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 28, 1996 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, Elkhart, Indiana 46514
(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 New York Stock Exchange
Preferred Share Purchase Rights New York 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 February 14, 1997 was 10,722,454. The
aggregate market value of the Registrant's Common Shares held by
nonaffiliates on March 11, 1997 was $195,684,785.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Excel Industries, Inc. proxy statement for
the 1997 annual meeting of shareholders are incorporated by
reference into Part III of this report.
<PAGE> PART I.
Item 1. Business
General
The registrant, an Indiana corporation (Company), is a
technically innovative tier-one supplier to the automotive, heavy
truck, recreational vehicle and bus industries. It produces
window, door and seating systems and injection molded plastic
parts for the North American automotive original equipment
manufacturers (Light Vehicle Products Segment) and appliances,
window, door and seating systems and hardware products for the
recreational vehicle, mass transit and heavy truck industry
(RV/MT/HT Products Segment). The Company is the leading
independent supplier of window systems to the combined
automotive, light truck and van, bus and recreational vehicle
markets in North America. The Company on April 3, 1996 completed
the purchase of shares of Anderson Industries, Inc. (Anderson).
Anderson's only operating asset was its wholly-owned subsidiary
Atwood Industries, Inc.
Business Strategy
The Company's business objective is to profitably expand its
position as a leading independent supplier of high quality,
technically innovative products to the Light Vehicle Products
Segment and the Recreational Vehicle, Mass Transit and Heavy
Truck Products Segment. 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.
Light Vehicle Products Segment
Products. The Company designs, engineers, manufactures and
supplies plastic and metal framed window assemblies, manual and
power glass regulator systems, manual seat systems and injection
molded plastic products principally for North American car and
light truck OEMs. The Company does not manufacture or sell
primary glass. Window and door systems products include various
types of automotive windshields, rear, vent, quarter, push out
and sliding windows; and window regulator systems, latches, door
frames, hinges and related components. Seat systems include seat
and height adjusters and recliner mechanisms. Other products for
the Light Vehicle Products Segment include hood and deck hinges;
control systems which include hand and foot operated parking
brakes and transmission selectors; and a variety of injection
molded plastic parts.
Customers and Marketing. The Company supplies its products
primarily to Ford, Chrysler and General Motors. Total sales to
these three customers for the three years ended December 28, 1996
were approximately 87% in 1994; 86% in 1995 and 65% in 1996. (For
a detailed breakdown by customer see Note 11 of Notes to
Consolidated Financial Statements included elsewhere herein).
The loss of any of these as a customer would have a material
adverse effect on the Company.
Sales of the Company's products to OEMs are made directly by the
Company's sales and engineering personnel located at the
Company's office in the Detroit area. Through this sales and
engineering office, the Company services its OEM customers and
manages its continuing programs of product design, development
and improvement.
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. During the year customers issue releases
under the contracts and accordingly the Company does not have a
significant backlog of orders. 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.
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.
Competition. The Company operates in a highly competitive
environment in the Light Vehicle Products Segment. 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,
Rockwell International, Magna 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 Light Vehicle Products
Segment.
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 $413.2
million in 1996.
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 latest 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 commenced production of PVC modular windows
in 1993 and currently supplies PVC modular windows for several
models. In addition, technology acquired from the Company's
alliance with Schade enabled the Company to supply door frames
for General Motors' 1995 and 1996 Saturn Coupe.
In 1996, the Company together with another manufacturer of
automotive parts acquired a 25% minority interest in Pollone
S.A., a Brazilian automotive parts supplier. This acquisition
provides a manufacturing base to supply products to the South
American markets.
Recreational Vehicle, Mass Transit and Heavy Truck Products
Segment
Products. Primary products for recreational vehicles include:
appliances such as water heaters, furnaces, stoves and ranges;
hardware such as jacks, couplers and surge brake actuators;
seating frames and seat adjusters and recliner mechanisms;
preassembled doors and windows for class A motor homes; glass or
plastic glazed window assemblies for mass transit systems; and
wing ventilator and fixed and moveable windows for heavy trucks.
Customers and Marketing. Major customers in the RV, Mass Transit
and Heavy Truck Products Segment include Fleetwood, Winnebago,
Damon, Jayco, Thor, Coachmen, Motor Coach Industries and
Navistar. Separate sales and engineering groups are located in
Rockford, Illinois and Elkhart, Indiana to service customers in
this business segment. Similar to the automotive industry,
customers in the RV, Mass Transit and Heavy Truck Products
Segment generally issue purchase orders for products on an annual
basis and periodically issue releases against those purchase
orders. Accordingly, this segment does not have a significant
backlog of orders at any particular time.
Competition. The RV industry is very competitive with more than
10 competitors and although no one competitor competes across all
product lines the following four are significant: Suburban;
Magic Chef; Hammerblow; and Hehr International.
Engineering, Research and Development
The Light Vehicle Products Segment expended approximately $10.9
million, $12.9 million and $14.0 million on engineering, research
and development during 1994, 1995 and 1996, respectively. These
increased expenditures have significantly improved capacity to
provide complete engineering and design services to support its
product lines. A corporate technical center is located 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.
In 1996 product engineering, research and development costs for
Recreational Vehicle, Mass Transit and Heavy Truck Products
Segment totaled $3.2 million. Amounts spent in 1995 and 1994
were not material.
Foreign Operations
The Company's foreign operations consists of a Mexican
manufacturing facility and an Italian manufacturing facility.
These facilities were acquired in connection with the acquisition
of Anderson and total sales from these facilities in 1996
amounted to $3,186,000.
Employees
The Company employs a total of approximately 6,800 persons, of
whom approximately 18% 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 Results of Operations
and Financial Condition--Liquidity and Capital Resources" and
Note 8 to the Company's Consolidated Financial Statements
included elsewhere herein.
Seasonality
The Light Vehicle Products Segment normally experiences reduced
sales volume in the months of July, August and December as
vacation periods, model change over and start-up and, in the case
of December, holidays which commence prior to Christmas and run
through New Years, affect the number of production days. The
RV/MT/HT Products Segment is seasonal in that sales in the
quarter October through December are normally at reduced levels.
Item 2. Properties
The Company operates 27 manufacturing facilities, all of which
are in good condition. Except as noted below, the Company owns
all of these facilities.
<TABLE>
<CAPTION>
Approximate
Building Size
Location (in square feet)
Light Vehicle Products Segment
<S> <C>
Elkhart 270,000 (1)
Jacksonville, Florida 260,000
Lawrenceburg, Tennessee 150,000
Fulton, Kentucky 80,000 (2)
Bowling Green, Kentucky 32,000
Mishawaka, Indiana 120,000
Toledo, Ohio 61,000 (3)
Pikeville, Tennessee 102,000 (4)
Detroit, Michigan 43,000 (3)
Rockford, Illinois 295,000
Oregon, Illinois 24,000
Stockton, Illinois 145,000
Mount Carroll, Illinois 39,000
West Union, Iowa 181,000
Battle Creek, Michigan 126,000
Jonesville, Michigan 150,000
Henry, Tennessee 114,000
Queretaro, Mexico 58,000 (3)
Recreational Vehicle, Mass Transit and Heavy Truck Products
Segment
Rockford, Illinois 116,000
Rockford, Illinois 50,000
Greenbriar, Tennessee 57,000
Elkhart, Indiana 122,000
Elkhart, Indiana 30,000 (3)
LaGrange, Indiana 140,000
Salt Lake City, Utah 67,000
Salt Lake City, Utah 48,000
Cesena, Italy 17,000
_________________________________
</TABLE>
(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 for manufacturing and the
Corporate Technical Center.
(2) The Company leases the Fulton, Kentucky facility pursuant to
a lease which expires in 1997. The Company is entitled to
extend the term of the lease for five (5) 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 these facilities on short to medium term
leases generally with options to renew. Lease rates are at
competitive levels.
(4) 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.
The Company believes that the properties and equipment are
in good operating condition and are adequate for the business use
intended. Utilization of the facilities varies with North
American light vehicle production and general conditions of the
economy. It is estimated that current capacity utilization
overall is approximately 70% to 75%.
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. The Company does not
believe the outcome of the lawsuit will materially effect its
financial condition, liquidity or results of operations.
For further information, see "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and
Note 8 to the Company's Consolidated Financial Statements
included elsewhere herein.
Item 4. Submission of Matters to Vote of Security Holders
There were no matters submitted to a vote of shareholders during
the fourth quarter of 1996.
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:
<TABLE>
<CAPTION>
Name Age Position and Offices
<S> <C> <C>
James O. Futterknecht, Jr. 50 Chairman, President and Chief
Executive Officer
Joseph A. Robinson 58 Senior Vice President and
Chief Financial Officer
James E. Crawford 50 Vice President and Managing
Director-Value Management and
Product Research and
Development
Louis R. Csokasy 49 Vice President and President-
Automotive Systems
Terrance L. Lindberg 54 Vice President and President-
Mass Transit, RV and Heavy
Truck Window and Door Systems
James M. Krzyzewski 49 Vice President and President-
Plastic Products
Michael C. Paquette 55 Vice President, Corporate
Human Resources
Robert A. Pickering 54 Vice President and President-
Atwood Mobile Products
Ike K. Eikelberner 49 Vice President and Corporate
Controller
</TABLE>
Mr. Futterknecht joined the Company in 1970, was Vice President -
Corporate Sales from 1976 until 1984, was Vice President -
Automotive Products from 1984 until 1987, was Vice President -
Automotive Sales and Engineering from 1987 to 1990, was Executive
Vice President from 1990 to 1992, and was President and Chief
Operating Officer from 1992 to 1995. He was appointed as a
director in 1992 and elected as Chairman and Chief Executive
Officer in September of 1995.
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, Vice President -
Modular Operations from 1987 to 1988, Vice President - Group
Operations/ Modular Products from 1988 to 1992, and Vice
President - Product Development and Value Engineering from 1992
to 1995. He is currently Vice President and Managing Director -
Value Management and Product Research and Development.
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, Vice President - Engineering from
1990 to 1992, and Vice President - Engineering and Quality from
1992 to 1995. He is currently Vice President and President -
Automotive Systems.
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 was Vice
President - Specialty Products and General Manager - Nyloncraft
from 1992 to 1995. He is currently Vice President and President
- - Mass Transit, RV and Heavy Truck Window and Door Systems.
Mr. Krzyzewski joined the Company in 1975, was General Manager of
the Belvedere division from 1984 to 1987, was Manager, Business
Strategy and Development from 1987 to 1990, and was Director,
Business Strategy and Development from 1990 to 1995. He is
currently Vice President and President, Plastic Products.
Mr. Paquette joined the Company in 1995 as Vice President,
Corporate Human Resources. Prior to that and since 1983, he was
Vice President of Human Resources for the Power Generation Group
of Cummins Engine Company, a Columbus, Indiana manufacturer of
diesel engines and related components.
Mr. Pickering joined Atwood Industries in 1989. He was Vice
President-Manufacturing 1989 to 1991 and President-Atwood Mobile
Products from 1991. He was elected a Vice President of the
Company in December, 1996.
Mr. Eikelberner joined the Company in 1976, was Controller-
Nyloncraft Division from 1989 to 1991, was Corporate Controller
from 1991 to 1996 and elected a Vice President in December 1996.
PART II.
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters
The Common Shares were traded on the American Stock Exchange
until December 12, 1995 and thereafter on the New York 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 New York Stock Exchange and
the American Stock Exchange, as applicable, and dividends
declared per share.
<TABLE>
<CAPTION>
Dividends
Share Prices Declared
High Low Per Share
Fiscal Year Ended December 30, 1995:
<S> <C> <C> <C>
1st Quarter 14.250 12.625 .110
2nd Quarter 14.500 12.625 .110
3rd Quarter 14.375 12.625 .110
4th Quarter 13.000 11.625 .110
Fiscal Year Ended December 28, 1996:
1st Quarter 14.000 10.875 .110
2nd Quarter 16.250 10.750 .110
3rd Quarter 17.000 13.000 .110
4th Quarter 16.375 14.125 .125
</TABLE>
As of February 21, 1997, there were 547 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. The Company's 7.78% Senior Notes
debt agreement contains certain restrictive covenants pertaining
to dividends. Currently, the Company has available for payment
of dividends $25,725,000 of retained earnings.
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
28, 1996. 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
Results of Operations and Financial Condition" 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:
Fiscal Year Ended,
Dec 31,
1992 1993 1994
<S> <C> <C> <C>
Net sales $426,873 $515,681 $607,183
Cost of goods sold 383,258 463,943 545,817
Gross profit 43,615 51,738 61,366
Selling, administrative
and engineering expenses 28,262 30,054 32,723
Restructuring charge (1) 4,500 --- ---
Gain on disposal
of Canadian facility (1) --- --- ---
Other income, net 713 2,015 2,145
Interest expense 5,555 3,474 3,406
Income before income taxes
and cumulative effect of
changes in accounting 6,011 20,225 27,382
Income tax provision 2,434 7,785 10,131
Income before cumulative
effect of changes in
accounting 3,577 12,440 17,251
Cumulative effect of
adoption of SFAS 106 and
109 3,195 --- ---
Net income 382 12,440 17,251
Net income (loss) per share:
Before cumulative effect
of changes in accounting:
Primary .47 1.23 1.60
Fully diluted .47 1.15 1.46
Cumulative effect of adop-
tion of SFAS 106 and 109:
Primary (.42) --- ---
Fully diluted (.42) --- ---
Net income:
Primary .05 1.23 1.60
Fully diluted .05 1.15 1.46
Cash dividends per share .24 .30 .37
Average shares outstanding 7,553 10,122 10,805
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data:
Dec 31,
1992 1993 1994
<S> <C> <C> <C>
Working Capital $ 60,331 $ 94,761 $ 96,145
Property, plant and
equipment 42,064 49,746 62,876
Total assets 182,096 229,316 254,630
Current portion of
long-term debt 1,561 1,553 1,358
Long-term debt (less current
portion) 34,592 35,094 33,578
Shareholders' equity 67,030 106,436 122,643
Book value per share 7.83 10.07 11.48
Long-term debt to total
capitalization 34% 25% 21%
____________________________
</TABLE>
(1) In 1992, the Company provided a reserve of $4,500 for
restructuring costs; and in 1995, the Company realized a
gain on the disposal of the Canadian facility. See Note 15
to the Company's Consolidated Financial Statements.
<TABLE>
<CAPTION>
Income Statement Data:
Fiscal Year Ended,
Dec 30, Dec 28,
1995 1996
<S> <C> <C>
Net sales $596,014 $887,741
Cost of goods sold 540,716 783,375
Gross profit 55,298 104,366
Selling, administrative
and engineering expenses 32,973 65,652
Restructuring charge (1) --- ---
Gain on disposal
of Canadian facility (1) 1,582 ---
Other income, net 3,805 1,736
Interest expense 3,322 9,784
Income before income taxes
and cumulative effect of
changes in accounting 24,390 30,666
Income tax provision 8,125 11,550
Income before cumulative
effect of changes in
accounting 16,265 19,116
Cumulative effect of
adoption of SFAS 106 and
109 --- ---
Net income 16,265 19,116
Net income (loss) per share:
Before cumulative effect
of changes in accounting:
Primary 1.52 1.79
Fully diluted 1.41 1.66
Cumulative effect of adop-
tion of SFAS 106 and 109:
Primary --- ---
Fully diluted --- ---
Net income:
Primary 1.52 1.79
Fully diluted 1.41 1.66
Cash dividends per share .44 .455
Average shares outstanding 10,690 10,709
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data:
Dec 30, Dec 28,
1995 1996
<S> <C> <C>
Working Capital $ 91,453 $114,140
Property, plant and
equipment 68,997 159,775
Total assets 269,518 443,234
Current portion of
long-term debt 9,164 9,554
Long-term debt (less current
portion) 24,021 123,452
Shareholders' equity 134,317 150,725
Book value per share 12.55 14.06
Long-term debt to total
capitalization 15% 45%
____________________________
</TABLE>
(1) In 1992, the Company provided a reserve of $4,500 for
restructuring costs; and in 1995, the Company realized a
gain on the disposal of the Canadian facility. See Note 15
to the Company's Consolidated Financial Statements.
<PAGE>
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
General
The Company was founded in 1928 and became a public company in
April 1984. In April 1996, the Company acquired all of the
outstanding common shares of Anderson Industries, Inc.,
(Anderson) located in Rockford, Illinois. Anderson is a holding
company whose main asset is Atwood Industries, Inc. (Atwood).
Atwood manufactures seat systems, including seat and height
adjusters, recliner mechanisms, hand and foot operated parking
brakes, transmission selectors and hood and deck hinges, all for
the automotive industry. In addition, Atwood produces appliances
such as water heaters, furnaces, stoves and ranges, hardware,
such as jacks, couplers and surge brake actuators, seating
frames, seat adjusters and recliner mechanisms for the
recreational vehicle industry. With this acquisition, the
Company has established lines of business to distinguish
activities for the light vehicle segment separate from the
recreational vehicles, mass transit and heavy truck segment
(RV/MT/HT). Prior to 1996, the Company operated in predominately
the light vehicle industry. The comparability of the Company's
results on a period-to-period basis is significantly affected by
this acquisition.
The light vehicle products segment normally experiences
reduced sales volumes in the months of July, August and December
as vacation periods, model changeover and start-up and, in the
case of December, holidays which commence prior to Christmas and
run through New Years, affect the number of production days. The
RV/MT/HT products segment is seasonal in that sales in the
quarter October through December are normally at reduced levels.
Results of Operations
1996 Compared to 1995
Sales for the year ended December 28, 1996 totaled $887.7
million, up $291.7 million or 49% from the preceding year. The
acquisition of Atwood added $284.9 million in 1996. The
remainder of the increase was due to a slight increase in overall
automotive volumes as selling prices remained stable. Increases
in production of our products for light trucks and sport utility
vehicles were offset by decreases in production for passenger
cars. Sales for the current year were $719.4 million for the
light vehicle segment and $168.3 million for the RV/MT/HT
segment.
Gross profit totaled $104.4 million, or 11.8% of sales, as
compared with $55.3 million, or 9.3% of sales for the prior year.
Gross profit from the Atwood acquisition amounted to $34.5
million or 12.1% of sales. The higher gross margin from Atwood
had the effect of increasing overall gross margin by .2
percentage points. The remaining improvement in margin results
from continued cost reductions and absence of significant launch
costs.
Selling, administrative and engineering expenses totaled
$65.7 million or 7.4% of sales for 1996, up from $33.0 million or
5.5% of sales in 1995. The Atwood acquisition added $28.1
million of selling, administrative and engineering expenses. The
remainder of the increase was due to increases in salaries,
fringes, legal and professional fees and costs associated with
engineering design and development activities.
Interest costs of $9.8 million for 1996 increased from $3.3
million in 1995 due to the increased long-term debt outstanding
including new Senior Notes issued in connection with the Anderson
acquisition. Interest income of $1.8 million in 1996, recorded
in other income, was down from $2.1 million in 1995 due to
reductions in marketable securities. Also included in other
income in 1995 was a $1.5 million gain on executive life
insurance.
Included in 1995 was a gain on the disposition of Excel
Metalcraft, Ltd., located in Aurora, Ontario in the amount of
$1,582,000 which amounted to 9 cents per share after income
taxes. This gain included the return to profits of $970,000 of
the restructuring reserve which was created in 1992. The final
phase of the restructuring was completed with the sale of the
shares of Metalcraft.
The income tax provision was 37.7% of pre-tax income in 1996
up from 33.3% in 1995. The previous year reflected the impact of
the non-taxable executive life insurance proceeds and a higher
level of income from investing in tax-free securities.
1995 Compared to 1994
Sales for the year ended December 30, 1995 totaled
$596.0 million, down $11.2 million or 2% from the preceding year.
This decrease occurred primarily in sales of modular windows for
passenger cars which were down 19%. North American light vehicle
production for 1995 was down 1.3% when compared to 1994. The
Company's largest customer, Ford Motor Company, reported
passenger car production in 1995 was 14% lower than the previous
year.
Gross profit totaled $55.3 million, or 9.3% of sales, as
compared with $61.4 million, or 10.1% of sales for the prior
year. The decrease in 1995 compared to 1994 was due to the
decreased sales, a change in product mix, a shortfall of cost
reductions against customer productivity commitments and the
adverse impact of new program launch costs.
Selling, administrative and engineering expenses totaled
$33.0 million for 1995, an increase of .8% or $.3 million, from
1994. 1995 expenses reflect higher costs in salaries and
consulting fees (for Employee Empowerment Training and Kaizen
activities) being offset by lower executive incentive
compensation. As a percent of sales, selling, administrative and
engineering expenses increased to 5.5% in 1995 as compared to
5.4% in 1994.
Interest costs of $3.3 million for 1995 were similar to the
$3.4 million incurred in 1994. Other income of $3.8 million in
1995 increased from $2.1 million in 1994 due to recording a
$1.5 million gain on executive life insurance. Interest income,
included in other income, increased from $1.8 million in 1994 to
$2.1 million in 1995 due to higher interest rates.
The income tax provision was 33.3% of pre-tax income in
1995, down from 37% in the preceding year. The 1995 percentage
reflected not only the impact of the non-taxable executive life
insurance proceeds but also the continuation of investing in tax-
free securities.
Included in 1995 was a gain on the disposition of Excel
Metalcraft, Ltd., located in Aurora, Ontario in the amount of
$1,582,000 which amounted to 9 cents per share after income
taxes. This gain included the return to profits of $970,000 of
the restructuring reserve which was created in 1992. The final
phase of the restructuring was completed with the sale of the
shares of Metalcraft.
Liquidity and Capital Resources
The Company completed the acquisition of all of the outstanding
common shares of Anderson on April 3, 1996 for approximately
$62,562,000 including five-year warrants for 381,000 shares of
Excel common stock exercisable at $13.25 per share (valued at
$1.5 million) and expenses of the transaction. The Company also
assumed approximately $85 million of Anderson's debt. On April
1, 1996 the Company entered into a $120,000,000 Credit Agreement
to facilitate the completion of this acquisition. On May 3, 1996
the Company issued 7.78% Senior Notes for $100,000,000 at which
time the Credit Agreement was amended to reduce the committed
line of credit to $60,000,000. Interest only is payable in
quarterly installments until 2000 at which time annual principal
and interest payments will be made to 2011.
At December 28, 1996, working capital totaled $114.1
million, and the current ratio was 1.9 to 1. Cash and marketable
securities totaled $30.6 million, a decrease of $7.2 million from
December 30, 1995.
In 1996, cash flow from operations totaled $69.8 million,
considerably higher than the $22.2 million in 1995. The
increased cash flow from operations resulted from improved level
of earnings including non-cash charges and reductions in working
capital (primarily trade receivables, billable tooling and
inventories).
Expenditures for capital equipment in 1996 were $29.2
million up from $21.7 million in 1995 and $25.5 million in 1994.
The increase in 1996 was due to capital expenditures for Atwood
operations. Capital additions consisting mainly of machinery and
equipment totaled $23.6 million in the light vehicle segment and
$4.0 million in the RV/MT/HT segment. The remainder was spent in
the corporate area. Capital expenditures for 1997 are budgeted
at $50 million.
Additionally, in 1996 the Company made its first payment on
its 10% Convertible Subordinated Notes, and repaid $71 million of
debt assumed in connection with the Anderson acquisition
utilizing proceeds from its Senior Note issue. Cash dividends
totaled $4.9 million for the year.
Long-term debt of $123.5 million as of December 28, 1996, or
45% of total capitalization, included not only the Senior Notes
but also $15 million of the Convertible Notes issued in January
1990. 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.
For 1997 the Company expects its current cash balances,
operating cash flow and available credit lines to be sufficient
to finance operating cash needs, capital expenditures and any
environmental clean-up requirements.
The Company entered into a 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.
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. 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. On September 5, 1996 the United States Department of
Justice lodged with the United States District Court for the
Northern District of Indiana a proposed partial consent decree
which specifies payment of Federal Past Response Costs from
certain PRPs which for Excel amounted to approximately $3.2
million which together with amounts due IDEM would bring Excel's
total obligation to approximately $3.4 million. This consent
decree has not been accepted by the Court, and comments objecting
to the consent decree have been lodged with the United States
Department of Justice.
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 the EPA Costs and that its cash on hand, unused lines of
credit or cash from operations are sufficient to fund any
required expenditures.
On February 14, 1997, the Company announced its plans to
close its Eddy Avenue automotive plant in Rockford, Illinois.
The Company expects to record a restructuring reserve in the
first quarter of 1997 after information is available to determine
the reserve. This reserve will be an adjustment to the opening
balance sheet of Anderson and not a charge to earnings.
Inflation
The impact of inflation on operating results for the years 1996,
1995 and 1994 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.
Cautionary Statements for Purposes of "Safe Harbor" Under the
Private Securities Reform Act of 1995
Certain statements in this Annual Report, in the Company's press
releases and in oral statements made by or with the approval of
an authorized executive officer of the Company constitute
"forward-looking statements" as that term is defined under the
Private Securities Litigation Reform Act of 1995. These may
include statements projecting, forecasting or estimating Company
performance and industry trends. The achievement of the
projections, forecasts or estimates is subject to certain risks
and uncertainties. Actual results and events may differ
materially from those projected, forecasted or estimated. The
applicable risks and uncertainties include general economic and
industry factors.
General risks that may impact the achievement of such
forecasts include: compliance with new laws and regulations,
significant raw material price fluctuations, and other business
factors. Specific risks to the Company include: risk of
recession in the economies in which its products are sold, the
concentration of a substantial percentage of the Company's sales
with a few major OEM customers, labor relations at the Company,
its customers and its suppliers; competition in pricing and new
product development from larger companies with substantial
resources.
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 28, 1996 and December 30,1995, and
the results of their operations and their cash flows for each of
the three fiscal years in the period ended December 28, 1996, 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.
PRICE WATERHOUSE LLP
South Bend, Indiana
February 20, 1997
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Amounts in thousands) December 28, December 30,
1996 1995
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments $ 6,580 $ 391
Marketable securities 23,981 37,416
Accounts receivable-trade, less
allowances of $2,443 in 1996 and
$725 in 1995 127,351 85,751
Customer tooling to be billed 17,278 26,090
Inventories 43,960 27,298
Prepaid expenses 19,800 7,018
Total current assets 238,950 183,964
Property, plant and equipment:
Land 3,561 1,280
Buildings and improvements 52,667 21,726
Machinery and equipment 194,270 116,527
Accumulated depreciation (90,723) (70,536)
159,775 68,997
Goodwill, net of accumulated
amortization of $4,074 in 1996 and
$3,050 in 1995 31,814 6,356
Other assets 12,695 10,201
$443,234 $269,518
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 68,673 $ 57,811
Accrued liabilities:
Salaries and wages 10,100 5,284
Employee benefits 10,628 7,091
Other 22,847 12,759
Income taxes payable 3,008 402
Current maturities of long-term debt 9,554 9,164
Total current liabilities 124,810 92,511
Long-term debt 123,452 24,021
Other long-term liabilities 44,247 18,669
Commitments and contingent liabilities -- --
Shareholders' equity:
Preferred shares-no par value,
authorized 1,000 shares, none
issued -- --
Common shares-no par value,
authorized 20,000 shares; issued
and outstanding in 1996, 10,718;
issued in 1995, 11,003 92,187 95,157
Retained earnings 58,653 44,412
Minimum pension liability adjustment (160) (659)
Cumulative translation adjustment 45 --
Treasury shares at cost, 300 shares -- (4,593)
Total shareholders' equity 150,725 134,317
$443,234 $269,518
The accompanying notes are an integral part of this statement.
</TABLE>
Consolidated Statement of Income
<TABLE>
<CAPTION>
(Amounts in thousands, except per share amounts)
Fiscal Year Ended
December 28, December 30, December 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $887,741 $596,014 $607,183
Cost of goods sold 783,375 540,716 545,817
Gross profit 104,366 55,298 61,366
Selling, administrative
and engineering expenses 65,652 32,973 32,723
Disposal of Canadian
facility -- (1,582) --
Operating income 38,714 23,907 28,643
Interest expense 9,784 3,322 3,406
Other income, net (1,736) (3,805) (2,145)
Income before
income taxes 30,666 24,390 27,382
Provision for income
taxes 11,550 8,125 10,131
Net income $ 19,116 $ 16,265 $ 17,251
Net income per share:
Primary $ 1.79 $ 1.52 $ 1.60
Fully diluted 1.66 1.41 1.46
Cash dividends per share $ .455 $ .44 $ .37
The accompanying notes are an integral part of this statement.
</TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Amounts in thousands)
_________________________________________________________________
<TABLE>
<CAPTION>
Common
Shares Common Retained
Outstanding Shares Earnings
<S> <C> <C> <C>
Balance at December 31, 1993 10,575 $87,537 $19,615
Net income 17,251
Dividends (4,012)
Share offering 380 7,032
Share options exercised 3 26
Shares issued under employee
stock purchase plan 16 236
Minimum pension liability
adjustment
Treasury shares purchased (290)
Balance at December 31, 1994 10,684 94,831 32,854
Net income 16,265
Dividends (4,707)
Share options exercised 7 57
Shares issued under employee
stock purchase plan 22 269
Minimum pension liability
adjustment
Treasury shares purchased (10)
Balance at December 30, 1995 10,703 95,157 44,412
Net income 19,116
Dividends (4,875)
Share options exercised 12 86
Shares issued under employee
stock purchase plan 15 192
Warrants issued 1,500
Minimum pension liability
adjustment
Cumulative translation
adjustment
Treasury shares purchased (12)
Treasury shares canceled (4,748)
Balance at December 28, 1996 10,718 $ 92,187 $58,653
Minimum
Pension Cumulative
Liability Translation
Adjustment Adjustment
<S> <C> <C>
Balance at December 31, 1993 $ (716) $ --
Net income
Dividends
Share offering
Share options exercised
Shares issued under employee
stock purchase plan
Minimum pension liability
adjustment 129
Treasury shares purchased
Balance at December 31, 1994 (587) --
Net income
Dividends
Share options exercised
Shares issued under employee
stock purchase plan
Minimum pension liability
adjustment (72)
Treasury shares purchased
Balance at December 30, 1995 (659) --
Net income
Dividends
Share options exercised
Shares issued under employee
stock purchase plan
Warrants issued
Minimum pension liability
adjustment 499
Cumulative translation
adjustment 45
Treasury shares purchased
Treasury shares canceled
Balance at December 28, 1996 $ (160) $ 45
Treasury
Shares Total
<S> <C> <C>
Balance at December 31, 1993 $ -- $106,436
Net income 17,251
Dividends (4,012)
Share offering 7,032
Share options exercised 26
Shares issued under employee
stock purchase plan 236
Minimum pension liability
adjustment 129
Treasury shares purchased (4,455) (4,455)
Balance at December 31, 1994 (4,455) 122,643
Net income 16,265
Dividends (4,707)
Share options exercised 57
Shares issued under employee
stock purchase plan 269
Minimum pension liability
adjustment (72)
Treasury shares purchased (138) (138)
Balance at December 30, 1995 (4,593) 134,317
Net income 19,116
Dividends (4,875)
Share options exercised 86
Shares issued under employee
stock purchase plan 192
Warrants issued 1,500
Minimum pension liability
adjustment 499
Cumulative translation
adjustment 45
Treasury shares purchased (155) (155)
Treasury shares canceled (4,748) --
Balance at December 28, 1996 $ -- $150,725
The accompanying notes are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
(Amounts in thousands)
Fiscal Year Ended
December 28, December 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,116 $ 16,265
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 26,246 13,720
Deferred income taxes (1,613) (108)
Gain from disposal of Canadian
facility -- (1,582)
Gain from life insurance -- (1,468)
Other 348 334
Changes in assets and liabilities,
excluding effect of acquisition
Accounts receivable and
prepaid expenses 19,206 (7,486)
Inventories and customer
tooling 25,955 (4,802)
Accounts payable and
accrued liabilities (19,409) 7,301
Total adjustments 50,733 5,909
Net cash provided by
operating activities 69,849 22,174
Cash flows from investing activities:
Purchase of property, plant
and equipment (29,209) (21,744)
Business acquired (58,984) --
Sale (purchase) of investments, net 8,290 (2,060)
Proceeds from disposal of
Canadian facility -- 6,306
Proceeds from life insurance -- 1,841
Other 929 (31)
Net cash used for
investing activities (78,974) (15,688)
Cash flows from financing activities:
Issuance of common shares 278 326
Payments of long-term debt (79,934) (1,751)
Dividends (4,875) (4,707)
Purchase of treasury shares (155) (138)
Issuance of long-term debt 100,000 --
Net cash provided by
(used for) financing
activities 15,314 (6,270)
Net change in cash and
short-term investments 6,189 216
Cash and short-term investments
at beginning of period 391 175
Cash and short-term investments
at end of period $ 6,580 $ 391
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 9,288 $ 3,358
Income taxes, net of refunds 10,524 10,380
December 31,
1994
<S> <C>
Cash flows from operating activities:
Net income $17,251
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 11,931
Deferred income taxes (546)
Gain from disposal of Canadian
facility --
Gain from life insurance --
Other 2,170
Changes in assets and liabilities,
excluding effect of acquisition
Accounts receivable and
prepaid expenses (8,561)
Inventories and customer
tooling (10,563)
Accounts payable and
accrued liabilities 9,604
Total adjustments 4,035
Net cash provided by
operating activities 21,286
Cash flows from investing activities:
Purchase of property, plant
and equipment (25,491)
Business acquired --
Sale (purchase) of investments, net 266
Proceeds from disposal of
Canadian facility --
Proceeds from life insurance --
Other 231
Net cash used for
investing activities (24,994)
Cash flows from financing activities:
Issuance of common shares 7,294
Payments of long-term debt (1,711)
Dividends (4,012)
Purchase of treasury shares (4,455)
Issuance of long-term debt --
Net cash provided by
(used for) financing
activities (2,884)
Net change in cash and
short-term investments (6,592)
Cash and short-term investments
at beginning of period 6,767
Cash and short-term investments
at end of period $ 175
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 3,433
Income taxes, net of refunds 9,138
In connection with the business acquired, the Company had certain
non-cash costs totaling $3 million, including the issuance of
warrants valued at $1.5 million.
The accompanying notes are an integral part of this statement.
</TABLE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Prior to 1996, the Company operated in predominately one industry
segment in North America: the design, engineering and manufacture
of certain components sold to manufacturers in the ground
transportation industry. With the acquisition of Anderson in
1996, the Company expanded into a second segment: the manufacture
of appliances and equipment for the recreational vehicle (RV)
industry.
The light vehicle products segment consists of the
manufacturing of window assemblies, regulators, seating systems
and injection molded parts for light vehicles manufactured in
North America. The RV, mass transit and heavy truck segments
consist of RV appliances, jacks and couplers, bus windows and
doors and windows for heavy trucks.
2. Significant Accounting Principles
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 10,709,000 for
1996, 10,690,000 for 1995, and 10,805,000 for 1994.
Fully diluted earnings per share assumes, when dilutive, the
conversion of the outstanding 10% convertible subordinated notes
which were issued on January 2, 1990.
Short-term investments and marketable securities
Short-term investments amounting to $4,097,000 at December 28,
1996, and $255,000 at December 30, 1995 consist of investments
generally in money market funds.
Marketable securities represent investments with maturities
generally longer than 90 days which are classified as "available
for sale" securities in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." All securities
mature prior to December 1997. Interest and dividends on
marketable securities are included in income as earned. Realized
gains or losses are determined on the specific identification
method.
Marketable securities are carried at fair value and consist
of the following:
<TABLE>
<CAPTION>
1996 1995
(000 Omitted)
<S> <C> <C>
Government securities $ 2,984 $ 7,203
Tax-free municipal
securities 9,307 23,713
Municipal fund par value
preferred shares 9,650 6,500
Other tax free securities 2,040 --
$ 23,981 $37,416
</TABLE>
Other income includes interest income of $1,772,000 in
1996,$2,113,000 in 1995, and $1,812,000 in 1994.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for all
inventories at December 28, 1996 except for $9,230,000.
Customer tooling to be billed
Customer tooling to be billed represents costs incurred by the
Company on behalf of the customer and is generally covered by
purchase orders and recoverable during the next twelve months.
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. Expenditures for
repairs and maintenance are expensed as incurred.
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.
Fair Value of Financial Instruments
The Company estimates the fair value of all financial instruments
where the face value differs from the fair value, primarily long-
term debt, based upon quoted amounts or the current rates
available for similar financial instruments. If fair value
accounting had been used at December 28, 1996, instead of the
historic basis accounting used in the financial statements, long-
term debt would exceed the reported level by approximately $3
million.
Income taxes
Deferred income taxes are provided using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes."
Foreign Currency Translation
For operations outside the United States that prepare financial
statements in currencies other than the United States dollar,
income, expense and cash flow amounts are translated at average
exchange rates during the period, and assets and liabilities are
translated at period-end exchange rates. These translation
adjustments are included as a separate component of shareholders'
equity.
Fiscal Year
The Company's fiscal year was changed in 1995 to consist of 52 or
53 weeks ending on the Saturday nearest the calendar year end.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. Acquisition
On April 3, 1996, the Company completed the purchase of all of
the outstanding common shares of Anderson Industries, Inc.
(Anderson) for approximately $62,562,000 including five-year
warrants for 381,000 shares of Excel common stock exercisable at
$13.25 per share (valued at $1.5 million) and expenses of the
transaction. The Company also assumed approximately $85 million
of Anderson's debt. On April 1, 1996, the Company entered into a
$120,000,000 Credit Agreement to facilitate the completion of
this acquisition. On May 3, 1996, the Company borrowed
$100,000,000 in 7.78% Senior Notes payable for 11 years in annual
installments beginning in 2000.
Anderson, located in Rockford, Illinois, is a holding
company whose main asset is Atwood Industries, Inc. Atwood
Industries manufactures products for the automotive and
recreational vehicle industries and is also headquartered in
Rockford, Illinois.
The acquisition of Anderson was accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair market values. The
excess of the purchase price over the estimated fair value of net
assets acquired ($26,482,000) has been accounted for as goodwill
and is being amortized over 35 years using the straight line
method.
The accompanying consolidated statements of income include
the operating results of Anderson since April 3, 1996. Pro forma
unaudited consolidated operating results of the Company and
Anderson for the year ended December 28, 1996 and December 30,
1995, assuming the acquisition had been made as of the beginning
of 1996 and 1995, are summarized below (in thousands except per
share amounts):
<TABLE>
<CAPTION>
Year Ended
1996 1995
<S> <C> <C>
Net sales $985,555 $995,803
Net income 20,745 9,783
Net income per share, primary 1.94 0.92
Net income per share, fully diluted 1.79 0.91
</TABLE>
Net income for the year ended December 30, 1995, includes a
charge which reduced net income by $4,978,000 for a warranty
issue on a component part manufactured by Anderson that was
recalled by a major automotive customer.
The unaudited pro forma financial information presented is
not necessarily indicative either of the results of operations
that would have occurred had the transactions been completed on
the indicated dates or of future results of operations of the
combined companies.
4. Research, Engineering and Development
Research, engineering and development expenditures charged to
operations approximated $17,237,000 in 1996, $12,897,000 in 1995,
and $10,916,000 in 1994.
5. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
(000 Omitted)
<S> <C> <C>
Raw materials $24,047 $16,911
Work in process and
finished goods 20,770 11,143
LIFO reserve (857) (756)
$43,960 $27,298
</TABLE>
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. The Company also provides
supplemental retirement benefits for certain executives.
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 $7,577,000 in 1996, $3,947,000 in
1995, and $3,868,000 in 1994.
Components of net pension expense for qualified defined
benefit pension plans are as follows:
<TABLE>
<CAPTION>
Year Ended
1996 1995 1994
(000 Omitted)
<S> <C> <C> <C>
Service cost $2,470 $1,642 $1,622
Interest cost 2,711 1,585 1,457
Actual return on
assets (2,248) (3,001) 133
Net amortization and
deferral 53 1,583 (1,396)
Net defined benefit
pension expense $2,986 $1,809 $1,816
</TABLE>
The increase in net pension expense in 1996 for qualified defined
benefit pension plans is due to the addition of Atwood Industries
defined benefit plans.
The funded status of qualified defined benefit pension plans is
as follows:
<TABLE>
<CAPTION>
Assets exceed
accumulated benefits
1996 1995
(000 Omitted)
<S> <C> <C>
Plan assets at fair value $24,528 $14,914
Projected benefit obligation 30,694 18,397
(6,166) (3,483)
Unrecognized costs 2,542 1,781
Net accrued pension costs $(3,624) $(1,702)
Actuarial present value of:
Vested benefit obligations $20,815 $12,770
Accumulated benefit
obligations $22,284 $13,590
Accumulated benefits
exceed assets
1996 1995
(000 Omitted)
Plan assets at fair value $ 9,923 $ 4,941
Projected benefit obligation 12,919 5,862
(2,996) (921)
Unrecognized costs (116) --
Net accrued pension costs $(3,112) $ (921)
Actuarial present value of:
Vested benefit obligations $11,984 $ 5,560
Accumulated benefit
obligations $12,797 $ 5,862
Major assumptions: 1996 1995
Discount rate 7.5% 7.5%-8.0%
Rate of increase in compensation 5.0% 5.0%
Expected rate of return on plan
assets 8.0% 8.0%
</TABLE>
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 certain
management employees. In addition, certain hourly and salary
employees are eligible for postretirement medical coverage until
age 65. The Company is primarily self-insured for such benefits.
The Company follows the provisions of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" and funds these benefits on a pay-as-you-go basis. The
components of net periodic postretirement benefit cost are as
follows:
<TABLE>
<CAPTION>
Year Ended
1996 1995 1994
(000 Omitted)
<S> <C> <C> <C>
Service costs, benefits
attributed to employee
service during the
year $ 868 $ 656 $ 909
Interest cost on
accumulated postretirement
benefit obligation 780 482 599
Amortization of
deferrals (200) (189) (15)
Net periodic postretirement
benefit cost $1,448 $ 949 $1,493
</TABLE>
The increase in net cost in 1996 is attributable to the addition
of the Atwood Industries postretirement benefit plan. The
decrease in net cost in 1995 is attributable to lower actual
claims and higher retiree contributions than projected.
Summary information on the Company's plans is as follows:
<TABLE>
<CAPTION>
1996 1995
(000 Omitted)
Accumulated postretirement benefit obligation:
<S> <C> <C>
Retirees $ 3,018 $ 1,079
Retirement-eligible actives 1,850 868
Other active participants 7,788 5,587
Accumulated postretirement benefit
obligation (APBO) 12,656 7,534
Unrecognized prior service costs 808 865
Unrecognized net gain 3,973 2,761
Accrued postretirement benefit
costs $17,437 $11,160
</TABLE>
Long-term accrued postretirement benefit costs of
$16,148,000 and $11,160,000 are included in other long-term
liabilities at December 28, 1996 and December 30, 1995,
respectively.
The discount rate used in determining the APBO was 7.75% in
1996 and 1995. The assumed health care cost trend rate used in
measuring the accumulated postretirement benefit obligation was
8.75% in 1996 and 9.25% in 1995, declining by .5% per year to a
rate of 6.0%. An increase of 1% in the health care cost trend
rate would increase the accrued postretirement benefit cost at
December 28, 1996 by $1,900,000 and the 1996 annual expense by
$529,000.
7. Long-term Debt
Following is a summary of long-term debt of the Company:
<TABLE>
<CAPTION>
1996 1995
(000 Omitted)
<S> <C> <C>
7.78% Senior notes $100,000 $ --
10% Convertible subordinated notes 22,000 30,000
Other 11,006 3,185
133,006 33,185
Current maturities (9,554) (9,164)
$123,452 $24,021
</TABLE>
The senior notes are due April 30, 2011. Interest only is
payable in quarterly installments until 2000 at which time annual
payments will commence ranging from $3.9 million to $12.2
million.
The convertible subordinated notes are due on December 1,
2000 and require aggregate prepayments of $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 debt agreements contain certain restrictive covenants
which require, among other things, that the Company maintain
certain financial ratios at specified levels, such as 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 $25,725,000 of
retained earnings. The Company was in compliance with the
financial covenants at December 28, 1996.
The other debt consists of Industrial Revenue Bonds,
capitalized leases, mortgages and equipment loans with interest
rates ranging from those tied to short-term Treasury rates to
10.1%. Certain plant and equipment purchased with the proceeds
of the debt collateralize these obligations.
The Company had available unused lines of credit of
approximately $60,000,000 at December 28, 1996 under terms of an
agreement executed in April, 1996. Funds are available under
this agreement through April, 2000 at an interest rate equal to
the London Interbank rate plus 75 basis points.
Long-term debt maturities are $9,554,000 in 1997,
$8,680,000 in 1998, $6,926,000 in 1999, $11,786,000 in 2000 and
$5,000,000 in 2001 and $91,060,000 thereafter.
8. Contingencies
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.
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. 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. On September 5, 1996 the United States Department of
Justice lodged with the United States District Court for the
Northern District of Indiana a proposed partial consent decree
which specifies payment of Federal Past Response Costs from
certain PRPs which for Excel amounted to approximately $3.2
million which together with amounts due IDEM would bring Excel's
total obligation to approximately $3.4 million. This consent
decree has not been accepted by the Court, and comments objecting
to the consent decree have been lodged with the United States
Department of Justice.
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 Company has been named a PRP for costs at seven other
disposal sites. The remedial investigations and feasibility
studies have been completed, and the results of those studies
have been provided to the appropriate agencies. The studies
indicated a range of viable remedial approaches, but agreement
has not yet been reached on the final remediation approach.
Furthermore, the PRPs for these sites have not reached an
agreement on the allocation of costs between the PRPs. The
Company believes it either has no liability as a responsible
party or that adequate provisions have been recorded for current
estimates of the Company's liability and estimated legal costs
associated with the settlement of these claims. It is reasonably
possible that the Company's recorded estimate of its obligation
may change in the near term.
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 28, 1996 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 was approximately $4,471,000 in 1996, $2,174,000 in 1995,
and $2,502,000 in 1994. Future minimum lease payments under
noncancellable operating leases are $3,861,000 in 1997,
$2,913,000 in 1998, $2,384,000 in 1999 and $937,000 in 2000.
10. Income Taxes
Pre-tax income reported by U.S. and foreign subsidiaries was as
follows:
<TABLE>
<CAPTION>
Year Ended
1996 1995 1994
(000 Omitted)
<S> <C> <C> <C>
United States $31,531 $24,390 $25,517
Foreign (865) -- 1,865
$30,666 $24,390 $27,382
The provision (benefit) for income taxes is summarized below:
Year Ended
1996 1995 1994
(000 Omitted)
Current:
U.S. federal $11,070 $ 7,213 $ 8,713
Foreign -- -- 484
State 2,093 1,020 1,480
13,163 8,233 10,677
Deferred:
U.S. federal (1,720) (142) (947)
Foreign -- -- 132
State 107 34 269
(1,613) (108) (546)
$11,550 $ 8,125 $10,131
</TABLE>
Deferred income taxes are provided for the temporary
differences between the financial reporting basis and tax basis
of the Company's assets and liabilities. Current deferred income
tax assets of $14,810,000 and $4,434,000 are classified as
prepaid expenses at December 28, 1996 and December 30, 1995,
respectively. Long-term deferred income tax liabilities of
$5,188,000 are classified as other long-term liabilities at
December 28, 1996 and $4,371,000 were classified as other assets
at December 30, 1995.
Deferred income taxes are comprised of the following at
December 28, 1996 and December 30, 1995:
<TABLE>
<CAPTION>
1996 1995
(000 Omitted)
<S> <C> <C>
Gross deferred tax liabilities
Property, plant and equipment $19,173 $ 2,407
Inventories -- 524
Other 653 580
19,826 3,511
Gross deferred tax assets
Pension and postretirement
benefit obligations 13,202 7,227
Other accrued liabilities 15,348 4,958
Inventories 519 --
Tax credit and net operating
loss carryforwards 2,865 506
31,934 12,691
Valuation allowance (2,486) (375)
Net deferred tax assets $ 9,622 $ 8,805
</TABLE>
At December 28, 1996 and December 30, 1995 the Company
maintained a valuation allowance for foreign tax credit and
foreign net operating loss carryforwards, which expire in 1997-
2004. The increase in the valuation reserve in 1996 is a result
of foreign net operating loss carryforwards generated by foreign
subsidiaries acquired in connection with the purchase of
Anderson. Based upon past operating results, the Company does
not currently estimate that it is more likely than not that these
carryforwards can be utilized before they expire.
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:
<TABLE>
<CAPTION>
Year Ended
1996 1995 1994
(000 Omitted)
<S> <C> <C> <C>
Tax at United States
statutory rate $10,733 $ 8,537 $ 9,584
State income taxes,
net of federal benefit 1,430 685 1,137
Rate differential on
foreign income -- -- 170
Research and
development tax credits (80) (150) (250)
Non-taxable interest
income (340) (455) (393)
Gain on executive life
insurance -- (514) --
Other (193) 22 (117)
$11,550 $ 8,125 $10,131
</TABLE>
11. Segment Information and Major Customers
The following segment information separating light vehicle
products and products for the recreational vehicle, mass transit
and heavy truck (RV/MT/HT) industry is for the year ended
December 28, 1996. Prior to 1996, the Company manufactured
products predominately for the light vehicle industry.
<TABLE>
<CAPTION>
Light Vehicle RV/MT/HT
Products Products Corporate Total
(000 Omitted)
<S> <C> <C> <C> <C>
Sales $719,435 $168,306 $ -- $887,741
Operating income
(expense) 33,369 14,251 (8,906) 38,714
Assets 297,042 106,915 39,277 443,234
Capital expenditures 23,582 4,002 1,625 29,209
Depreciation expense 18,748 4,549 1,336 24,633
</TABLE>
Sales to three major customers, Ford Motor Company, Chrysler
Corporation, and General Motors Corporation, were approximately
47%, 12% and 6%, respectively, of the Company's net sales in 1996
as compared to 69%, 11% and 6% in 1995 and 71%, 12% and 4% in
1994.
Accounts receivable from Ford Motor Company, Chrysler
Corporation, and General Motors Corporation approximated 60% of
trade accounts receivable at December 28, 1996 and 85% at
December 30, 1995. Sales to customers outside of North America
were not significant.
12. Common Shares
On May 5, 1994, the shareholders approved a new 1994 Stock
Compensation Plan (the Plan). The Plan has reserved 245,150
common shares for issuance to officers, other key employees and
non-employee directors. The Plan provides that options may be
granted at not less than fair market value and if not exercised,
expire ten years from the date of grant. Generally, the options
become exercisable at the rate of 25% per year commencing one
year from the date of grant.
The following table sets forth stock option activity.
<TABLE>
<CAPTION>
Year Ended
1996 1995
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
<S> <C> <C> <C> <C>
Stock options outstanding
at beginning of year 263,750 $12.23 291,750 $ 17.48
Options granted 15,000 12.25 271,500 12.38
Options exercised (12,200) 7.54 (7,500) 7.61
Options canceled (15,650) 12.38 (292,000) 17.73
Stock options outstanding
at year end 250,900 $12.45 263,750 $ 12.23
Options exerciseable
at year end 57,300 $12.56 8,250 $ 5.23
</TABLE>
<TABLE>
<CAPTION>
1994
Weighted
Average
Exercise
Options Price
<S> <C> <C>
Stock options outstanding
at beginning of year 19,250 $ 6.59
Options granted 279,000 18.12
Options exercised (3,500) 7.61
Options canceled (3,000) 18.13
Stock options outstanding
at year end 291,750 $ 17.48
Options exerciseable
at year end 15,750 $ 6.36
</TABLE>
The Company has adopted the disclosure only provisions of
SFAS No. 123, "Accounting for Stock Based Compensation."
Accordingly, the element of compensation cost applicable to
granting of stock options has not been recognized for financial
statement purposes. Had compensation cost for the options
granted been recognized for financial statement purposes using
the Black-Scholes option pricing model, the Company's net
earnings and earnings per share would have been reduced to the
pro forma amounts indicated (amounts in thousands except per
share amounts):
<TABLE>
<CAPTION>
Year Ended
1996 1995
Reported Pro Forma Reported Pro Forma
<S> <C> <C> <C> <C>
Net earnings $19,116 $18,882 $16,265 $16,031
Per share 1.79 1.77 1.52 1.50
</TABLE>
The fair value of the option grant is estimated on the date
of grant with the following assumptions: dividend yield of 3.2%;
expected volatility 33%; risk-free interest rate of 6.5%; and
expected life of 5 years.
The Company has an employee stock purchase plan and has
reserved 301,870 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 28, 1996, 148,130 shares had been
issued under the plan.
The Company has reserved 1,664,901 common shares for
possible future issuance in connection with its $22,000,000
convertible notes issued on January 2, 1990.
The Company has outstanding warrants for the purchase of
381,000 common shares at a price of $13.25. These warrants were
issued in connection with the acquisition of Anderson Industries
and if not exercised, expire April 2001.
On December 21, 1995, the Company announced that its Board
of Directors adopted a shareholder rights plan. The Company
adopted the plan to protect shareholders against unsolicited
attempts to acquire control of the Company that do not offer what
the Company believes to be an adequate price to all shareholders.
The rights were issued to shareholders of record on January 22,
1996 and will expire on January 21, 2006.
The plan provides for the issuance of one right for each
outstanding share of the Company's Common Stock. The rights will
become exercisable only if a person or group acquires or
announces a tender offer to acquire 20% or more of the Company's
outstanding voting stock. Each right entitles the holder to buy
one one-hundredth share of a newly authorized series of preferred
stock from the Company. Also, after such acquisition all rights
holders except the acquirer will be entitled to purchase common
shares at one-half of the then current market price of the common
shares. Any activity regarding this plan would have a dilutive
effect on earnings per share calculations.
13. Quarterly Results of Operations (Unaudited)
The following table sets forth in summary form the quarterly
results of operations for the fiscal years ended December 28,
1996 and December 30, 1995 (amounts in thousands except per share
amounts):
<TABLE>
<CAPTION>
1996
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $150,607 $274,148 $227,635 $235,351
Gross profit 15,903 35,987 23,932 28,544
Net income 4,883 8,053 2,223 3,957
Net income per share
Primary $ .46 $ .75 $ .21 $ .37
Fully diluted .41 .66 .21 .35
</TABLE>
<TABLE>
<CAPTION>
1995
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $161,989 $158,749 $126,867 $148,409
Gross profit 17,013 15,362 9,119 13,804
Net income 6,256 4,068 2,300 3,641
Net income per share
Primary $ .59 $ .38 $ .22 $ .34
Fully diluted .52 .35 .22 .32
</TABLE>
14. Executive Life Insurance Proceeds
Included in other income in the third quarter of 1995 is
$1,468,000 for the net gain from executive life insurance.
15. Disposal of Canadian Facility
Included in the first quarter of 1995 is a gain on the
disposition of Excel Metalcraft, Ltd., (Metalcraft) located in
Aurora, Ontario in the amount of $1,582,000 which amounts to
9 cents per share after income taxes. This gain includes the
return to profits of $970,000 of the restructuring reserve which
was created in 1992. The final phase of the restructuring was
completed with the sale of the shares of Metalcraft. Metalcraft
had net sales of $935,000 in 1995 and $20,494,000 in 1994.
16. Subsequent Event
On February 14, 1997, the Company announced its plans to
close its Eddy Avenue automotive plant in Rockford, Illinois.
The Company expects to record a restructuring reserve in the
first quarter of 1997 after information is available to determine
the reserve. This reserve will be an adjustment to the opening
balance sheet of Anderson and not a charge to earnings.
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 1997 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 of Executive Officers," "Summary
Compensation Table," "Options," "Pension Plans," "Deferred
Compensation Plans" and "Executive Separation Agreements" 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 "Board Meetings and
Committees" 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 28, 1996 and December
30, 1995
Consolidated Statement of Income - Fiscal years ended
December 28, 1996,
December 30, 1995 and December 31, 1994
Consolidated Statement of Shareholders' Equity - Fiscal
years ended
December 28, 1996, December 30, 1995 and December 31, 1994
Consolidated Statement of Cash Flows - Fiscal years ended
December 28, 1996, December 30, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedule
The following financial statement schedule is included with this
report:
Report of Independent Accountants on Financial Statement
Schedule
II - Valuation and Qualifying Accounts and Reserves
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 28, 1996.
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.
<TABLE>
<S> <C>
March 21, 1997 s/ James O. Futterknecht
James O. Futterknecht,
Chairman of the Board,
President and Chief Executive
Officer
</TABLE>
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.
<TABLE>
<S> <C>
March 21, 1997 s/ James O. Futterknecht
James O. Futterknecht,
Chairman of the Board,
President and Chief
Executive Officer (Principal
Executive Officer)
March 21, 1997 s/ Joseph A. Robinson
Joseph A. Robinson, Secretary-
Treasurer and Chief Financial
Officer (Principal Financial
and Accounting Officer)
March 21, 1997 s/ Ike K. Eikelberner
Ike K. Eikelberner, Corporate
Controller and Principal
Accounting Officer
March 21, 1997 s/ John G. Keane
John G. Keane, Director
March 21, 1997 s/ Richard A. Place
Richard A. Place, Director
March 21, 1997 s/ James K. Sommer
James K. Sommer, Director
March 21, 1997 s/ Ralph R. Whitney, Jr.
Ralph R. Whitney, Jr.,
Director
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Excel Industries, Inc.
Our audits of the consolidated financial statements referred to
in our report dated February 20, 1997, appearing in the 1996
Annual Report to Shareholders of Excel Industries, Inc. also
included an audit of the Financial Statement Schedule listed in
Item 14(a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICE WATERHOUSE LLP
South Bend, Indiana
February 20, 1997
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
<TABLE>
<CAPTION>
Balance at
beginning
Classification of period Acquisition
<S> <C> <C>
Year ended December 31, 1994:
Allowance for uncollectible
accounts receivable $ 725,000 $ ---
Year ended December 30, 1995:
Allowance for uncollectible
accounts receivable $ 868,000 $ ---
Deferred tax valuation
allowance $ --- $ ---
Year ended December 28, 1996:
Allowance for uncollectible
accounts receivable $ 725,000 $ 513,000
Deferred tax valuation
allowance $ 375,000 $1,916,000
Additions Balance at
charged to end of
Classification expense Deductions period
<S> <C> <C> <C>
Year ended December 31, 1994:
Allowance for uncollectible
accounts receivable $ 151,000 $( 8,000)(1)$ 868,000
Year ended December 30, 1995:
Allowance for uncollectible
accounts receivable $ 8,000 $(151,000)(1)$ 725,000
Deferred tax valuation
allowance $ 375,000 $ --- $ 375,000
Year ended December 28, 1996:
Allowance for uncollectible
accounts receivable $1,486,000 $(281,000)(1)$2,443,000
Deferred tax valuation
allowance $ 352,000 $(157,000)(2)$2,486,000
(1) Primarily reflects write-offs of uncollectible accounts, net
of recoveries of amounts previously written off.
(2) Represents foreign net operating loss carryforwards utilized
and adjustments to reflect final tax return amounts.
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page No.
Exhibit In Manually
Number Description of Exhibit Signed Copy
<S> <C>
(2.1) Stock purchase agreement dated
March 4, 1996 among Excel
Industries, Inc. and Anderson
Industries, Inc. and the
stockholders of Anderson
Industries, Inc. was filed as
Exhibit 2 to the Company's
Form 8-K filed April 3, 1996
and is incorporated herein by
reference
(3.1) Articles of Incorporation of
the Company as amended
effective January 5, 1996 were
filed as Exhibit 3.1 to the
Company's Annual Report on
Form 10-K filed March 29, 1996
and is incorporated herein by
reference
(3.2) The Code of By-Laws of the
Company as amended effective
December 21, 1995 was filed as
Exhibit 3.4 to the Company's
Annual Report on Form 10-K
filed March 29, 1996 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 2-5,
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
(4.4) Rights Agreement between the
Company and Chemical Mellon
Shareholder Services L.L.C.,
as Rights Agent,was filed as
Exhibit 4 to the Company's
Current Report on Form 8-K
filed January 8, 1996 and is
incorporated herein by
reference
(4.5) Warrant Grant and Registration
Rights Agreement dated April
3, 1996 among Excel
Industries, Inc. and certain
stock holders of Anderson
Industries, Inc. was filed as
Exhibit 4.1 to the Company's
Form 8-K filed April 3, 1996
and is incorporated herein by
reference
(4.6) Amended and Restated Credit
Agreement dated April 29, 1996
among Excel Industries, Inc.,
certain banks, Society
National Bank as agent and
Harris Trust and Savings Bank
as co-agent was filed as
Exhibit 4.2 to the Company's
Form 8K/A Amendment No. 1
dated May 13, 1996 and is
incorporated herein by
reference
(4.7) Form of Note Purchase
Agreement dated May 3, 1996
between Excel Industries, Inc.
and each of several
institutional investors was
filed as Exhibit 4.3 to the
Company's Form 8K/A Amendment
No. 1 dated May 13, 1996 and
is incorporated herein by
reference
(9) Not Applicable
(10.1) 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
(10.2) 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
(10.3)* 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
(10.4) 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
(10.5)* 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
(10.6) 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
(10.7) 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
(10.8) 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.
(10.9) 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
(10.10) Purchase Agreement between the
Company and Ford Motor Company
dated January 31, 1994 was
filed as Exhibit 10.13 to the
Company's Annual Report on
Form 10-K filed March 29,
1994, and is incorporated
herein by reference.
(10.11)* Form of Executive Separation
Agreements between the Company
and the following persons:
James O. Futterknecht, Jr.,
Joseph A. Robinson, Louis R.
Csokasy, James E. Crawford,
Terrance L. Lindberg, Michael
C. Paquette and James M.
Krzyzewski was filed as
Exhibit 10.13 to the Company's
Annual Report on Form 10-K
filed March 29, 1996 and is
incorporated herein by
reference
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(16) Not Applicable
(18) Not Applicable
(21) List of the Company's
subsidiaries.........
(22) Not Applicable
(23) Consent of Independent
Accountants.....
(24) Not Applicable
(27) Financial Data Schedule.....
(28) Not Applicable
* Management contract or compensation
plan or arrangement.
</TABLE>
1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 6,580
<SECURITIES> 23,981
<RECEIVABLES> 129,794
<ALLOWANCES> 2,443
<INVENTORY> 43,960
<CURRENT-ASSETS> 238,950
<PP&E> 250,498
<DEPRECIATION> 90,723
<TOTAL-ASSETS> 443,234
<CURRENT-LIABILITIES> 124,810
<BONDS> 0
0
0
<COMMON> 92,187
<OTHER-SE> 58,538
<TOTAL-LIABILITY-AND-EQUITY> 443,234
<SALES> 887,741
<TOTAL-REVENUES> 887,741
<CGS> 783,375
<TOTAL-COSTS> 849,027
<OTHER-EXPENSES> (1,736)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,784
<INCOME-PRETAX> 30,666
<INCOME-TAX> 11,550
<INCOME-CONTINUING> 19,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,116
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.66
</TABLE>
EXHIBIT 21
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF INCORPORATION
<S> <C>
Excel Corporation Indiana
Excel Industries of Michigan, Inc. Michigan
Excel Global, Inc. Barbados
Excel of Tennessee L.P. Tennessee
X.E. Co. Michigan
Anderson Industries, Inc. Illinois
Atwood Industries, Inc. Illinois
Atwood Mobile Products, SRL Italy
Autopartes Excel De Mexico Mexico
Atwood Automotive, Inc. Michigan
Hydro Flame Corporation Utah
Mark I Molded Plastics, Inc. Michigan
Mark I Molded Plastics of Tennessee, Inc. Tennessee
</TABLE>
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 Registration Statement on Form S-
8 (No. 33-53543) effective May 9, 1994 of Excel Industries, Inc.
of our report dated February 20 1997 appearing on page 14 of this
Form 10-K. We also consent to the incorporation by reference of
our report on the Financial Statement Schedule, which appears on
page 34 of this Form 10-K.
PRICE WATERHOUSE LLP
South Bend, Indiana
March 21, 1997
