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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 June 30, 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 July 31, 1995:
6,520,292
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<PAGE>
DURAKON INDUSTRIES, INC.
INDEX
PAGE
NUMBER
PART I Financial Information
Condensed consolidated balance sheets -
June 30, 1995 and December 31, 1994. 3-4
Condensed consolidated statements of
operations - three and six months ended
June 30, 1995 and 1994. 5
Condensed consolidated statements of cash
flows - six months ended June 30, 1995 and 1994. 6
Notes to condensed consolidated financial
statements. 7
Management's discussion and analysis of
financial condition and results of operations. 8-9
PART II Other Information.
Item 6(b) Exhibits and Reports on Form 8-K. 10
Signatures 11
<PAGE>
<TABLE>
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
($ in Thousands) 1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents $13,733 $13,143
Accounts receivable, less
allowances of $559 and $474 15,838 15,203
Inventories:
Raw materials and work
in process 7,386 5,908
Finished goods 9,849 7,885
Total inventories 17,235 13,793
Prepaid expenses and other 1,474 1,542
Deferred income taxes 1,422 1,426
Total current assets 49,702 45,107
Property, plant and equipment, net 17,996 15,607
Goodwill 14,769 15,078
Patents, net 993 1,122
Other assets 113 143
$83,573 $77,057
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
June 30, December 31,
($ in Thousands) 1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current maturities of
long-term debt $ 1,241 $ 1,767
Accounts payable 13,389 10,756
Other current liabilities 5,636 7,045
Total current liabilities 20,266 19,568
Long-term debt 2,764 2,641
Deferred income taxes 306 330
Minority interest 110 281
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
shares issued and outstanding 21,506 21,506
Accumulated translation adjustment (345) (295)
Retained earnings 38,966 33,026
Total shareholders' equity 60,127 54,237
$83,573 $77,057
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
($ in Thousands, except per
share amounts)
Six months ended Three months ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $86,711 $66,490 $42,667 $35,432
Cost of products sold 64,480 46,498 31,945 24,369
Gross profit 22,231 19,992 10,722 11,063
Selling, general and
administrative expenses 12,927 10,701 6,410 5,413
Operating income 9,304 9,291 4,312 5,650
Interest income (expense),
net 210 283 75 160
Other income (expense),
net (370) 19 26 (75)
Income before income taxes 9,144 9,593 4,413 5,735
Provision for income taxes 3,204 3,848 1,341 2,335
Net income $5,940 $5,745 $3,072 $3,400
Net income per share of
common stock $0.89 $0.87 $0.46 $0.51
Weighted average shares
(in 000's) 6,692 6,628 6,689 6,633
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
<CAPTION>
($ in Thousands)
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $5,940 $5,745
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,069 1,698
Gain on sale of property, plant and equipment (9) (19)
Net increase (decrease) of intangible and
other assets 13 (760)
Decrease in deferred income taxes (20) (1,798)
Increase (decrease) due to changes in current
items:
Accounts receivable (635) (2,574)
Inventories (3,442) (3,651)
Prepaid expenses and other current assets 68 1,539
Accounts payable 2,633 4,277
Accrued expenses and other current liabilities (1,404) 830
Net cash provided by operating activities 5,213 5,287
Cash flows from investing activities:
Purchases of property, plant and equipment (4,230) (1,779)
Proceeds from note receivable -- 480
Proceeds from retirement of property, plant
and equipment 17 23
Net cash used in investing activities (4,213) (1,276)
Cash flows from financing activities:
Repayment of long-term debt (579) (74)
Borrowings of long-term debt 176 865
Increase (decrease) in minority interest, net (171) 154
Net cash provided by (used in) financing
activities (574) 945
Effect of exchange rate changes on cash 164 (44)
Cash and cash equivalents:
Increase for the period 590 4,912
Balance, beginning of period 13,143 17,041
Balance, end of period $13,733 $21,953
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
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 June 30, 1995, and the results of operations and cash flows
for the three and six month periods ended June 30, 1995 and 1994.
Note 2
The Company is contingently liable under the terms of
agreements covering certain of its customers' financing
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 $6.8 million at June 30,
1995.
Note 3
The provision for income taxes reflected effective tax rates
of 30% and 35% for the quarter and six months ended June 30,
1995, respectively. The 1995 rates were lower than the statutory
federal income tax rate of 35% due to the settlement of an income
tax dispute partially offset by a provision for state income
taxes. The 1995 effective tax rates are lower than the 1994
effective tax rate of 39% primarily due to the settlement of an
income tax dispute.
<PAGE>
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 $7,235,000 or 20% for the three
months ended June 30, 1995 and by $20,221,000 or 30% for the six
months ended June 30, 1995 over the corresponding periods in
1994.
<TABLE>
Three Months Ended Six Months Ended
June 30 June 30
<CAPTION>
($ in 000's) % %
1995 1994 Inc. 1995 1994 Inc.
<S> <C> <C> <C> <C> <C> <C>
Net sales
Pickup accessories $22,232 $18,756 19% $43,993 $33,945 30%
Vehicle trans. 20,435 16,676 23% 42,718 32,545 31%
Total $42,667 $35,432 20% $86,711 $66,490 30%
</TABLE>
Net sales in the pickup truck accessories segment increased
$3,476,000 or 19% in the second quarter 1995 compared to the
corresponding period in 1994. Total bedliner unit volume was up
34% over the second quarter of 1994. The increase in volume was
primarily due to the purchase of Benton which was not acquired
until July of 1994. Despite a weak economy in Mexico, unit sales
to international markets were up 94% compared to the second
quarter of 1994. These volume increases were offset by lower
unit volumes to the domestic OEM and aftermarket channels.
Average selling prices were down in most channels as a result of
increased competition in OEM aftermarket programs.
For the six months ended June 30, 1995, net sales in the
pickup truck accessories segment increased $10,048,000 or 30%
compared to the same period in 1994. Year-to-date unit volume
was up 45% over the same period in 1994. The year-to-date
increases in sales and unit volume were attributable to the
addition of the Benton operation and strong international demand.
<PAGE>
Net sales in the vehicle transportation segment increased by
$3,759,000 or 23% in the second quarter and by $10,173,000 or 31%
for the first six months of 1995 compared to the respective
periods in 1994. The sales increase reflects a price increase
effective in the first quarter, as well as an increase in unit
sales of both rollback car carriers and truck chassis. Wheel
lift unit sales were below comparative periods for last year due
to the withdrawal of a previously offered wheelgrid feature, due
to the settlement of a patent and the delayed introduction of a
more technically advanced product.
For the second quarter of 1995, the consolidated gross
margin percentage was 25% compared to 31% in the same period last
year. The gross margin was 26% for the six months ended June 30,
1995 versus 30% for the six months ended June 30, 1994. The
decrease in gross margin percentage was due primarily to lower
unit volume and lower average selling prices for pickup truck
bedliners in the pickup accessories segment. During the second
quarter, the pickup truck accessories gross margin was below 1994
levels due to higher raw material prices, the change to prepaid
customer freight and increased production costs. The gross
margin percentages were below 1994 levels in the vehicle
transportation segment due to increased levels of truck chassis
sales which carry a significantly lower gross margin than
manufactured products. Excluding truck chassis sales, gross
margin increased for the second quarter and for the six months
ended June 30, 1995 as a result of increased volume of rollback
car carriers.
Selling, general and administrative expenses increased
$997,000 or 18% in the second quarter and $2,226,000 or 21%
year-to-date compared to the same periods in 1994. However, as
a percentage of net sales, selling and administrative expenses
were flat in the quarter and down 1% year-to-date compared to
1994. The increase in selling, general and administrative
expenses was primarily due to Benton which was acquired in the
third quarter of 1994. Jerr-Dan incurred higher commission
expense, product development costs and legal fees.
For the second quarter of 1995 net interest income was
$75,000 compared to $160,000 for the second quarter of 1994. For
the six months ended June 30, 1995 net interest income was
$210,000 compared to $283,000 for the same period in 1994. Net
other income for the second quarter was $26,000 compared to
$75,000 net other expense in the second quarter of 1994.
Year-to-date net other expense was $370,000 in 1995 compared to
net other income of $19,000 in 1994. Year-to-date 1995 reflected
a devaluation of the Mexican peso and subsequent translation
losses.
The provision for income taxes resulted in effective tax
rates of 30% and 35% for the quarter and six months ended June
30, 1995, respectively, compared to 41% and 40% for the same
periods in 1994. The 1995 effective rates includes provisions
for state income taxes and the statutory rate of 35% for federal
income taxes offset by the settlement of an income tax dispute.
LIQUIDITY AND CAPITAL RESOURCES
In the second quarter 1995, cash provided by operating
activities totaled $5.2 million slightly below the second 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 $2,200,000 reduced the
available borrowing capacity to $17,800,000 at June 30, 1995.
<PAGE>
PART II - OTHER INFORMATION
Item 6 (b) - Exhibits and reports on form 8-K
Sequentially
Numbered
Exhibit # Description Page
Exhibit 11 Calculation of earnings per share for the
six and three months ended June 30, 1995
and 1994. 12-13
No reports on form 8-K have been filed during the quarter ended
June 30, 1995.
<PAGE>
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: August 14, 1995 /s/ Thomas A. Galas
Thomas A. Galas, Senior
V.P. Finance and
Administration, Chief
Financial Officer
(Principal Financial
Officer)
<PAGE>
<TABLE>
EXHIBIT 11
DURAKON INDUSTRIES, INC.
CALCULATION OF EARNINGS PER SHARE
(UNAUDITED)
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended June 30,
1995 1994
<S> <C> <C>
Net earnings available to common
stockholders $3,072 $3,400
Primary
Average number of shares oustanding 6,520 6,485
Add: Dilutive effect of stock options
based upon treasury stock method 169 148
Total 6,689 6,633
Per share amount $0.46 $0.51
Fully diluted
Average number of shares outstanding 6,520 6,485
Add: Dilutive effect of stock options
based upon treasury stock method 169 148
Total 6,689 6,633
Per share amount $0.46 $0.51
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>
<PAGE>
<TABLE>
EXHIBIT 11
(cont'd)
DURAKON INDUSTRIES, INC.
CALCULATION OF EARNINGS PER SHARE
(UNAUDITED)
(In thousands, except per share amounts)
<CAPTION>
Six Months Ended June 30,
1995 1994
<S> <C> <C>
Net earnings available to common
stockholders $5,940 $5,745
Primary
Average number of shares oustanding 6,520 6,481
Add: Dilutive effect of stock options
based upon treasury stock method 172 147
Total 6,692 6,628
Per share amount $0.89 $0.87
Fully diluted
Average number of shares outstanding 6,520 6,481
Add: Dilutive effect of stock options
based upon treasury stock method 172 147
Total 6,692 6,628
Per share amount $0.89 $0.87
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 13,733
<SECURITIES> 0
<RECEIVABLES> 16,397
<ALLOWANCES> 559
<INVENTORY> 17,235
<CURRENT-ASSETS> 49,702
<PP&E> 38,268
<DEPRECIATION> 20,272
<TOTAL-ASSETS> 83,573
<CURRENT-LIABILITIES> 20,266
<BONDS> 0
<COMMON> 21,506
0
0
<OTHER-SE> 38,621
<TOTAL-LIABILITY-AND-EQUITY> 83,573
<SALES> 86,711
<TOTAL-REVENUES> 86,711
<CGS> 64,480
<TOTAL-COSTS> 77,407
<OTHER-EXPENSES> 370
<LOSS-PROVISION> 19
<INTEREST-EXPENSE> 194
<INCOME-PRETAX> 9,144
<INCOME-TAX> 3,204
<INCOME-CONTINUING> 5,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,940
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
</TABLE>
