the Company's existing businesses. The
Company added high volume conventional window capacity to its product line as
a result of a 1986 acquisition from Irvin Industries. In the mid-1980's,
Ford--initially the Company's only RIM window customer--started its own
subsidiary to manufacture RIM windows in Fulton, Kentucky. In 1986, the
Company acquired Ford's RIM window subsidiary and manufacturing facility. In
1988, the Company acquired Nyloncraft, Inc., which manufactures injection
molded thermoplastic products primarily for the automotive industry.
Nyloncraft also supplies plastic components to six of the Company's
manufacturing facilities. In 1990, the Company acquired the window regulator
business operated by Hoover Universal, Inc., a subsidiary of Johnson Controls,
Inc. The Company's technical capabilities, in particular the corporate
technical center, have enabled it to redesign several products, reduce
operating expenses and improve overall operations in the newly-acquired window
regulator business.
MARKET DESCRIPTION AND INDUSTRY FACTORS
Automotive Market
General. The overall market for new cars and light trucks in North America is
large and cyclical, with average annual growth of 1% to 2%. However,
considerable growth or decline routinely occurs within specific product
segments or model lines. In particular, light truck sales have grown rapidly
over the last 15 years as compared to the demand for cars. This growth in
light truck demand primarily reflects the increased use of mini-vans and sport
utility vehicles. The Company believes it will continue to be well-positioned
as a supplier of window systems to OEMs in this higher growth market segment.
Changing Supplier Policies. Several developments have substantially altered
the competitive environment for automotive suppliers, including consolidation
among suppliers and increased outsourcing of key components by OEMs. During
the 1980s, Ford, Chrysler and General Motors began to reduce their supplier
base, focusing on long-term sole-source contracts with more capable suppliers.
Increasingly, the criteria for selection include not only cost, quality and
responsiveness, but also certain full-service capabilities including design,
engineering and project management support. OEMs now have rigorous programs
for evaluating and rating suppliers which encompass quality, cost control,
reliability of delivery, new technology implementation, engineering
competence, continuous improvement programs and overall management. Under
these programs, each facility operated by a supplier is evaluated
independently. The suppliers who obtain superior ratings are favorably
considered for new business; those who do not may continue their existing
contracts, but normally do not receive additional business. As a result,
these new supplier policies have sharply reduced the number of component
suppliers. In the 1990's, OEM supply agreements have incorporated
productivity provisions which specify annual price reductions which may be
offset by product improvements, manufacturing improvements and/or various
other mutually agreed upon methods.
Transplants. Over the last ten years, Japanese manufactured vehicles have
gained an increasing share of the North American market. In addition, a
growing percentage of such vehicles are being made at North American
operations of Japanese manufacturers ("Transplants"). Transplants receive
component parts from a variety of sources including suppliers in Japan,
Japanese suppliers who establish U.S. facilities and existing U.S. component
suppliers. Because of the current market share of the Transplants, supplying
them is an attractive opportunity. To date, the Company has been selected to
supply window systems for certain Nissan, Mazda and Mitsubishi models
manufactured in North America. The Company has also been selected to supply
fixed vent windows for the new BMW model scheduled to be built in South
Carolina in 1995.
Non-Automotive Market
The market for heavy trucks in North America is cyclical, and the Company
believes it is well positioned to take advantage of supply opportunities which
arise as aging fleets are replaced with new models. The availability of
federally funded programs and the price of gasoline and diesel fuel are
factors which affect the demand for intracity buses purchased for municipal
mass transit systems. The market for recreational vehicles is influenced
significantly by the strength of the economy and the level of consumer
discretionary spending. Recent growth trends in the sale of recreational
vehicles have been positive.
PRODUCTS
The Company designs, engineers, manufactures and supplies plastic and metal
framed window assemblies, manual and power glass regulator systems and
injection molded thermoplastic products principally for North American car,
light truck and van, heavy truck, bus, military and recreational vehicle OEMs.
The Company does not manufacture or sell primary glass.
Modular Window Systems. The Company's modular, plastic framed windows are
value-added parts because clips, weatherstripping and bright trim are attached
during the molding process. The module-manufacturing processes used by the
Company give the OEM designers great flexibility in window shape, sealing and
aerodynamics. The module supplied to the OEM also lowers its parts inventory,
reduces part weight and reduces assembly efforts. The Company produces
modular windshields and rear windows, as well as fixed quarter, sliding and
push out modular windows.
The Company utilizes RIM technology and also PVC injection molding technology
to manufacture modular windows. In RIM technology, liquids are mixed and fed
into a mold that holds glass, framing and fastening components. The mixture
polymerizes, and the completed module is removed, trimmed, cleaned, inspected
and packed for shipment. In PVC injection molding, solid plastic subjected to
high temperature and pressure flows in liquid form into the mold where it
reverts without chemical reaction to a solid.
Conventional Windows. The Company also produces conventionally framed window
assemblies utilizing painted cold-rolled steel, stainless steel, rubber and/or
aluminum. The glass or plastic glazed window assemblies supplied for mass
transit systems have durable aluminum frames and non-leak weatherstripping.
The Company supplies a wide variety of conventional windows to car, light
truck and heavy truck OEMs, including pivoting wing ventilator windows, fixed
and movable quarter windows and swing-out and sliding windows. The Company's
flush-mount recreational vehicle windows seal tightly and feature independent
sliding screens, removable storm windows and an anti-theft locking mechanism.
Window Regulator Systems. The Company supplies manual and electrically
powered versions of regulators (the mechanisms for lifting and lowering
windows) for front and rear side windows and tailgate windows. The Company
stresses safety, weight, glass stability, window system integration, parts
reduction and enhanced vehicle design flexibility in its window regulators.
Injection Molded Thermoplastic Products. The Company's Nyloncraft division
manufactures injection molded inside and outside door handles, door latch
components, fan shrouds, airspring pistons, window crank handles and a variety
of other custom engineered products. The Company molds parts from nylons,
polyesters, acetal and other engineered thermoplastic materials.
Door Systems. The Company designs and manufactures preassembled doors for
Class A motorhomes and ballistic door/window systems for the Hummer tactical
military vehicle. The Company's preassembled door systems improve the OEMs'
installation productivity and assist in design flexibility.
CUSTOMERS AND MARKETING
The Company supplies its products primarily to Ford, Chrysler and General
Motors. Historical sales of the Company by customer group are set forth
below. The loss of Ford, Chrysler or General Motors as a customer would have
a material adverse effect on the Company.
<TABLE>
Year Ended December 31,
<CAPTION>
1991 1992 1993
Net Net Net
Sales Percent Sales Percent Sales Percent
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Ford $243,577 69% $310,579 73% $373,116 72%
Chrysler 27,279 8 36,944 9 56,445 11
General Motors 26,254 8 18,973 4 20,109 4
Other 55,158 15 60,377 14 66,011 13
Total $352,268 100% $426,873 100% $515,681 100%
</TABLE>
Sales of the Company's products to OEMs are made directly by the Company's
sales and engineering personnel located at the Company's offices in the
Detroit area and Elkhart, Indiana. Through these sales and engineering
offices, the Company services its OEM customers and manages its continuing
programs of product design improvement and development.
The Company's customers award contracts that normally cover parts to be
supplied for a particular vehicle model. Such contracts typically extend over
the life of the model, which is generally four to seven years. The primary
risk to the Company is that an OEM will produce fewer units of a model than
anticipated. In addition, the Company competes for new business to supply
parts for successor models and therefore runs the risk that the OEM will not
select the Company to produce parts on a successor model. In order to reduce
its reliance on any one model, the Company produces parts for a broad cross-
section of both new and more mature models. The Company has been chosen as a
supplier on a variety of generally successful car, light truck and van models.
The following table presents a summary of the 1994 and 1995 models for which
the Company is producing or will produce component parts.
COMPANY 1994/1995 MODELS
Ford Escort, Explorer, Taurus, Sable, Aerostar, Windstar,
Ranger, Continental, Cougar, Mark VIII, Bronco,
Thunderbird, Town Car, Econoline, Crown Victoria,
Grand Marquis, Mustang, Probe, Villager, F-Series
Truck
Chrysler LHS, LeBaron, Fifth Avenue, Imperial, Cherokee,
Wrangler, Comanche, Voyager, Avenger, Sebring,
Concorde, Intrepid, Vision, New Yorker, Dakota, Ram
Truck, Ram Van/Wagon, Talon
General Motors Cavalier, Sunbird, Vandura Van, APV Mini-Van, S-10
Truck, Saturn Coupe, Saturn Station Wagon
Nissan Quest, Sentra GS, Nissan Truck
Mazda MX6
Mitsubishi Eclipse
Based on its ability to service its OEM customers' needs effectively, the
Company believes it will be able to maintain its position on most existing
models, while also expanding into new models as further consolidation in the
OEM supplier base occurs. The Company believes that the presence of
Transplants represents an attractive growth opportunity over the next decade.
The Company is currently supplying products for Mazda, Nissan and Mitsubishi
models. The Company believes that it is favorably positioned to increase its
business with the Transplants because of the Company's reputation for
technical innovation, quality excellence, reliability and competitive cost.
In the non-automotive markets, the Company sells various types of conventional
window systems to North American OEMs of medium and heavy trucks, recreational
vehicles and buses. The Company is the dominant supplier of wing ventilator
windows for medium and heavy trucks manufactured in the United States and
Canada. The Company's customers include Navistar, Freightliner, Volvo GM
Heavy Truck Corp., Mack Truck, Paccar (Kenworth and Peterbilt models) and
Ford. The Company supplies aluminum framed window systems to Fleetwood and
Winnebago, the leading recreational vehicle OEMs in North America, as well as
a number of other recreational vehicle manufacturers. The Company is the
dominant supplier of metal framed window systems to intra and intercity bus
OEMs.
The Company also manufactures preassembled doors for certain recreational
vehicle OEMs and door systems for the Hummer tactical military vehicle.
The Company maintains separate sales and engineering groups at its corporate
offices in Elkhart, Indiana to service these non-automotive markets. The
Company has received "Supplier of the Year" and "Master of Quality" awards
from Fleetwood and Freightliner, respectively, as well as recognition for
quality and delivery accomplishments from other non-automotive OEMs. The
Company believes that its cost competitiveness, quality excellence and design
and engineering capabilities obtained in the automotive supply markets enable
it to compete effectively in non-automotive markets as well.
COMPETITION
The Company operates in a highly competitive environment in each of its
markets. The number of the Company's competitors in the automotive markets is
expected to decrease due to the supplier consolidation resulting from changing
OEM policies. The Company's major competitors include Donnelly Corporation,
Libbey-Owens-Ford Co., Guardian Industries, Dura, Inc., Rockwell
International, Hehr International, OEM internal operations and a large number
of smaller operations.
The Company principally competes for new business both at the beginning of the
development of new models and upon the redesign of existing models by its
major customers. New model development generally begins two to four years
prior to the marketing of such models to the public. Once a producer has been
designated to supply parts to a new program, an OEM will generally continue to
purchase those parts from the designated producer for the life of the program.
Competitive factors in the market for the Company's products include product
quality, design and engineering competence, customer service, product mix, new
product innovation, cost and timely delivery. The Company believes that its
business strategy allows it to compete effectively in the markets for its
products.
The Company believes that it is well-positioned to succeed in this highly
competitive supplier environment. The Company's size, emphasis on quality,
customer service orientation, manufacturing expertise and technological
leadership all contribute to the Company's success in the transportation
supply industry.
RESEARCH, ENGINEERING AND DEVELOPMENT
The Company expended approximately $5.2 million, $5.5 million and $7.9 million
on research, engineering and development during 1991, 1992 and 1993,
respectively. These increased expenditures have improved significantly the
Company's capacity to provide complete engineering and design services to
support its product lines. The Company also has a corporate technical center
in Elkhart, Indiana for basic research and development, as well as a large
engineering and design staff in the Detroit area which works closely with
automotive OEMs during all phases of new product development and production.
FOREIGN OPERATIONS
In addition to its domestic facilities described below, the Company owns a
manufacturing facility in Aurora, Ontario, Canada and leases a manufacturing
facility in Juarez, Mexico. The financial information concerning the Canadian
operations of the Company is set forth in Notes 10 and 11 to the Company's
Consolidated Financial Statements included elsewhere herein.
EMPLOYEES
The Company employs a total of approximately 3,500 persons, of whom
approximately 20% are covered by collective bargaining agreements. The
Company believes its relationship with its employees is good.
ENVIRONMENTAL MATTERS
The Company believes it is in substantial compliance with federal, state,
local and foreign laws regarding discharge of materials into the environment
and does not anticipate any material adverse effect on its future earnings,
capital expenditures or competitive position as a result of compliance with
such laws.
For a discussion of potential environmental liabilities, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and Note 8 to the Company's Consolidated
Financial Statements included elsewhere herein.
ITEM 2. PROPERTIES
The Company operates 11 manufacturing facilities, all of which are in good
condition. The Company manufactures framed window assemblies at its Elkhart,
Jacksonville, LaGrange, Aurora, Lawrenceburg, Fulton and Toledo manufacturing
facilities. Injection molded thermoplastic parts are manufactured at the
Bowling Green and Mishawaka facilities. Window regulator systems, latches and
related components are manufactured at the Jacksonville, Pikeville and Juarez,
Mexico facilities. Except as noted below, the Company owns all of these
facilities.
Approximate
Building Size
Location (in square feet)
Elkhart 270,000 (1)
Jacksonville, Florida 260,000
LaGrange, Indiana 140,000
Aurora, Ontario (Canada) 120,000
Lawrenceburg, Tennessee 150,000
Fulton, Kentucky 80,000 (2)
Bowling Green, Kentucky 32,000
Mishawaka, Indiana 120,000 (3)
Toledo, Ohio 61,000 (4)
Pikeville, Tennessee 101,900 (5)
Juarez, Mexico 15,000 (6)
_________________________________
(1) Approximately 35,000 square feet of this facility houses the Company's
executive offices and approximately 140,000 square feet of the facility
are used in manufacturing.
(2) The Company leases the Fulton, Kentucky facility pursuant to a lease
which expires in 1994. The Company is entitled to extend the term of
the lease for six (6) additional terms of three (3) years each and may,
at its option, purchase the facility at any time during the lease.
(3) The Company leases the Mishawaka, Indiana facility pursuant to a lease
which expires in 1998. The Company is entitled to extend the term of
such lease until 2003 and may, at its option, purchase such facility at
any time during the term of the lease.
(4) The Company leases the Toledo, Ohio facility pursuant to a lease which
expires on May 31, 1998.
(5) The Company leases the Pikeville, Tennessee facility pursuant to a Lease
Purchase Contract entered into as part of agreements for the issuance of
two series of industrial development bonds. Title to the facility will
be transferred to the Company for Ten Dollars ($10.00) on completion of
payment on the bond issues on July 1, 1999. Rent is payable semi-
annually with respect to the Series A bonds and is equal to the
principal and interest due on the bonds. Semi-annual principal payments
on the Series A bonds currently are $75,000. Interest on the
outstanding principal balance of the Series B bonds is payable
quarterly, with an annual payment of principal in the amount of
$200,000.
(6) The Company leases the Juarez, Mexico facility pursuant to a month-to-
month lease.
ITEM 3. LEGAL PROCEEDINGS
On February 22, 1993, the United States filed a lawsuit in the United States
District Court for the Northern District of Indiana against the Company and
certain other parties. On July 20, 1993, the Indiana Department of
Environmental Management ("IDEM") joined the lawsuit. The lawsuit seeks
recovery of the costs of enforcement, prejudgment interest and an amount in
excess of $6.8 million, which represents costs incurred to date by the United
States Environmental Protection Agency ("EPA") and IDEM in connection with the
contamination of soil and groundwater on the Company's property in Elkhart,
Indiana, and a well field of the City of Elkhart in close proximity to the
Company's facility. The lawsuit also seeks a declaration that the Company and
the other defendants are liable for any future costs incurred by the EPA and
IDEM in connection with the site.
For further information, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 8 to the Company's
Consolidated Financial Statements included elsewhere herein.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
Executive Officers of the Company
The names and ages of all executive officers of the Company, all positions and
offices held by each of them and the period during which each such person has
served in these offices and positions is set forth below:
Name Age Position and Offices
James J. Lohman 52 Chairman of the Board
and Chief Executive Officer
James O. Futterknecht, Jr.47 President and Chief Operating Officer
Joseph A. Robinson 55 Secretary, Treasurer and Chief Financial
Officer
James E. Crawford 47 Vice President-Product Development and
Value Engineering
Louis R. Csokasy 46 Vice President-Engineering and Quality
Terrance L. Lindberg 51 Vice President-Specialty Products and
General Manager-Nyloncraft
Mr. Lohman has been the Chairman of the Board of Directors since 1985 and
Chief Executive Officer since 1983. He joined the Company in 1964 and was
Group Vice President from 1978 to 1981 and was President from 1981 to 1992.
He has been a director of the Company since 1978.
Mr. Futterknecht joined the Company in 1970, was Vice President - Corporate
Sales from 1976 until 1984, was Vice President - Automotive Products from 1986
until 1987, was Vice President - Automotive Sales and engineering from 1987 to
1990, and was Executive Vice President from 1990 to 1992. He was elected as
President and Chief Operating Officer and was appointed as a director in 1992.
Mr. Robinson joined the Company as Secretary, Treasurer and Chief Financial
Officer in December 1991 and was appointed as a director in 1992. Prior to
that time, he was employed by the Standard Products Co., a manufacturer of
automotive parts as Vice President from 1990 to 1991 and as Vice President -
Finance from 1976 to 1990.
Mr. Crawford joined the Company in 1978, was Product Engineering Manager from
1979 until 1984, was Vice President - Engineering/Research from 1984 until
1987, was Vice President - Modular Operations from 1987 to 1988, and was Vice
President-Group Operations/Modular Products from 1988 to 1992. Mr. Crawford
has been Vice President-Product Development and Value Engineering since 1992.
Mr. Csokasy joined the Company in 1972. He was General Manager - Recreational
Vehicles from 1985 to 1987, Manager of Corporate Engineering from 1987 to
1990, and was Vice President - Engineering from 1990 to 1992. He has been
Vice President - Engineering and Quality since 1992.
Mr. Lindberg joined the Company in 1983, was Manager of Mass Transit and Heavy
Truck Products from 1984 to 1987, was Manager of Group Operations from 1987
until 1990, was Vice President - Group Operation from 1990 to 1992. Mr.
Lindberg has been Vice President - Specialty Products and General Manager -
Nyloncraft since 1992.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The Common Shares are traded on the American Stock Exchange under the symbol
EXC. The following table sets forth for the fiscal periods indicated the high
and low sale prices of the Common Shares, as reported by the American Stock
Exchange, and dividends declared per share.
<TABLE>
<CAPTION>
Dividends
Share Prices Declared
High Low Per Share
<S> <C> <C> <C>
Fiscal Year Ended December 31, 1992:
1st Quarter $12.875 $ 7.250 $.06
2nd Quarter 12.875 10.750 .06
3rd Quarter 14.750 12.125 .06
4th Quarter 17.750 10.750 .06
Fiscal Year Ended December 31, 1993:
1st Quarter 18.250 13.875 .06
2nd Quarter 19.625 15.500 .08
3rd Quarter 21.000 16.375 .08
4th Quarter 19.875 15.750 .08
</TABLE>
As of February 15, 1994, there were 502 holders of record of the Common
Shares.
The Company has paid cash dividends every quarter since becoming a public
company in April 1984. The Company intends to continue to pay quarterly cash
dividends on its Common Shares, but the payment of dividends and the amount
and timing of such dividends will depend upon the Company's earnings, capital
requirements, financial condition and other factors deemed relevant by the
Company's Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Amounts in thousands, except per share amounts)
The following table presents selected consolidated financial data of the
Company as of and for the five fiscal years ended December 31, 1993. The
selected consolidated financial data have been derived from audited
consolidated financial statements of the Company. Such selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company and the notes thereto
included elsewhere herein. The comparability of the results for the periods
presented is significantly affected by certain events, as described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--General."
<TABLE>
<CAPTION>
INCOME STATEMENT DATA:
Year Ended December 31,
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Net sales $277,114 $281,369 $352,268 $426,873 $515,681
Cost of goods sold 236,014 245,027 321,058 383,258 463,943
Gross profit 41,100 36,342 31,210 43,615 51,738
Selling, admini-
strative and engin-
eering expenses 22,819 23,336 25,205 28,262 30,054
Restructuring charge
(1) --- --- --- 4,500 ---
Other income (expense),
net 289 1,208 (216) 713 2,015
Interest expense 5,470 5,446 5,516 5,555 3,474
Income before income
taxes and cumulative
effect of changes in
accounting 13,100 8,768 273 6,011 20,225
Income tax provision 5,478 3,560 122 2,434 7,785
Income before cumula-
tive effect of
changes in accounting 7,622 5,208 151 3,577 12,440
Cumulative effect of
adoption of
SFAS 106 and 109 --- --- --- 3,195 ---
Net income 7,622 5,208 151 382 12,440
Net income (loss)
per share:
Before cumulative
effect of
changes in accounting:
Primary 1.18 .80 .02 .47 1.23
Fully diluted 1.18 .80 .02 .47 1.15
Cumulative effect of
adoption of
SFAS 106 and 109:
Primary --- --- --- (.42) ---
Fully diluted --- --- --- (.42) ---
Net income:
Primary 1.18 .80 .02 .05 1.23
Fully diluted 1.18 .80 .02 .05 1.15
Cash dividends per share .40 .40 .24 .24 .30
Average shares
outstanding 6,439 6,459 6,488 7,553 10,12
<CAPTION>
BALANCE SHEET DATA:
December 31,
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Working Capital $ 43,753 44,203 42,517 60,331 94,761
Property, plant and
equipment 40,886 50,305 48,445 42,064 49,746
Total assets 125,885 155,724 150,645 182,096 229,316
Short-term debt
(includes current
portion of long-term
debt) 3,607 4,247 4,025 1,561 1,553
Long-term debt (less
current portion) 41,196 50,728 46,743 34,592 35,094
Shareholders' equity 46,552 49,326 48,181 67,030 106,436
Book value per share 7.22 7.63 7.41 7.83 10.07
Long-term debt to total
capitalization 47% 51% 49% 34% 25%
____________
<FN>
(1) In 1992, the Company provided a reserve of $4,500 for restructuring
costs. See Note 4 to the Company's Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIOMS
GENERAL
The Company was founded in 1928 and became a public company in April 1984.
Since 1984, the Company has expanded sales internally and through several
strategic acquisitions designed to complement the Company's businesses. In
January 1986, the Company acquired Irvin Industries, Inc.'s wing ventilator
window business operated in Jacksonville, Florida. Later in 1986, the Company
consummated a private placement of Common Shares to Ford in exchange for cash,
a long-term supply contract and a Ford subsidiary engaged in the manufacture
and sale of modular window systems. In 1988, the Company acquired Nyloncraft,
Inc. which manufactures injection molded thermoplastic products primarily for
the automotive industry. In 1990, the Company acquired the window regulator
business operated by Hoover Universal, Inc., a subsidiary of Johnson Controls,
Inc., which the Company now operates under the name "Excel Systems". The
comparability of the Company's results on a period-to-period basis is
significantly affected by such acquisitions.
RESULTS OF OPERATIONS
1993 Compared to 1992
Sales for the year ended December 31, 1993 totaled a record $515.7 million, an
increase of $88.8 million, or 21%, over the preceding year. This increase in
sales resulted from generally more favorable economic conditions in North
America as total light vehicle production increased 12% and light vehicle
production of Ford in North America increased 15%. Specifically, sales of new
programs, including Ford/Nissan mini-vans, Ford F-Series and Ranger trucks,
Chrysler LH sedans and Dodge trucks, helped account for improved sales volume.
Gross profit totaled $51.7 million, or 10.0% of sales, as compared with $43.6
million, or 10.2% of sales for the prior year. Gross profit in dollars
improved with the improved level of sales. Gross profit as a percent of sales
declined due to a change in product mix and start-up costs related to new
programs.
Selling, administrative and engineering expenses totaled $30.1 million for
1993, an increase of 6%, or $1.8 million, from 1992. The increase reflected,
among other items, an increase in engineering personnel costs, amounts for
outside consultants and an increase in the provision for incentive
compensation. As a percent of sales, selling, administrative and engineering
expenses declined to 5.8% in 1993 as compared to 6.6% in 1992.
Interest costs of $3.5 million for 1993 compared to the $5.6 million incurred
in 1992. The decline in interest expense reflected the reduction in interest
and the prepayment penalty incurred in 1992 related to Senior Notes which were
retired in 1992.
Other income in 1993 totaled $2.0 million, an increase of $1.3 million from
1992. Other income in 1993 included $1.9 million of interest income arising
from the investment of proceeds of the Company's Common Share offerings in
March 1993 and June 1992.
The income tax provision was 38.5% of pre-tax income in 1993, down from 40.5%
in the preceding year. The 1993 percentage reflected the impact of certain
tax credits and lower effective state tax rates.
In 1992, the Company provided a reserve of $4.5 million for restructuring
costs. This charge represented estimated costs to downsize its Aurora,
Ontario, Canada plant and relocate production of certain light truck and van
windows to other manufacturing plants of the Company. During 1993, a total of
$1.0 million in costs were incurred to relocate a portion of the production.
The remaining production is expected to be relocated during 1994. The
remaining reserve will be used to cover the cost of severance, the relocation
of production and equipment writedowns expected in the future.
1992 Compared to 1991
Sales for the year ended December 31, 1992 totaled $426.9 million, an increase
of $74.6 million, or 21%, over the preceding year. This increase in sales
resulted from generally more favorable economic conditions in North America as
total light vehicle production increased 9% and light vehicle production of
Ford in North America increased 16%. Specifically, sales of new programs,
including Ford/Nissan mini-van and Ford Econoline full-size van, and increased
production of Ford Taurus/Sable sedans helped account for improved sales
volume.
Gross profit totaled $43.6 million, or 10.2% of sales, as compared with $31.2
million, or 8.9% of sales, for the prior year. The improved level of
profitability, both in dollars and as a percent of sales, resulted from higher
sales, better utilization of facilities and continued implementation of cost
reduction programs.
Selling, administrative and engineering expenses totaled $28.3 million for
1992, an increase of 12%, or $3.1 million, from 1991. The increase reflected,
among other items, a provision for incentive compensation of $1.4 million. As
a percent of sales, selling, administrative and engineering expenses declined
to 6.6% in 1992 as compared to 7.2% in 1991.
Interest costs of $5.6 million for 1992 were comparable to the $5.5 million
incurred in 1991. The Company completed a public offering of Common Shares in
June 1992, raising nearly $21 million, a portion of which was used for the
prepayment of its 11.25% Guaranteed Senior Notes. Prepayment of the notes
required a premium of $1.3 million, which premium was charged to interest
expense and offset, in part, reductions in interest resulting from the decline
in the overall levels of borrowings.
Other income increased $0.9 million in 1992 due to income on short-term cash
investments resulting, in part, from proceeds of the Company's Common Share
offering in June 1992.
In the fourth quarter of 1992, a reserve of $4.5 million was recorded for
restructuring costs. This charge represents estimated costs to downsize the
Company's Ontario, Canada facility and relocate production of certain light
and heavy truck windows to other manufacturing plants of the Company.
The income tax provision was 40.5% of pre-tax income in 1992, down from 44.7%
in the preceding year. The 1991 percentage was unusually high due to losses
for which no tax benefit was available.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," effective January 1, 1992. This standard
requires the recognition of future tax benefits attributable to temporary
differences between the financial reporting basis and tax basis of assets and
liabilities to the extent that realization of such benefits is more likely
than not.
The Company has recognized the future tax benefits of postretirement benefit
obligations, the restructuring reserve and other recorded obligations and tax
loss carryforwards since management has determined, based on the Company's
history of prior operating earnings and future expectations, that operating
income of the Company will more than likely be sufficient to fully offset
these expenses when deductible for tax purposes.
In 1992, the Company recorded $3.2 million as the cumulative effect of the
adoption of SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," and SFAS No. 109. The Company previously accounted for
its postretirement benefit costs other than pensions on a pay-as-you-go basis.
The ongoing annual costs resulting from the adoption of SFAS No. 106 will
approximate $1.3 million.
LIQUIDITY AND CAPITAL RESOURCES
Working capital totaled $94.8 million as of December 31, 1993, and the current
ratio was 2.40 to 1. Cash and marketable securities totaled $46.6 million as
of December 31, 1993.
In 1993, cash flow from operations totaled $10.2 million, and a public
offering of Common Shares in March 1993 raised an additional $30.3 million.
Cash expenditures for capital equipment amounted to $18.1 million, and
dividends totaled $3.2 million. In addition, payments of long-term debt
totaled $2.0 million. Overall, cash and marketable securities increased $19.0
million in 1993.
Long-term debt totaled $35.1 million as of December 31, 1993, or 25% of total
capitalization. Included in this amount is $30 million of Convertible Notes
issued in January 1990 to affiliates of CIGNA Corporation and Textron, Inc.
The principal balance of each Convertible Note is convertible, at the option
of the holder, into Common Shares at a current price of $13.214 per share.
Capital expenditures for 1994 are budgeted at $17.9 million. The Company's
cash balances, operating cash flows and short-term lines of credit are
expected to be adequate for anticipated operating requirements in 1994.
The Company has entered into the 1994 Supply Agreement with Ford which
requires the absorption of the effects of inflation and requires specified
price reductions or productivity offsets to price reductions. The Company
believes that this type of agreement is typical in the automotive supply
business, and the Company's ability to maintain gross margins at or near their
present levels will be dependent on its ability to substantially offset the
effects of this and other such agreements through productivity improvements,
cost reduction programs and implementation of value analysis/value engineering
programs, which reduce part weight and system costs to the customer.
A chemical cleaning compound, trichloroethylene ("TCE"), has been found in the
soil and groundwater on the Company's property in Elkhart, Indiana, and, in
1981, TCE was found in a well field of the City of Elkhart in close proximity
to the Company's facility. The Company has been named as one of nine
potentially responsible parties ("PRPs") in the contamination of this site.
EPA and IDEM have conducted a preliminary investigation and evaluation of the
site and have undertaken temporary remedial action in the nature of air-
stripping towers. In early 1992, the EPA issued a Unilateral Order under
Section 106 of the Comprehensive Environmental Response, Compensation and
Liability Act which required the Company and other PRPs to undertake remedial
work. The Company and the other PRPs have reached an agreement regarding the
funding of groundwater monitoring and the operation of the air-strippers as
required by the Unilateral Order. The Company was required to install and
operate a soil vapor extraction system to remove TCE from the Company's
property. As of February 1, 1994, the Company has installed and is operating
the equipment pursuant to the Unilateral Order. In addition, the EPA and IDEM
have asserted a claim for reimbursement of their investigatory costs and the
costs of installing and operating the air-strippers on the municipal well
field (the "EPA Costs"). On February 22, 1993, the United States filed a
lawsuit in the United States District Court for the Northern District of
Indiana against eight of the PRPs, including the Company. On July 20, 1993,
IDEM joined in the lawsuit. The lawsuit seeks recovery of the costs of
enforcement, prejudgment interest and an amount in excess of $6.8 million,
which represents costs incurred to date by the EPA and IDEM, and a declaration
that the eight defendant PRPs are liable for any future costs incurred by the
EPA and IDEM in connection with the site.
The Company does not believe the annual cost to the Company of monitoring
groundwater and operating the soil vapor extraction system and the air-
strippers will be material. Each of the PRPs, including the Company, is
jointly and severally liable for the entire amount of the EPA Costs. Certain
PRPs, including the Company, are currently attempting to negotiate an agreed
upon allocation of such liability. The Company believes that adequate
provisions have been recorded for its costs and its anticipated share of EPA
Cost and that its cash on hand, unused lines of credit or cash from operations
are sufficient to fund any required expenditures.
The EPA has also named the Company as a PRP for costs at three other disposal
sites. It has also asked the Company for information about contamination at
other sites. The Company believes it either has no liability as a responsible
party or that adequate provisions have been recorded for any costs to be
incurred.
INFLATION
The impact of inflation on operating results for the years 1993, 1992 and 1991
was not significant. Raw material costs during these periods have increased;
however, use of LIFO inventory methods by the Company has minimized any impact
from inflation. The majority of the Company's property, plant and equipment
is of recent purchase, and depreciation charges are based on historical cost.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Following are the consolidated financial statements of the Company and its
subsidiaries, the notes thereto, and the auditors' report.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Excel Industries, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Excel
Industries, Inc. and its subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles. 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 of
these statements in accordance with generally accepted auditing standards
which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in the notes to consolidated financial statements, effective
January 1, 1992, the Company changed its method of accounting for postretirement
health care benefits by adopting, on an immediate recognition basis, Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for Post-
retirement Benefits Other Than Pensions." The Company also changed its
method of accounting for income taxes, effective January 1, 1992, by adopting
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
PRICE WATERHOUSE
South Bend, Indiana
February 17, 1994
</TABLE>
<TABLE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
<CAPTION>
DECEMBER 31,
1993 1992
(S) <C> <C>
Assets
Current assets:
Cash and short-term investments $ 6,767 $ 27,510
Marketable securities 39,786 --
Accounts receivable-trade, less
allowances of $725 23,485 16,222
-related party 47,168 43,342
Customer tooling to be billed 9,161 5,887
Inventories 29,867 26,746
Prepaid expenses 6,113 4,764
Total current assets 162,347 124,471
Property, plant and equipment:
Land 937 939
Buildings and improvements 21,902 21,135
Machinery and equipment 80,680 71,021
Accumulated depreciation (53,773) (51,031)
49,746 42,064
Goodwill, net of accumulated amortization
of $2,356 in 1993 and $2,010 in 1992 7,050 7,397
Deferred income taxes and other assets 10,173 8,164
$229,316 $182,096
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable-trade $ 37,283 $ 28,460
-related party 9,700 13,601
Accrued liabilities:
Salaries and wages 5,712 3,983
Income taxes 1,208 2,132
Other 12,130 14,403
Current installments on long-term debt 1,553 1,561
Total current liabilities 67,586 64,140
Long-term debt 35,094 34,592
Other long-term liabilities, primarily
employee benefits 20,200 16,334
Commitments and contingent liabilities -- --
Shareholders' equity:
Preferred shares-no par value, 1,000 shares
authorized, none issued -- --
Common shares-no par value, 20,000-shares
authorized; 10,575 and 8,558 respectively,
issued and outstanding 87,537 57,282
Retained earnings 19,615 10,346
Unrecognized pension actuarial losses,
net of tax (716) (598)
Total shareholders' equity 106,436 67,030
$229,316 $182,096
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
<TABLE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands, except per share amounts)
<CAPTION>
YEAR ENDED DECEMBER 31,
1993 1992 1991
<S> <C> <C> <C>
Net sales $515,681 $426,873 $352,268
Costs and expenses:
Cost of goods sold 463,943 383,258 321,058
Selling, administrative
and engineering expenses 30,054 28,262 25,205
Restructuring charge -- 4,500 --
Interest expense 3,474 5,555 5,516
Other (income) expense, net (2,015) (713) 216
Total costs and expenses 495,456 420,862 351,995
Income before income taxes and
cumulative effect of changes
in accounting 20,225 6,011 273
Income tax provision 7,785 2,434 122
Income before cumulative effect
of changes in accounting 12,440 3,577 151
Cumulative effect of adoption of
SFAS 106 and 109 -- 3,195 --
Net income $ 12,440 $ 382 $ 151
Net income (loss) per share:
Before cumulative effect of
changes in accounting
Primary $ 1.23 $ .47 $ .02
Fully diluted 1.15 .47 .02
Cumulative effect of adoption of
SFAS 106 and 109
Primary -- (.42) --
Fully diluted -- (.42) --
Net income
Primary 1.23 .05 .02
Fully diluted 1.15 .05 .02
Cash dividends per share $ .30 $ .24 $ .24
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
<TABLE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Unrecognized
Shares Pension Cumulative
Issued and Common Retained Actuarial Translation
Outstanding Shares Earnings Losses Adjustment Total
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1990 6,466 $ 35,949 $ 13,298 $ (592) $ 671 $ 49,326
Net income 151 151
Dividends (1,558) (1,558)
Stock options exercised 17 84 84
Shares issued under employee stock
purchase plan 19 160 160
Unrecognized pension actuarial
losses, net of tax (12) (12)
Effect of exchange rate changes ________ ________ ________ ________ 30 30
Balance at December 31, 1991 6,502 36,193 11,891 (604) 701 48,181
Net income 382 382
Dividends (1,927) (1,927)
Share offering 2,013 20,759 20,759
Stock options exercised 29 200 200
Shares issued under employee stock
purchase plan 14 130 130
Unrecognized pension actuarial
losses, net of tax 6 6
Effect of exchange rate changes ________ ________ ________ ________ (701) (701)
Balance at December 31, 1992 8,558 57,282 10,346 (598) -- 67,030
Net income 12,440 12,440
Dividends (3,171) (3,171)
Share offering 2,000 30,019 30,019
Stock options exercised 8 51 51
Shares issued under employee stock
purchase plan 9 185 185
Unrecognized pension actuarial
losses, net of tax ________ ________ ________ (118) ________ (118)
Balance at December 31, 1993 10,575 $ 87,537 $ 19,615 $ (716) $ -- $106,436
======== ======== ======== ======== ======== ========
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
<TABLE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
- -------------------------------------------------------------------------------
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 12,440 $ 382 $ 151
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,145 10,082 10,637
Deferred income taxes 548 (3,837) (2,207)
Cumulative effect of changes in accounting -- 3,195 --
Other 3,443 2,661 939
Changes in current assets and liabilities
Accounts receivable and prepaid expenses (13,418) (17,169) 1,176
Inventories and customer tooling (6,395) 6,774 4,286
Accounts payable and accrued liabilities 3,454 19,067 849
Total adjustments (2,223) 20,773 15,680
Net cash provided by operating activities 10,217 21,155 15,831
Cash flows from investing activities:
Purchase of property, plant and equipment (18,104) (4,687) (9,670)
Investment in marketable securities, net (39,786) -- --
Other ( 648) 461 3,810
Net cash used for investing activities (58,538) (4,226) (5,860)
Cash flows from financing activities:
Issuance of common shares 30,255 21,089 244
Payments of long-term debt (2,001) (14,615) (4,207)
Dividends (3,171) (1,927) (1,558)
Issuance of long-term debt 2,495 -- --
Net cash provided by (used for) financing
activities 27,578 4,547 (5,521)
Net change in cash and short-term investments (20,743) 21,476 4,450
Cash and short-term investments at beginning of
period 27,510 6,034 1,584
Cash and short-term investments at end of period $ 6,767 $ 27,510 $ 6,034
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 3,308 $ 6,081 $ 5,634
Income taxes, net of refunds 7,996 6,602 281
<FN>
The accompanying notes are an integral part of this statement.
</TABLE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Excel Industries, Inc. (Company) is engaged in the manufacture
and sale of a broad line of window assemblies, manual and
electric window regulators, upper door frames, and injection
molded thermoplastic parts. The Company's products are used in
the manufacture of automobiles, heavy and light trucks, buses and
recreational vehicles.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany transactions, profits and balances are eliminated.
Net income per share
Primary net income per share is computed using the weighted
average number of shares outstanding during the period. Shares
used to compute primary net income per share were 10,122,000 for
1993, 7,553,000 for 1992, and 6,488,000 for 1991.
Fully diluted earnings per share assumes, when dilative, the
conversion of the 10% convertible subordinated notes which were
issued on January 2, 1990.
Stock dividends and splits are given retroactive effect in
computing the weighted average number of shares outstanding
during the period.
Short-term investments and marketable securities
Short-term investments amounting to $5,771,000 at December 31,
1993 consist of investments generally in money market funds.
Marketable securities consist of U.S. Government securities, tax-
free municipal securities and municipal fund par value preferred
shares with maturities generally longer than 90 days.
Such investments are carried at cost which approximates market.
Other income includes interest income of $1,916,000 in 1993,
$1,010,000 in 1992, and $674,000 in 1991.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for
domestic inventories and the first-in, first-out (FIFO) method
for Canadian inventories.
Properties
Plant and equipment are carried at cost and include expenditures
for new facilities and those which substantially increase the
useful lives of existing plant and equipment.
Depreciation
The Company provides for depreciation of plant and equipment
using methods and rates designed to amortize the cost of such
equipment over its useful life. Depreciation is computed
principally on accelerated methods for new plant and equipment
and the straight-line method for used equipment. The estimated
useful lives range from 10 to 40 years for buildings and
improvements and 2 to 20 years for machinery and equipment.
Goodwill
The excess of purchase price over the fair value of net assets of
acquired businesses (goodwill) is amortized on a straight-line
basis over 20 to 40 years.
Income taxes
Deferred income taxes are provided using the liability method in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes".
3. RESEARCH, ENGINEERING AND DEVELOPMENT
Research, engineering and development expenditures charged to
operations approximated $7,913,000 in 1993, $5,518,000 in 1992,
and $5,200,000 in 1991.
4. RESTRUCTURING CHARGE
In the fourth quarter of 1992, the Company provided a reserve of
$4,500,000 for restructuring costs. The charge was equivalent to
$2,900,000 or 34 cents per share after taxes. This charge
represented estimated costs to downsize its Aurora, Ontario,
Canada plant and relocate production of certain light truck and
van windows to other manufacturing plants of the Company. A
total of $1,010,000 was incurred in 1993 to transfer a portion of
the planned production.
5. INVENTORIES
Inventories consist of the following:
December 31,
1993 1992
(000 Omitted)
Raw materials $17,948 $15,302
Work in process and finished goods 12,378 11,699
LIFO reserve (459) (255)
$29,867 $26,746
6. PENSION AND OTHER EMPLOYEE BENEFIT PLANS
Pension and profit sharing plans
The Company and its subsidiaries provide retirement benefits to
substantially all employees through various pension, savings and
profit sharing plans. Defined benefit plans provide pension
benefits that are based on the employee's final average salary
for salaried employees and stated amounts for each year of
credited service for hourly employees. Contributions and costs
for the Company's various other benefit plans are generally
determined based on the employee's annual salary. Total
expense relating to the Company's various retirement plans
aggregated $2,199,000 in 1993, $2,102,000 in 1992, $1,712,000 in
1991.
Components of net pension expense for all defined benefit pension
plans are as follows:
Year Ended December 31,
1993 1992 1991
(000 Omitted)
Service cost $1,319 $1,312 $1,243
Interest cost 1,344 1,245 1,137
Actual return on assets (617) (1,242) (1,139)
Net amortization and deferral (582) 190 222
Net defined benefit pension
expense $1,464 $1,505 $1,463
The funded status of defined benefit pension plans is as follows:
December 31,
1993 1992
(000 Omitted)
Plan assets at fair value $15,844 $ 14,868
Projected benefit obligations 20,421 17,869
(4,577) (3,001)
Unrecognized costs 1,862 472
Net accrued pension costs $(2,715) $(2,529)
Actuarial present value of:
Vested benefit obligations $15,644 $13,853
Accumulated benefit obligations $16,655 $14,815
Major assumptions:
Discount rate 7.5% 8%
Rate of increase in compensation 5% 5% to 8%
Expected rate of return on plan assets 8 8%
It is generally the Company's policy to fund the ERISA minimum
contribution requirement. Plan assets are invested primarily in
corporate equity securities and bonds and insurance annuity
contracts.
Supplemental and other postretirement benefits
In addition to providing pension benefits, the Company provides
certain health care benefits to substantially all active
employees and postretirement health care benefits to management
employees. The Company is primarily self-insured for such
benefits and prior to 1992 followed the practice of expensing
such benefits on a pay-as-you-go basis.
In 1992, the Company adopted the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." The Company elected to immediately recognize the
Accumulated Postretirement Benefit Obligation (APBO) as
January 1, 1992 in the amount of $6,447,000 (approximately
$4,000,000 after-tax or 61 cents per share).
Summary information on the Company's plan is as follows:
December 31,
1993 1992
(000 Omitted)
Retirees $1,504 $1,060
Retirement-eligible actives 968 1,245
Other active participants 6,077 5,402
Unrecognized gain 407 --
Accrued liability $8,956 $7,707
Accrued postretirement benefit cost
The Company plans to continue the policy of funding these benefits on
a pay-as-you-go basis. The components of net periodic postretirement
benefit cost are as follows:
Year Ended December 31,
1993 1992
(000 Omitted)
Service costs, benefits attributed to
employee service during the year $ 821 $ 750
Interest cost on accumulated
postretirement benefit obligation 578 510
Net periodic postretirement benefit cost $1,399 $1,260
The discount rate used in determining the APBO was 7.75% in 1993 and
8% in 1992. The assumed health care cost trend rate used in measuring
the accumulated postretirement benefit obligation was 10.25% declining
by 1% per year to a rate of 6.25%. An increase of 1% in health care
cost trend rate would increase the accrued postretirement benefit cost
at December 31, 1993 by $2,066,000 and the 1993 annual expense by
$384,000.
7. LONG-TERM DEBT
Following is a summary of long-term debt of the Company:
December 31,
1993 1992
(000 Omitted)
10% Convertible subordinated notes $30,000 $30,000
Industrial Revenue Bonds 5,383 4,533
Capital lease obligations 1,264 1,620
36,647 36,153
Current portion (1,553) (1,561)
$35,094 $34,592
During 1992, the Company prepaid the balance owing on its guaranteed
senior notes and was subject to a prepayment premium of approximately
$1.3 million. Such amount is included in the accompanying income
statement in interest expense.
The convertible notes are due on December 1, 2000 and require
aggregate prepayments of $8,000,000 in 1996, $7,000,000 in 1997,
$6,000,000 in 1998, $5,000,000 in 1999 and $4,000,000 in 2000. The
holders of the notes have the option to convert their notes at any
time into common shares of the Company at a current conversion price
of $13.214 per share. The Notes are subject to prepayment at the
option of the Company if the market value of the Company's common
shares equals or exceeds 150% of the conversion price for a specified
period. The note agreements provide for maintaining a current ratio
of 1.5 to 1, restrict the amount of additional borrowings and limit
the amount of dividends that can be paid. Currently the Company has
available for payment of dividends $19,615,000 of retained earnings.
The Industrial Revenue Bonds bear interest at rates of interest tied
to short-term Treasury rates. Certain plant and equipment purchased
with the proceeds of the bonds collateralize these obligations.
The Company had available unused lines of credit of approximately
$6,300,000 at December 31, 1993.
Long-term debt maturities are $1,553,000 in 1994, $1,358,000 in 1995,
$9,557,000 in 1996, $8,072,000 in 1997, $6,580,000 in 1998, and
$9,527,000 thereafter.
8. CONTINGENCIES
A chemical cleaning compound, trichlorethylene (TCE), has been found
in the soil and groundwater on the Company's property in Elkhart,
Indiana, and in 1981, TCE was found in a well field of the City of
Elkhart in close proximity to the Company's facility. The Company has
been named as one of nine potentially responsible parties (PRPs) in
the contamination of this site.
The United States Environmental Protection Agency (EPA) and the
Indiana Department of Environmental Management (IDEM) have conducted a
preliminary investigation and evaluation of the site and have
undertaken temporary remedial action in the nature of air-stripping
towers.
In early 1992, the EPA issued a Unilateral Order under Section 106 of
the Comprehensive Environmental Response, Compensation and Liability
Act which required the Company and other PRPs to undertake remedial
work. The Company and the other PRPs have reached an agreement
regarding the funding of groundwater monitoring and the operation of
the air-strippers as required by the Unilateral Order. The Company
was required to install and operate a soil vapor extraction system to
remove TCE from the Company's property. As of February 1, 1994, the
Company has installed and is operating the equipment pursuant to the
Unilateral Order. In addition, the EPA and IDEM have asserted a claim
for reimburesement of their investigatory costs and the costs of
installing and operating the air-strippers on the munipal well field
(the EPA Costs). On February 22, 1993, the United States filed a
lawsuit in the United States District Court for the Northern District
of Indiana against eight of the PRPs, including the Company. On July
20, 1993, IDEM joined in the lawsuit. The lawsuit seeks recovery of
the costs of enforcement, prejudgment interest and an amount in excess
of $6.8 million, which represents costs incurred to date by the EPA
and IDEM, and a declaration that the eight defendant PRPs are liable
for any future costs incurred by the EPA and IDEM in connection with
the site.
The Company does not believe the annual cost to the Company of
monitoring groundwater and operating the soil vapor extraction system
and the air-strippers will be material. Each of the PRPs, including
the Company, is jointly and severally liable for the entire amount of
the EPA Costs. Certain PRPs, including the Company, are currently
attempting to negotiate an agreed upon allocation of such liability.
The Company believes that adequate provisions have been recorded for
its costs and its anticipated share of EPA Costs and that its cash on
hand, unused lines of credit or cash from operations are sufficient to
fund any required expenditures.
The EPA has also named the Company as a PRP for costs at three other
disposal sites. It has also asked the Company for information about
contamination at other sites. The Company believes it either has no
liability as a responsible party or that adequate provisions have been
recorded for any costs to be incurred.
There are claims and pending legal proceedings against the Company and
its subsidiaries with respect to taxes, workers' compensation,
warranties and other matters arising out of the ordinary conduct of
the business. The ultimate result of these claims and proceedings at
December 31, 1993 is not determinable, but, in the opinion of
management, adequate provision for anticipated costs has been made or
insurance coverage exists to cover such costs.
9. LEASES
The Company leases certain of its manufacturing facilities, sales
offices, transportation and other equipment. Total rental expense for
all leases was approximately $3,416,000 in 1993, $2,998,000 in 1992,
and $2,123,000 in 1991. Future minimum lease payments under
noncancellable operating leases are $1,341,000 in 1994, $1,055,000 in
1995, $826,000 in 1996, $753,000 in 1997 and $143,000 in 1998.
10. INCOME TAXES
Effective January 1, 1992, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". This statement mandates the liability
approach for computing deferred income taxes similar to SFAS No. 96
previously followed by the Company. The cumulative effect of the
change was to increase first quarter 1992 earnings by $800,000 (12
cents per share). The change had no impact on the 1992 income tax
provision. Prior year financial statements have not been restated.
Pre-tax income (loss) reported by U.S. and foreign subsidiaries was as
follows:
Year Ended December 31,
1993 1992 1991
(000 Omitted)
United States $17,933 $8,688 $1,835
Foreign 2,292 (2,677) (1,562)
$20,225 $6,011 $ 273
The provision (benefit) for income taxes is summarized below:
Year Ended December 31,
1993 1992 1991
(000 Omitted)
Current:
US federal $ 6,049 $5,007 $1,615
Foreign 465 38 --
State 645 1,226 714
7,159 6,271 2,329
Deferred:
US federal (317) (1,922) (1,388)
Foreign 941 (1,256) (685)
State 2 (659) (134)
626 (3,837) (2,207)
$ 7,785 $2,434 $ 122
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and tax basis of the Company's
assets and liabilities. At December 31, 1993, current deferred income
tax assets of $2,886,000 are classified as prepaid expenses, long-term
U.S. deferred income tax assets of $6,094,000 are classified as other
assets, and $627,000 of long-term foreign deferred income tax
liabilities are classified as other long-term liabilities.
Deferred income taxes are comprised of the following at December 31:
1993 1992
(000 Omitted)
Gross deferred tax liabilities
Property, plant and equipment $ 2,257 $2,571
Inventories 436 308
Other 680 564
3,373 3,443
Gross deferred tax assets
Postretirement benefit obligations 6,296 5,046
Restructuring reserve 1,103 1,655
Other accrued liabilities 3,708 4,210
Loss carryforwards 619 1,453
11,726 12,364
Net deferred tax assets $ 8,353 $ 8,921
The provision for income taxes computed by applying the Federal
statutory rate to income before income taxes is reconciled to the
recorded provision as follows:
Year Ended December 31,
1993 1992 1991
(000 Omitted)
Tax at United States
statutory rate $7,079 $2,044 $ 93
State income taxes, net of
federal benefit 421 374 383
Canadian rate differential on
income/(losses) 344 (134) (154)
Other (59) 150 (200)
$7,785 $2,434 $ 122
Provision has been made for U.S. and Canadian taxes on undistributed
earnings of the Company's Canadian subsidiary.
The Company possesses approximately $10,570,000 of U.S. state income
tax loss carryforwards. U.S. state loss carryforwards expire to the
extent of $1,002,000 in the year 2005, $4,758,000 in 2006, and
$4,810,000 in 2007.
11. SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company operates in predominately one industry segment: the
design, engineering and manufacture of certain components sold to
manufacturers in the ground transportation industry.
The Company, through its subsidiaries, operates primarily in two
countries: the United States and Canada. The Company's Canadian
subsidiary had net sales of $36,074,000 in 1993, $29,421,000 in 1992,
and $21,735,000 in 1991. Total assets of the Canadian subsidiary were
approximately $9,416,000 and $12,538,000 at December 31, 1993 and
1992, respectively. Intercompany sales were insignificant.
Sales to three major customers, Ford Motor Company, Chrysler
Corporation and General Motors Corporation, were approximately 72%,
11% and 4%, respectively, of the Company's net sales in 1993 as
compared to 73%, 9% and 4% in 1992 and 69%, 8% and 8% in 1991.
Accounts receivable from General Motors Corporation and Chrysler
Corporation approximated 68% of trade accounts receivable at December
31, 1993 and 48% at December 31, 1992. Amounts due from Ford Motor
Company are classified as "accounts receivable, related party" in the
Company's balance sheet at December 31, 1993 and December 31, 1992.
Sales to customers outside of the United States and Canada were not
significant.
12. COMMON SHARES
The Company has an incentive stock option plan covering key employees
which was approved by shareholders in 1984. The plan provides that
options may be granted at not less than fair market value and if not
exercised, expire 10 years from the date of grant. At December 31,
1993, there were reserved 48,590 shares for the granting of options
and options outstanding for 19,250 shares at an average exercise price
of $6.59. During 1993, options for 7,875 shares were exercised at an
average exercise price of $6.44. There were no options granted nor
did any options expire during 1993.
The Company has an employee stock purchase plan and has reserved
353,717 common shares for this purpose. The plan allows eligible
employees to authorize payroll withholdings which are used to purchase
common shares from the Company at ninety-percent (90%) of the closing
price of the common shares on the date of purchase. Through December
31, 1993, 96,296 shares had been issued under the plan.
The Company has reserved 2,270,319 common shares for possible future
issuance in connection with its $30,000,000 convertible notes issued
on January 2, 1990.
13. RELATED PARTY TRANSACTIONS
Ford Motor Company owned 24% of the Company's common shares at
December 31, 1993, 30% at December 31, 1992 and 40% at December 31,
1991. On January 11, 1994, Ford Motor Company donated 1,047,201 of
the Company's common shares to the Ford Motor Company Fund. On
January 13, 1994, Ford Motor Company and the Ford Motor Company Fund
announced their intention to dispose of their combined 24% ownership
in the Company through a secondary public offering. Ford officials
stated that the disposition of common shares would not impact the
customer-supplier relationship between Ford and the Company.
Significant related party transactions are as follows:
Year Ended December 31,
1993 1992 1991
(000 Omitted)
Product sales $373,000 $311,000 $244,000
Product purchases 124,000 77,000 58,000
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth in summary form the quarterly results
of operations for the years ended December 31, 1993 and 1992.
<TABLE>
<CAPTION>
1993
-------------------------------------------------
(000's except per share amounts)
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $127,340 $138,875 $114,888 $134,578
Gross profit 14,295 16,044 10,015 11,384
Net income 3,422 4,491 1,650 2,877
Net income per share
Primary $ .39 $ .43 $ .16 $ .27
Fully diluted .35 .38 .16 .26
======== ======== ======== ========
<CAPTION>
1992
-------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $ 98,432 $113,038 $102,516 $112,887
Gross profit 10,258 12,603 9,635 11,119
Income (loss) before
changes in accounting 1,295 2,445 657 (820)
Cumulative effect of
adoption of
SFAS Nos. 106 and 109 (3,195) -- -- --
Net income (loss) (1,900) 2,445 657 (820)
Net income (loss)
per share before
changes in accounting
Primary $ .20 $ .37 $ .08 $(.10)
Fully diluted .20 .33 .08 (.10)
Cumulative effect of
changes in accounting
Primary (.49) -- -- --
Fully diluted (.49) -- -- --
Net income (loss)
Primary (.29) .37 .08 (.10)
Fully diluted (.29) .33 .08 (.10)
======== ======== ======== ========
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "ELECTION OF DIRECTORS" in the
Company's proxy statement for the 1994 annual meeting of shareholders (the
"Proxy Statement") is incorporated herein by reference. The Proxy Statement
has previously been filed with the Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Compensation of Directors,"
"Compensation Committee Interlocks and Insider Participation," "Compensation
of Executive Officers," "Summary Compensation Table," "Pension Plan," and
"Deferred Compensation Plans" in the Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Outstanding Shares," "Principal
Shareholders," and "Security Ownership of Management" in the Proxy Statement
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Compensation Committee Interlocks
and Insider Participation" in the Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following consolidated financial statements of the Company and its
subsidiaries are included in Item 8 of this report.
Report of Independent Accountants
Consolidated Balance Sheet - December 31, 1993 and 1992
Consolidated Statement of Income - Years ended December 31, 1993, 1992
and 1991
Consolidated Statement of Shareholders' Equity - Years ended
December 31, 1993, 1992 and 1991
Consolidated Statement of Cash Flows - Years ended December 31, 1993,
1992 and 1991
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules
The following financial statement schedules are included with this report:
Report of Independent Accountants on Financial Statement Schedules
i - Marketable Securities
v - Property, Plant and Equipment
vi - Accumulated Depreciation and Amortization of Property, Plant
and Equipment
viii - Valuation and Qualifying Accounts
ix - Short-Term Borrowings
x - Supplementary Income Statement Information
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(a) (3) Exhibits
The list of exhibits contained in the Exhibit Index immediately following the
signature page of this Form 10-K is incorporated herein by reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 1993.
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 to be signed on its
behalf by the undersigned thereunto duly authorized.
EXCEL INDUSTRIES, INC.
MarcH 25, 1994 By: /s/ James J. Lohman
James J. Lohman, Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
March 25, 1994 /s/ James J. Lohman
James J. Lohman, Chairman of the Board and
Chief Executive Officer
March 25, 1994 /s/ Joseph A. Robinson
Joseph A. Robinson, Secretary-Treasurer
and Chief Financial Officer (Principal
Financial and Accounting Officer)
March 25, 1994 /s/ James O. Futterknecht, Jr.
James O. Futterknecht, Jr., Director
March 25, 1994 /s/ John G. Keane
John G. Keane, Director
March 25, 1994 /s/ James K. Sommer
James K. Sommer, Director
March 25, 1994 /s/ Ralph R. Whitney
Ralph R. Whitney, Jr., Director
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Excel Industries, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 17, 1994 appearing on page 19 of the 1993 Annual Report to
Shareholders of Excel Industries, Inc. also included an audit of the Financial
Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion,
these Financial Statement Schedules present fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE
South Bend, Indiana
February 17, 1994
<TABLE>
MARKETABLE SECURITIES
SCHEDULE I
<CAPTION>
Number of shares
Name of issuer and or units or principal Cost of Market Value at Carrying Value at
title of each issue amount of bonds and notesEach Issue December 31, 1993 December 31, 1993
<S> <C> <C> <C> <C>
United States Government
Securities $18,000,000 $17,011,000 $17,011,000 $17,011,000
State tax free
municipal securities 5,100,000 5,612,000 5,612,000 5,612,000
City tax free
municipal securities 4,210,000 4,533,000 4,533,000 4,533,000
Nuveen Virginia Premium Income
par value securities 40 2,000,000 2,000,000 2,000,000
Nuveen municipal fund
par value securities 60 3,000,000 3,000,000 3,000,000
Nuveen Performance Plus
par value securities 40 2,000,000 2,000,000 2,000,000
Nuveen Select Quality Municipal
Fund par value securities 40 2,000,000 2,000,000 2,000,000
Puerto Rico securities 1,450,000 1,561,000 1,556,000 1,556,000
Other tax free securities 1,027,000 1,074,000 1,074,000 1,074,000
$38,791,000 $38,786,000 $38,786,000
</TABLE/
</TABLE>
<TABLE>
PROPERTY, PLANT AND EQUIPMENT
SCHEDULE V
<CAPTION>
Balance at Balance at
beginning Additions end of
Classification of period at cost Retirements Other* Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1991:
Land $ 971,000 $ -- $ (40,000) $ -- $ 931,000
Buildings and improvements 18,923,000 2,368,000 (228,000) 10,000 21,073,000
Machinery and equipment 60,949,000 7,277,000 (1,764,000) 15,000 66,477,000
$80,843,000 $ 9,645,000 $(2,032,000) $ 25,000 $ 88,481,000
Year ended December 31, 1992:
Land $ 931,000 $ 14,000 $ -- $ (6,000) $ 939,000
Buildings and improvements 21,073,000 443,000 (141,000) (240,000) 21,135,000
Machinery and equipment 66,477,000 4,230,000 923,000** (609,000) 71,021,000
$88,481,000 $ 4,687,000 $ 782,000 $ (855,000) $ 93,095,000
Year ended December 31, 1993:
Land $ 939,000 $ -- $ -- $ (2,000) $ 937,000
Buildings and improvements 21,135,000 868,000 -- (101,000) 21,902,000
Machinery and equipment 71,021,000 17,236,000 (7,342,000) (235,000) 80,680,000
$93,095,000 $18,104,000 $(7,342,000) $ (338,000) $103,519,000
<FN>
* Represents effect of foreign currency translation.
** Includes write-off of fully depreciated assets, the basis of which were written down at date of acquisition.
</TABLE>
<TABLE>
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
SCHEDULE VI
<CAPTION>
Balance at Balance at
beginning end of
Classification of period Depreciation Retirements Other* Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1991:
Buildings and improvements$ 4,343,000 $ 1,269,000 $ (100,000) $ 2,000 $ 5,514,000
Machinery and equipment 26,195,000 8,903,000 (587,000) 11,000 34,522,000
$30,538,000 $10,172,000 $ (687,000) $ 13,000 $40,036,000
Year ended December 31, 1992:
Buildings and improvements$ 5,514,000 $ 1,205,000 $ (118,000) $ (72,000) $ 6,529,000
Machinery and equipment 34,522,000 8,363,000 1,992,000** (375,000) 44,502,000
$40,036,000 $ 9,568,000 $ 1,874,000 $ (447,000) $51,031,000
Year ended December 31, 1993:
Buildings and improvements$ 6,529,000 $ 1,069,000 $ -- $ (33,000) $ 7,565,000
Machinery and equipment 44,502,000 8,645,000 (6,578,000) (361,000) 46,208,000
$51,031,000 $ 9,714,000 $(6,578,000) $ (394,000) $53,773,000
<FN>
* Represents effect of foreign currency translation.
** Includes write-off of fully depreciated assets, the basis of which were written down at date of acquisition.
</TABLE>
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE VIII
<CAPTION>
Balance at Additions Balance at
beginning charged to end of
Classification of period expense Deductions* Period
<S> <C> <C> <C> <C>
Year ended December 31, 1991:
Allowance for uncollectible
accounts receivable $521,000 $856,000 $(639,000) $738,000
Year ended December 31, 1992:
Allowance for uncollectible
accounts receivable $738,000 $200,000 $(213,000) $725,000
Year ended December 31, 1993:
Allowance for uncollectible
accounts receivable $725,000 $167,000 $(167,000) $725,000
<FN>
* Primarily reflects write-offs of uncollectible accounts, net of recoveries of amounts previously written off.
</TABLE>
<TABLE>
SHORT-TERM BORROWINGS
SCHEDULE IX
<CAPTION>
Maximum Average Weighted
Category of Weighted amount amount average
aggregate Balance average outstanding outstanding interest rate
short-term at end interest during the during the during the
borrowings of period rate* period period period
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1991 Amounts payable
to banks for
borrowings under
Excel Industries
and Canadian
lines-of-credit $22,000 9.4% $5,433,000 $1,200,000 9.7%
Year ended December 31, 1992 Amounts payable
to banks for
borrowings under
Canadian lines-
of-credit -- 8.1% $ 22,000 $ 1,833 8.1%
Year ended December 31, 1993 Amounts payable
to banks for
borrowings under
Excel Industries
line-of-credit -- -- $ -- $ -- N/A
<FN>
* The weighted average interest rate during the period is computed on the interest expense during the period divided by
the average short-term borrowings outstanding during such period.
</TABLE>
<TABLE>
SUPPLEMENTARY INCOME STATEMENT INFORMATION
SCHEDULE X
<CAPTION>
Charged to Costs and Expenses
For the year ended
December 31,
Item 1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $12,801,000 $9,863,000 $ 9,368,000
Depreciation 9,714,000 9,568,000 10,172,000
Goodwill amortization 347,000 347,000 347,000
Taxes, other than payroll
and income taxes 1,339,000 1,561,000 1,432,000
Advertising costs 66,000 43,000 32,000
Royalties 649,000 621,000 ---
</TABLE>
EXHIBIT INDEX
Page No.
Exhibit In Manually
Number Description of Exhibit Signed Copy
(3.1) The Amended Articles of Incorporation of the
Company were filed as Exhibit 3.1 to the
Registration Statement on Form S-1 filed on
February 27, 1987 (Reg. No. 33-12282) and
are incorporated herein by reference
(3.2) The Code of By-Laws of the Company as
amended effective April 29, 1992 was filed
as Exhibit 4.3 to the Company's
Registration Statement on Form S-2 (Reg.
No. 33-47706) filed on May 6, 1992 and is
incorporated herein by reference
(4.1) A specimen of the certificate
representing the Common Stock of the
Company was filed as Exhibit 4.1 to the
Company's Amendment No. 1 to the
Registration Statement on Form S-1 filed on
April 3, 1984 (Reg. No. 2-89521) and is
incorporated herein by reference
(4.2) Article VI, Section 3-5, Article VII
and Article XII, Section 1 of the Articles
of Incorporation of the Company are
included as part of Exhibit 3.1 above
(4.3) Articles X, XI, XV, XVI, XXIV of the Code of
By-Laws of the Company are included as part
of Exhibit 3.2 above
(9) Not Applicable
(10.1)* The Supplemental Major Medical Expense
Insurance Plan of the Company was filed as
Exhibit 10.7 to the Company's Registration
Statement on Form S-1 filed on February 17,
1984 (Reg. No. 2-89521) and is incorporated
herein by reference
(10.2) Purchase and Supply Contract between the
Company and Ford Motor Company dated
October 7, 1986, was filed as part of
Exhibit (e) (2) of the Company's Schedule
13E-4 filed on August 27, 1986, and is
incorporated herein by reference
(10.3) Lease Agreement between Modular Concepts,
Inc. and Fulton Industrial Development
Authority was filed as Exhibit 10.12 to the
Registration Statement on Form S-1 filed on
February 27, 1987 (Reg. No. 33-12282) and
is incorporated herein by reference
(10.4)* The Excel Industries, Inc. Stock Purchase
Plan and Trust was filed as Exhibit 4.4 to
Amendment No. 1 to the Company's
Registration Statement on Form S-8 filed on
June 9, 1987 (Reg. No. 33-14508) and is
incorporated herein by reference
(10.5) Commercial Lease and Option to Purchase
dated February 5, 1988, between the Company
and P-F-P Partnership, and Indiana general
partnership (for the Mishawaka facility)
was filed as Exhibit 10.16 to the Company's
Annual Report on Form 10-K filed on March
24, 1988, and is incorporated herein by
reference
(10.6) Lease Agreement dated May 4, 1988 between
the Company and Willis Day Properties, Inc.
(for the Toledo, Ohio facility) was filed
as Exhibit 10.18 to the Company's Annual
Report on Form 10-K filed March 20, 1989,
and is incorporated herein by reference
(10.7)* The 1989 Deferred Compensation Plan of the
Company as amended effective October 1,
1991 was filed as Exhibit 10.12 to the
Company's Annual Report on Form 10-K filed
March 26, 1992 and is incorporated herein
by reference
(10.8) Lease Purchase Contract dated July 1, 1979
between The Industrial Development Board
for the City of Pikeville (the "Pikeville
Board") and Ferro Manufacturing Corporation
("Ferro") was filed as Exhibit 10.20 to the
Company's Annual Report on Form 10-K filed
March 27, 1991, and is incorporated herein
by reference
(10.9) First Amendment to Lease Purchase Contract,
dated January 1, 1983, between the
Pikeville Board and Ferro was filed as
Exhibit 10.21 to the Company's Annual
Report on Form 10-K filed March 27, 1991,
and is incorporated herein by reference
(10.10)* Supplemental Deferred Compensation Agreement
between the Company and James J. Lohman was
filed as Exhibit 10.20 to the Company's
Annual Report on Form 10-K filed March 26,
1992 and is incorporated herein by
reference
(10.11)* Excel Industries, Inc. and Subsidiaries
Incentive Compensation Plan was filed on
Exhibit 10.14 to the Company's Annual
Report on Form 10-K filed March 26, 1993,
and is incorporated herein by reference.
(10.12) Lease Extension Agreement dated September
17, 1992 between the Company and Willis Day
Properties, Inc. (for the Toledo facility)
was filed on Exhibit 10.15 to the Company's
Annual Report on Form 10-K filed March 26,
1993, and is incorporated herein by
reference.
(10.13) Purchase Agreement between the Company and
Ford Motor Company dated January 31,
1994...........
(11) Not Applicable
EXHIBIT 10.13
FORD MOTOR COMPANY (BUYER) AND
EXCEL INDUSTRIES, INC. (SELLER)
PURCHASE AGREEMENT
PURCHASE AND SUPPLY
(a) FORD MOTOR COMPANY (Buyer) will purchase and EXCEL INDUSTRIES,
INC. (Seller) will manufacture and supply 100 percent of Buyer's
requirements of the parts shown on Attachment I beginning with the
1994 calendar year and extending through the 1998 calendar year.
This agreement applies to the current design level of these parts,
to versions as modified by normal engineering changes, and, at the
Buyer's option, to similar new parts sourced by the Buyer and
supplied by the Seller during the life of this agreement.
(b) This agreement includes the provisions of Ford's standard
purchase order.
(c) Incremental business will be reconciled in accordance with the
commercial proposal utilizing activity based costing as developed
by Ford Cost Estimating, and the pricing formula agreed to on April
14, 1993.
PART CONTENT
For reference, Seller's average part cost content breakdown is as
follows:
Encapsulated Conventional JIT/Hardware Regulators
Raw Material CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
Purchased Parts WITH RESPECT TO OMITTED INFORMATION
Labor WHICH HAS BEEN FILED SEPARATELY
Overhead/MRO WITH THE COMMISSION
Profit/Depreciation
Total
ECONOMICS
Prices are based on Seller's cost as of January 1, 1994. Prices
will not be adjusted for economics (e.g., raw material, purchased
parts, labor and overhead/MRO) during the term of this agreement.
(Barring extraordinary price increases).
<PAGE>
PRODUCTIVITY
(a) Prices will be reduced during the agreement as follows:
Each January 1, all current production parts and new parts launched
prior to July 1 of the preceding year will be reduced per the
following schedule. All parts launched July 1 or later will be
subject to productivity reductions on January 1 following the first
full year of production.
Date Encapsulated Conventional JIT/Hardware Regulators
(Less Glass) (Less Glass) (Less Glass)
January 1, 1994 CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
January 1, 1995 WITH RESEPCT TO OMITTED INFORMATION
January 1, 1996 WHICH HAS BEEN FILED SEPARATELY
January 1, 1997 WITH THE COMMISSION
January 1, 1998
(b) Seller may retain the economic benefits of implemented changes
that were initiated by Seller, with the written approval of the
Buyer, in design (SPECS), processing, packing (per packaging plan
agreement), and shipping to achieve the productivity improvements
that Seller needs to reduce prices as specified in the foregoing
section. With each change that Seller initiates, Seller must
ion. With each change that Seller initiates, Seller must
furnish information and data that demonstrate, in conformance with
good engineering practice, the feasibility of the change. Buyer
usually will conduct its own engineering analysis of the proposed
change and shall not be obligated to approve any change that it
believes to be detrimental. When implemented in production, the
annual savings of approved SPECS, net of any related costs incurred
by Buyer, will be applied as an offset to the Seller's productivity
commitment. Savings in excess of Seller's productivity commitment
in a given year will be applied toward the next year's commitment.
SERVICE AND REPLACEMENT
(a) At Buyer's request, Seller will sell to Buyer (i) the supplies
of this Agreement necessary to fulfill Buyer's current model
service and replacement requirements for such supplies at the
prices specified herein plus any actual cost differential for
packaging, and (ii) if such supplies are assemblies, service and
replacement parts of the assemblies at prices such that the total
price of all parts of the assembly does not exceed the price of the
assembly less assembly costs, plus any actual cost differential for
packaging.
(b) At Buyer's request during the seven-year (or longer if
required by law) after Buyer's complete current model purchases,
Seller will sell to Buyer supplies to fulfill Buyer's past model
service and replacement requirements at the prices specified herein
plus actual cost differentials for packaging and manufacturing.
During the seventh year of such period, Buyer and Seller will
negotiate in good faith with regard to Seller's continued
manufacture of service and replacement supplies.
PAYMENT TERMS
Payment terms will be net 15th, 25th and 35th
TERMINATION
Sections 17(a) - (c) of the terms and conditions of the purchase
order are hereby deleted and replaced by the following: If during
this Agreement, (a) the quality of Seller's supplies deteriorates,
(b) Seller does not remain competitive in quality and delivery with
other responsible suppliers or potential suppliers, (c) Seller
fails to take appropriate actions to ensure the long-term cost
competitiveness of the product covered by the Agreement, or (d)
Buyer can substitute supplies of significantly advance design or
processing, Buyer may terminate its purchase obligations in whole
or in part without further liability. Buyer shall provide written
notice to Seller which outlines its causes for termination and
specifies a termination date at least three months after the date
of the notice. If Seller demonstrates to Buyer, within one month
of the date of the notice, that Seller will correct the causes by
the termination date or a subsequent date acceptable to Buyer,
termination will be suspended and this Agreement will continue.
ACCEPTED:
EXCEL INDUSTRIES, INC.: FORD MOTOR COMPANY:
TITLE/DATE TITLE/DATE
EXHIBIT 21
Name of Subsidiary State of Incorporation
Excel Corporation Indiana
Excel Metalcraft, Ltd. Canada
Excel Industries of Michigan, Inc. Michigan
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-91986) effective July 19, 1984, the Registration
Statement on Form S-8 (No. 33-14508) effective June 11, 1987 and the
Prospectus constituting part of the Registration Statement of Form S-3 (No.
33-52315) effective March 17, 1994 of Excel Industries, Inc. of our report
dated February 17, 1994 appearing on page 16 of this Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page 34 of this Form 10-K.
PRICE WATERHOUSE
South Bend, Indiana
March 30, 1994
