<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _________________
Commission file number 0-13601
DURAKON INDUSTRIES, INC.
Incorporated under the IRS Employer ID No.:
laws of Michigan 38-2492342
2101 N. Lapeer Road
Lapeer, Michigan 48446
(810) 664-0850
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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:
Common Stock, without par value; as of April 29, 1995:
6,520,292
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2
DURAKON INDUSTRIES, INC.
INDEX
PAGE
NUMBER
PART I Financial Information
Condensed consolidated balance sheets -
March 31, 1995 and December 31, 1994. 3-4
Condensed consolidated statements of
operations - three months ended March 31,
1995 and 1994. 5
Condensed consolidated statements of cash
flows - three months ended March 31, 1995
and 1994. 6
Notes to condensed consolidated financial
statements. 7
Management's discussion and analysis of
financial condition and results of
operations. 8-10
PART II Other Information.
Item 6(b) Exhibits and Reports on Form 8-K. 10
Signatures 11
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3
<TABLE>
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
($ in 000's) 1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents $15,664 $13,143
Accounts receivable, less
allowances of $552 and $474 17,121 15,203
Inventories:
Raw materials and work
in process 6,661 5,908
Finished goods 8,459 7,885
Total inventories 15,120 13,793
Prepaid expenses and other 1,432 1,542
Deferred income taxes 1,422 1,426
Total current assets 50,759 45,107
Property, plant and equipment, net 15,979 15,607
Goodwill 14,980 15,078
Patents, net 1,057 1,122
Other assets 109 143
$82,884 $77,057
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
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4
<TABLE>
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
($ in 000's) 1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current maturities of
long-term debt $1,845 $1,767
Accounts payable 12,894 10,756
Other current liabilities 7,935 7,045
Total current liabilities 22,674 19,568
Long-term debt 2,804 2,641
Deferred income taxes 306 330
Minority interest 55 281
Shareholders' equity:
Preferred stock, $1 par value -
100,000 shares authorized; none
issued -- --
Common stock, without par value -
15,000,000 shares authorized;
6,520,292 and 6,520,292 shares
issued and outstanding 21,506 21,506
Currency translation (355) (295)
Retained earnings 35,894 33,026
Total shareholders' equity 57,045 54,237
$82,884 $77,057
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
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5
<TABLE>
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<CAPTION>
($ in 000's) 1995 1994
<S> <C> <C>
Net sales $44,044 $31,058
Cost of products sold 32,535 22,129
Gross profit 11,509 8,929
Selling, general and
administrative expenses 6,517 5,288
Operating income 4,992 3,641
Interest income, net 135 123
Other income (expense), net (396) 94
Income before income taxes 4,731 3,858
Provision for income taxes 1,863 1,513
Net income $2,868 $2,345
Net income per share of common
stock $0.43 $0.36
Weighted average shares (in 000's) 6,670 6,599
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
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6
<TABLE>
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<CAPTION>
($ in 000's) 1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $2,868 $2,345
Adjustment to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,053 870
(Gain) loss on sale of property,
plant and equipment 3 (2)
Net increase of intangible and other
assets (13) (145)
Decrease in deferred income taxes (20) --
Increase (decrease) due to changes in
current items:
Accounts receivable (1,919) (947)
Inventories (1,327) (1,061)
Prepaid expenses and other current
assets 111 (231)
Accounts payable 2,138 1,939
Accrued expenses and other current
liabilities 1,040 1,096
Net cash provided by operating
activities 3,934 3,864
Cash flows from investing activities:
Purchases of property, plant and
equipment (1,413) (1,069)
Proceeds from note receivable -- 480
Proceeds from retirement of property,
plant and equipment 2 4
Net cash used in investing activities (1,411) (585)
Cash flows from financing activities:
Increase (decrease) in long-term debt 114 (95)
Increase (decrease) in minority
interest, net (226) 93
Net cash used in financing activities (112) ( 2)
Effect of exchange rate changes on cash 110 (39)
Cash and cash equivalents:
Increase (decrease) for the period 2,521 3,238
Balance, beginning of period 13,143 17,041
Balance, end of period $15,664 $20,279
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
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7
DURAKON INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
The unaudited condensed consolidated financial statements
and notes should be read in conjunction with the annual
consolidated financial statements and notes thereto. Results of
operations for interim periods should not be considered as
indicative of results to be expected for a full year.
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals)
necessary to present fairly the Company's financial position as
of March 31, 1995, and the results of operations and cash flows
for the three month periods ended March 31, 1995 and 1994.
Note 2
The Company is contingently liable under the terms of
agreements covering certain of its customers' leasing
arrangements. The agreements provide for the repurchase of
products sold to customers in the event of default by the
customer to the financing company. The contingent liability
under these agreements was approximately $5.9 million at March
31, 1995.
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8
DURAKON INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of
certain factors which have affected the Company's financial
position and operating results during the periods included in the
accompanying condensed consolidated financial statements.
Results of Operations
Net sales increased by $12.9 million or 42% for the three
months ended March 31, 1995 over the same period in 1994.
<TABLE>
Three Months Ended
March 31
<CAPTION>
($ in 000's) 1995 1994 %
Increase
<S> <C> <C> <C>
Net sales
Pickup accessories $21,761 $15,189 43%
Vehicle transportation 22,283 15,869 40%
Total $44,044 $31,058 42%
</TABLE>
Net sales in the pickup truck accessories segment increased
by $6.6 million or 43% in the first quarter 1995 compared to the
corresponding period in 1994. Pickup truck bedliner unit volume
increased 58% over the same 1994 period. A majority of the net
sales increase was attributable to Benton Plastics, Inc.
("Benton"), however, the Durakon division also recorded a sales
increase over the initial quarter of 1994. Unit sales to
international markets were up over 150% compared to the first
quarter of 1994 even though volume in Mexico was down due to
weakness in the Mexican economy. Pickup truck bedliner unit
volume in the domestic aftermarket increased over the first
quarter 1994 greater than the increase in pickup truck sales.
Unit volume declined in the OEM channel compared to the initial
quarter of 1994.
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9
Net sales in the vehicle transportation segment increased by
$6.4 million or 40% over the corresponding period in 1994. Unit
volumes were up 32% over the first quarter of 1994. Higher
volumes are attributed to increased market penetration and an
improved domestic economy. Net sales increased at a rate higher
than unit volume due to a larger percentage of truck chassis sales.
For the first quarter of 1995, the consolidated gross margin
percentage was 26% versus 29% in the same period last year. The
primary reason for the reduced gross margin percentage was the
increase in sales from the lower margin vehicle transportation
segment. Margins on non chassis sales in the vehicle
transportation segment remained even with the prior year. In the
pickup truck accessories segment, margins declined due to sales
from Benton Plastics which have lower margins. Also, margins in
the pickup truck accessories segment declined due to a change to
prepaid freight to customers and increased raw material costs.
These increases were partially offset by productivity improvements.
As a percent of sales, selling, general and administrative
expenses decreased to 15% from 17% in the first quarter of 1995
compared to the same period last year. However, these costs
increased $1,229,000 or 23% in the same period. All of the
increase in the pickup truck accessories segment was due to the
addition of ZZ Wheelz, Inc. and Benton Plastics, Inc. which were
not acquired until the second and third quarters of 1994.
Spending in the vehicle transportation segment was higher due to
increased costs related to higher sales volumes, product development
activities and professional fees.
For the three months ended March 31, 1995, net interest
income was $135,000 versus $123,000 for the first quarter last
year. The increase was attributable to interest income earned
on the investment of the Company's available cash. Net other
expense was $396,000 for the first quarter of 1995, which
primarily reflects charges for the devaluation of the Mexican
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10
peso and subsequent currency translation losses. Net other
income of $94,000 for the quarter ended March 31, 1994, primarily
represented a gain on the sale of an investment.
The provision for income taxes reflected an effective tax
rate of 39% for the first quarter of 1995 versus 39% for the
first quarter of 1994. The effective rates exceeded the
statutory Federal rate of 35% primarily due to state income
taxes.
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter 1995, cash provided by operating
activities totaled $3.9 million slightly above the first quarter
of 1994. The Company has a $20 million unsecured revolving
credit agreement with Comerica Bank which expires June 30, 1997.
Five standby letters of credit totaling $2,700,000 reduced the
available borrowing capacity to $17,300,000 at March 31, 1995.
PART II - OTHER INFORMATION
Item 6 (b) - Exhibits and reports on form 8-K
Exhibit 11 Calculation of earnings per share for the three
months ended March 31, 1995 and 1994.
No reports on form 8-K have been filed during the
quarter ended March 31, 1995.
<PAGE>
11
SIGNATURES
Pursuant to the requirement to the Security Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Durakon Industries, Inc.
(Registrant)
Date: May 12, 1995 /s/William Webster
William Webster, President and
Chief Executive Officer
/s/Thomas A. Galas
Thomas A. Galas, Senior V.P.
Finance and Administration/Chief
Financial Officer
(Principal Financial Officer)
<TABLE>
<CAPTION>
EXHIBIT 11
DURAKON INDUSTRIES, INC.
CALCULATION OF EARNINGS PER SHARE
(UNAUDITED)
Three Months Ended March 31,
( in 000's) 1995 1994
<S> <C> <C>
Net earnings available to common
stockholders $2,868 $2,345
Primary
Average number of shares outstanding 6,520 6,476
Add: Dilutive effect of stock
options based upon treasury
stock method 150 123
Total 6,670 6,599
Per share amount $0.43 $0.36
Fully diluted
Average number of shares outstanding 6,520 6,476
Add: Dilutive effect of stock
options based upon treasury
stock method 150 125
Total 6,670 6,601
Per share amount $0.43 $0.36
Note: This calculation is required by Regulation S-K, Item 601,
and is filed as an exhibit under Item 6(b) of Form 10-Q.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 15,664
<SECURITIES> 0
<RECEIVABLES> 17,673
<ALLOWANCES> 552
<INVENTORY> 15,120
<CURRENT-ASSETS> 50,759
<PP&E> 35,523
<DEPRECIATION> 19,544
<TOTAL-ASSETS> 82,884
<CURRENT-LIABILITIES> 22,674
<BONDS> 0
<COMMON> 21,506
0
0
<OTHER-SE> 35,539
<TOTAL-LIABILITY-AND-EQUITY> 82,884
<SALES> 44,044
<TOTAL-REVENUES> 44,044
<CGS> 32,535
<TOTAL-COSTS> 39,052
<OTHER-EXPENSES> 396
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> 4,731
<INCOME-TAX> 1,863
<INCOME-CONTINUING> 2,868
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,868
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
