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<PAGE> 1
===========================================================================
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, 1996
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, 1996: 6,520,292
===========================================================================
<PAGE> 2
DURAKON INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C>
PART I Financial Information
Condensed consolidated balance sheets - March 31, 1996 and
December 31, 1995. 3-4
Condensed consolidated statements of operations - three months
ended March 31, 1996 and 1995. 5
Condensed consolidated statements of cash flows - three months
ended March 31, 1996 and 1995. 6
Notes to condensed consolidated financial statements. 7
Management's discussion and analysis of financial condition and
results of operations. 8-11
PART II Other Information.
Item 6(b) Exhibits and Reports on Form 8-K. 11
Signatures 12
</TABLE>
<PAGE> 3
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
($ in 000's) 1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 9,836 $12,757
Accounts receivable, less allowances of $741 and $640 18,302 17,468
Inventories:
Raw materials and work in process 4,774 5,838
Finished goods 9,568 6,302
------- -------
Total inventories 14,342 12,140
Prepaid expenses and other 1,915 1,141
Deferred income taxes 2,526 2,526
------- -------
Total current assets 46,921 46,032
Property, plant and equipment, net 18,825 18,346
Goodwill 13,721 13,870
Patents, net 474 507
Deferred income taxes 269 268
Other assets 294 114
------- -------
$80,504 $79,137
======= =======
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
<PAGE> 4
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
($ in 000's) 1996 1995
--------- ------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,319 $ 1,342
Accounts payable 9,348 10,058
Other current liabilities 8,852 8,936
------- -------
Total current liabilities 19,519 20,336
------- -------
Long-term debt 1,556 1,572
Deferred income taxes 614 614
Minority interest 106 59
------- -------
Total long-term liabilities 2,276 2,245
------- -------
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 (260) (275)
Retained earnings 37,463 35,325
------- -------
Total shareholders' equity 58,709 56,556
------- -------
$80,504 $79,137
======= =======
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
<PAGE> 5
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
($ in 000's) 1996 1995
------- -------
<S> <C> <C>
Net sales $43,895 $44,044
Cost of products sold 33,739 32,535
------- -------
Gross profit 10,156 11,509
Selling, general and
administrative expenses 6,756 6,517
------- -------
Operating income 3,400 4,992
Interest income, net 116 135
Other expense, net (39) (396)
------- -------
Income before income taxes 3,477 4,731
Provision for income taxes 1,339 1,863
------- -------
Net income $2,138 $2,868
====== ======
Net income per share of common stock $0.32 $0.43
====== ======
Weighted average shares (in 000's) 6,667 6,670
====== ======
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE> 6
DURAKON INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
($ in 000's) 1996 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,138 $ 2,868
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 962 1,053
Gain on sale of property, plant and equipment -- 3
Net increase of other assets (180) (13)
Decrease in deferred income taxes -- (20)
Increase (decrease) due to changes in current items:
Accounts receivable (834) (1,919)
Inventories (2,202) (1,327)
Prepaid expenses and other current assets (774) 111
Accounts payable (733) 2,138
Other current liabilities (84) 1,040
------- -------
Net cash provided by (used in) operating activities (1,707) 3,934
------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,409) (1,413)
Proceeds from retirement of property, plant and equipment 150 2
------- -------
Net cash used in investing activities (1,259) (1,411)
Cash flows from financing activities:
Repayment of long-term debt (16) 114
Increase (decrease) in minority interest, net 55 (226)
------- -------
Net cash provided by (used in) financing activities 39 (112)
Effect of exchange rate changes on cash 6 110
------- -------
Cash and cash equivalents:
Increase (decrease) for the period (2,921) 2,521
Balance, beginning of period 12,757 11,628
------- -------
Balance, end of period $ 9,836 $14,149
======= =======
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
6
<PAGE> 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, 1996, and the results of operations and cash flows for
the three month periods ended March 31, 1996 and 1995.
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 $8.5 million at March 31, 1996.
7
<PAGE> 8
DURAKON INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed consolidated
financial statements.
Results of Operations ($ in 000's)
Net sales of $43,895 for the three months ended March 31, 1996 were
$149 below sales for the first quarter of 1995. Net sales by business segment
were:
Net Sales ($ in 000's)
<TABLE>
<CAPTION>
Three Months Ended March 31:
---------------------------------------------------
1996 1995 % Increase
---- ---- ----------
<S> <C> <C> <C>
Segment sales:
- --------------
Pickup accessories $20,498 $21,761 (5.8%)
Vehicle transportation 23,397 22,283 5.0%
------- ------- -----
Total $43,895 $44,044 ( .3%)
======= ======= ====
</TABLE>
Net sales in the pickup accessories segment declined 5.8% to $20,498.
Unit volume of pickup truck bedliners was down 2.9% for the first quarter 1996
compared to the initial quarter of 1995. This decline was primarily due to
distributors purchasing in advance of an announced price increase in March of
1995. Average net selling prices in the quarter were down approximately 4%
from the first quarter last year but have been unchanged for the past three
quarters. The first quarter of 1995 also included $675 of sales from ZZ Wheelz
which was disposed of in December of 1995.
In the vehicle transportation segment net sales increased 5.0% to
$23,397 in the first quarter of this year versus the initial quarter of 1995.
The increase in sales reflects a 13% increase in chassis sales (which carry a
lower margin) to $11,897 and a 2% decline in equipment sales to $11,500.
Average net selling prices on equipment sales improved approximately 7%
8
<PAGE> 9
compared to the same quarter last year.
Gross margin for the quarter ending March 31, 1996 was $10,156, down
$1,353 from the same period last year. The consolidated gross margin percent
also declined to 23% from 26% in the first quarter of 1995.
Gross Margin ($ in 000's)
<TABLE>
<CAPTION>
Three Months Ended March 31:
---------------------------------------------------
1996 1995 % Increase
---- ---- ----------
<S> <C> <C> <C>
Segment gross margin:
- ---------------------
Pickup accessories $ 6,642 $ 7,610 (12.7%)
Vehicle transportation 3,514 3,899 ( 9.9%)
------- ------- ------
Total $10,156 $11,509 (11.8%)
======= ======= =====
</TABLE>
In the pickup truck accessories segment for the quarter, the gross
margin percentage was 32% versus 35% in last years first quarter. While
average net selling prices have been stable for the past three quarters, they
were 4% lower in the first quarter of 1996 compared to the same period last
year. Manufacturing costs per unit were higher for Durakon branded products
due to the addition of new liner features and spending to improve product
quality and plant output. Manufacturing costs per unit for Bodygard(TM)
products declined due largely to improved purchasing economies of the combined
operations.
The gross margin percent in the vehicle transportation segment
declined to 15% in the first quarter of 1996 compared to 17% for the same
period last year. Margins on equipment sales and service were down from the
first quarter last year. Lower unit volume coupled with a less favorable
product mix were the major factors contributing to the margin decline.
Selling, general and administrative expenses were $6,756 for the first
quarter of 1996, an increase of 3.7% over the first quarter of 1995. As a
percent of sales, selling, general and administrative expenses were 15.4% in
the quarter ended March 1996 compared to 14.8% for the same period last year.
9
<PAGE> 10
Selling, General and Administrative Expenses ($ in 000's)
<TABLE>
<CAPTION>
Three Months Ended March 31:
---------------------------------------------------
1996 1995 % Increase
---- ---- ----------
<S> <C> <C> <C>
Segment selling, general &
- ---------------------------
administrative expenses:
- ------------------------
Pickup accessories $ 4,551 $ 4,270 6.6%
Vehicle transportation 2,205 2,247 (1.9%)
------- ------- -----
Total $ 6,756 $ 6,517 3.7%
======= ======= =====
</TABLE>
The increase of $281 in selling, general and administrative expenses
in the pickup truck accessories segment was attributable to additional
staffing, training and system development at our Duraliner USA distribution
network. These locations are being upgraded to support the sales and services
of additional products. As a percent of sales selling, general and
administrative expenses in this segment were 22.2% in the first quarter of 1996
versus 19.6% in the same period last year.
In the vehicle transportation segment, selling, general and
administrative spending was down 1.9% and was 9.4% of sales versus 10.1% in the
first quarter of 1995.
Operating income was $3,400 for the first quarter of 1996, down 32%
from the same period last year.
Operating Income ($ in 000's)
<TABLE>
<CAPTION>
Three Months Ended March 31:
----------------------------------------------------
1996 1995 % Increase
---- ---- ----------
<S> <C> <C> <C>
Segment operating income:
- -------------------------
Pickup accessories $ 2,091 $ 3,340 (37.4%)
Vehicle transportation 1,309 1,652 (20.8%)
------- ------- ------
Total $ 3,400 $ 4,992 (31.9%)
======= ======= =====
</TABLE>
Although sales of pickup truck bedliners were strong in the first
quarter of 1996, with volumes about equal to the first quarter of 1995, the
lower average net selling prices associated with those sales was the major
factor in the decline of operating income in the pickup truck accessories
segment.
10
<PAGE> 11
In the vehicle transportation segment, improved selling prices were
more then offset by lower unit sales of equipment and a less favorable product
mix.
In the first three months ended March 31, 1996, net interest income
was $116 versus $135 for the same period last year. Interest income on
invested cash was $166 versus $199 in the first quarter last year due to lower
cash balances. Interest expense decreased to $50 from $64. Net other expense
declined $357 to $39 reflecting a more stable Mexican peso. The first quarter
of last year reflected the impact of the devaluation of the peso.
The provision for income taxes reflects an effective tax rate of
approximately 39% for the first quarter of both 1996 and 1995. The effective
tax rate exceeds the statutory federal rate of 35% primarily due to providing
for state income taxes.
LIQUIDITY AND CAPITAL RESOURCES ($ in 000's)
In the first quarter 1996, cash used by operating activities totaled
$1,707 versus cash provided of $3,934 in the first quarter of 1995. The major
use of cash was to fund inventories in both business segments. The Company has
a $20,000 unsecured revolving credit agreement with Comerica Bank which expires
June 30, 1997. While there have been no borrowings against this facility, the
Company has outstanding letters of credit totaling $1,700 which reduced the
available borrowing capacity to $18,300 at March 31, 1996.
PART II - OTHER INFORMATION
Item 6 (b) - Exhibits and reports on form 8-K
Exhibit 11 Calculation of earnings per share for the three months ended
March 31, 1996 and 1995.
No reports on form 8-K have been filed during the quarter
ended March 31, 1996.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirement to the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Durakon Industries, Inc.
(Registrant)
Date: May 15, 1996 /s/ David W. Wright
-------------------------------------------
David W. Wright, President
/s/ Thomas A. Galas
-------------------------------------------
Thomas A. Galas, Senior V.P. Finance and
Administration/Chief Financial Officer
(Principal Financial Officer)
12
<PAGE> 13
EXHIBIT NEW
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------- ----------- ----
<S> <C> <C>
11 Calculation of Earnings per Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
DURAKON INDUSTRIES, INC.
CALCULATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
($ in 000's) 1996 1995
<S> <C> <C>
Net earnings available to common stockholders $2,138 $2,868
====== ======
Primary
Average number of shares oustanding 6,520 6,520
Add: Dilutive effect of stock options based
upon treasury stock method 147 150
------ ------
Total 6,667 6,670
====== ======
Per share amount $0.32 $0.43
====== ======
Fully diluted
Average number of shares outstanding 6,520 6,520
Add: Dilutive effect of stock options based
upon treasury stock method 147 150
------ ------
Total 6,667 6,670
====== ======
Per share amount $0.32 $0.43
====== ======
</TABLE>
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.
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,836
<SECURITIES> 0
<RECEIVABLES> 18,302
<ALLOWANCES> 0
<INVENTORY> 14,342
<CURRENT-ASSETS> 46,921
<PP&E> 18,825
<DEPRECIATION> 0
<TOTAL-ASSETS> 80,504
<CURRENT-LIABILITIES> 19,519
<BONDS> 1,556
0
0
<COMMON> 21,506
<OTHER-SE> 37,203
<TOTAL-LIABILITY-AND-EQUITY> 80,504
<SALES> 43,895
<TOTAL-REVENUES> 43,895
<CGS> 33,739
<TOTAL-COSTS> 40,495
<OTHER-EXPENSES> 39
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,477
<INCOME-TAX> 1,339
<INCOME-CONTINUING> 2,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,138
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
|
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