<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended December 31, 1995
/ / 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.
(Exact name of registrant as specified in its charter)
Michigan 38-2492342
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2101 N. Lapeer Road, Lapeer, Michigan 48446
Registrant's telephone number, including area code (810) 664-0850
Securities registered pursuant to Section 12(b)of the Act: None
Securities registered pursuant to Section 12(g)of the Act: Common Stock,
without par
value (Title
of Class)
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 the 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 aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant as of March 19, 1996, computed by reference to
the last sale price for such stock on that date as reported on the Nasdaq
National Market System, was $53,925,884.
At March 19, 1996, the number of shares outstanding of the registrant's
Common Stock, without par value, was 6,520,292.
Portions of the registrant's Proxy Statement for its 1996 Annual Meeting
of Shareholders have been incorporated by reference in Part III of this Annual
Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
Durakon Industries, Inc. (the "Company") was incorporated in Michigan on
December 21, 1983, and is the successor by merger to Durakon, Inc. which was
incorporated in Michigan in 1979. The Company operates its business in two
segments, the pickup truck bedliners and accessories segment (pickup truck
accessories segment) and the vehicle transportation and towing segment (vehicle
transportation segment).
Pickup Truck Accessories Segment. This segment's principal product is a
one-piece, seamless pickup truck bedliner, custom engineered and molded in
various sizes to fit most domestic and foreign pickup trucks. A matching
protector is supplied with each bedliner to protect the truck's tailgate.
Bedliners are constructed of high density polyethylene plastic, and are
designed to protect the entire bed area including the floor, front panel and
sidewalls. The Company markets bedliners under the Duraliner(R), AllStar(R)
and Bodygard(TM) brand names and, to a lesser extent, manufactures for private
labels. Purchasers of the Duraliner(R) product also receive proprietary cargo
restraining board pockets (Duraloc(R)), two tier stacking capability and other
premium features.
The Company's marketing strategy for pickup truck bedliners is to service
the aftermarket through distributors of light truck accessories, light truck
dealers, camper top manufacturers, retail chains and mass merchandisers as well
as directly servicing original equipment manufacturers. Management believes
that purchasers of light trucks generally prefer to purchase add-on
accessories, such as a pickup truck bedliner, at the time they purchase their
truck. This allows installation of the bedliner prior to delivery, before
damage to the truck occurs, and also permits the buyer to finance the bedliner
in conjunction with the truck.
The Company also distributes through its Duraliner U.S.A. network, which
consists of 10 warehouses located throughout the country. Those warehouses
sell the Company's bedliners, as well as, Big Mat(R) bed floormats,
Duratrunk(R) storage containers, bumpers, running boards, bug shields, and a
variety of other pickup truck accessories, all of which are manufactured by
other companies. Big Mat(R) mats, which are constructed of rubber and
reinforced nylon, are designed to protect the floor area of pickup truck beds.
The Duratrunk(R) is a high-density polyethylene plastic storage container with
proprietary design improvements over conventional tool/storage boxes.
Vehicle Transportation Segment. Through its wholly-owned subsidiary
Jerr-Dan Corporation ("Jerr-Dan"), the Company manufactures and distributes
rollback car carriers and tow trucks for use in the vehicle transportation,
towing and recovery industry.
Rollback car carriers are fabricated from aluminum, steel and wood to
provide platforms which hydraulically tilt to allow a vehicle to be loaded onto
the platform for transportation. Carriers equipped with a towbar attachment
can tow an additional vehicle behind the unit. Some models are also available
with an optional deck above the driver's cab to allow for an additional vehicle
to be transported. The Wrangler(TM), Shark(TM), Viper(TM) and Rustler(TM)
models are designed for transporting automobiles and light-duty vehicles, while
the Transporter(TM) and Super Series(TM) models, with deck capacities up to
30,000 pounds, can also transport heavy equipment. Jerr-Dan offers the
auxiliary axle system as an option on its Wrangler(TM), Viper(TM), and
Rustler(TM) models to increase payload capacities by up to 5,000 pounds.
Rollback carriers are typically purchased by salvage dealers, towing
companies, automobile dealers, industrial equipment distributors, and antique
and race car owners.
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Jerr-Dan also manufactures and markets towing and recovery equipment.
These products lift disabled vehicles by the wheels for general towing
applications. Wheel lift tow trucks have supplanted the conventional hook and
sling equipment by providing towing which is normally damage-free to vehicles
with plastic front-end components and/or front-wheel drive. Heavy-duty towing
units, as supplied by Jerr-Dan's DeWalt Division, are equipped with frame-fork
attachments to enable a disabled vehicle to be pickup up by the front axle.
Towing units are customarily supplied with boom and winch features for use in
vehicle recovery applications. Jerr-Dan's towing and recovery product line
includes the HPL(TM), Power Grid(TM), and DeWalt(TM) models.
Jerr-Dan's marketing strategy is to compete nationally through its
independently-owned distributor network with innovative products of high
quality and superior customer service. Methods used to accomplish this
objective include advertising in trade journals, trade show participation,
publication of the Company's "Write-Carrier" magazine and utilization of the
distributor/customer in product development activities.
Jerr-Dan's manufacturing operations include the machining and fabrication
of steel and aluminum parts and assemblies, and the manufacture of hydraulic
componentry used in its products. Jerr-Dan's products are assembled, tested
and installed on truck chassis purchased by Jerr-Dan or its customers, or sold
as kits for installation by its distributors.
OTHER CORPORATE MATTERS
Employment. At December 31, 1995, the Company and its subsidiaries
employed 880 persons. Approximately 24% of its employees are covered by a
collective bargaining agreement with the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America. The most
recent agreement was ratified by the union on March 1, 1994, expires February
28, 1997, and covers 208 employees at the Lapeer, Michigan plant.
Significant Customers. No one customer accounts for more than 10% of
consolidated net sales and no material part of the Company's business is
dependent upon a single customer or a few customers.
Competition. In the opinion of management, the competitive factors in
each industry in which the Company and its subsidiaries operate include brand
recognition, total quality, marketing support, price, customer service, prompt
delivery and reputation. The Company emphasizes all of these factors in its
operating strategy.
The pickup truck accessories segment markets its products worldwide to
original equipment manufacturers and to independent aftermarket distributors.
The Company's primary competitor in all of these markets is Penda Corporation,
a privately owned company headquartered in Portage, Wisconsin. While no market
data is readily available, the Company believes it has the largest share of the
market for pickup truck bedliners but believes that Penda is the largest
supplier to original equipment manufacturers. There are many other
manufacturers of pickup truck bedliners but the Company believes that none of
them maintains a marketshare comparable to the Company or Penda.
In the vehicle transportation segment, the Company primarily sells in
North America. While the Company is not aware of any source of market data on
this industry, it believes that Miller Industries, Inc., a publicly held
company headquartered in Atlanta, Georgia has the largest marketshare.
Chevron, Inc., a privately held company headquartered in Mercer, Pennsylvania
and Vulcan Equipment Company, Inc., a privately held company headquartered in
Olive Grove, Mississippi are
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also major competitors of the Company. The Company believes it maintains the
second largest marketshare in the vehicle towing and recovery industry.
Patents. The Company has a policy of filing patent applications for its
important product designs and manufacturing methods. The patents the Company
considers most valuable expire after 1999.
Backlogs. Neither the pickup truck accessories segment nor the vehicle
transportation segment maintain a sales backlog as sales orders are generally
filled within one month.
Raw Materials. Raw materials used in the production of the Company's
products are available from several sources. Management believes that its
present sources and adequate replacement sources will be available to meet the
Company's anticipated demand for the foreseeable future. Hydrocarbon based
resin, which is the principal raw material of the pickup truck accessories
segment, is subject to significant price fluctuation. The impact of resin
pricing on the Company's results is discussed in Item 7., Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Regulatory Requirements. The Company, as a manufacturer utilizing
hydrocarbon substances, is subject to provisions of state and federal laws
governing discharges of pollutants into the environment and the exposure of
employees to harmful substances. The Company believes that it is currently in
compliance with such applicable provisions and that continued compliance will
not require material capital expenditures.
ITEM 2. PROPERTIES ($ in 000's)
Pickup Truck Accessories Segment. The Company has two manufacturing
locations for pickup truck bedliners. The largest one is owned, the other
facility is leased. The owned facility is a 257,000 square foot building
complex on 135 acres of land in Lapeer, Michigan. This facility also houses
the Company's warehouse facility, distribution center and administrative
offices. The leased facility is 102,000 square feet on 7 acres of land in
Clinton, Tennessee. The lease expires in 2003; rental under this lease was
approximately $262 in 1995. The Company also leases two facilities in
Richardson, Texas. One facility is 12,000 square feet and is for the
manufacturing of wheelcovers. The second facility is 9,000 square feet and is
for warehousing and light assembly of wheelcovers.
The Company's Mexican subsidiary leases a 21,000 square foot manufacturing
facility in Lerma, Mexico. Rental under this lease agreement was $144 during
1995.
The Company has 10 leased locations which operate under the name
"Duraliner U.S.A." that are primarily used as sales centers. These facilities,
located in Santa Fe Springs and Stockton, California; Ft. Lauderdale and
Lakeland, Florida; New Orleans, Louisiana; Springfield, Massachusetts;
Westland, Michigan; Ft. Worth and Houston, Texas; and Charleston, West
Virginia, have approximately 9,000 to 21,000 square feet per location.
Aggregate rentals under these leases were approximately $511 in 1995. The
expiration dates for these leases range from 1996 to 1997.
Vehicle Transportation Segment. The Company owns an 112,000 square foot
manufacturing facility located on 12.5 acres of land in Greencastle,
Pennsylvania. This location also houses storage facilities and administrative
offices.
The Company leases an additional assembly location in Greencastle,
Pennsylvania. This facility has approximately 6,000 square feet. Annual rent
is $18, payable on a month-to-month
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basis. An additional manufacturing location is leased in Channelview, Texas.
The location has 7,000 square feet and the annual rent is $30. The lease
expires June 30, 1998.
Additional warehousing space of 65,000 square feet is leased in Las Vegas,
Nevada to provide inventory availability for Jerr-Dan's western distributors.
The 1995 rent under this agreement was $222 and this lease expires July 31,
2000.
Adequacy of Facilities and Production Capacity. In the opinion of
management, the facilities and manufacturing capacity for both business
segments are adequate to operate at current market conditions.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in certain routine litigation incidental to its
business. The effect of such litigation on the business and financial
condition of the Company is not expected by management to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matters were submitted to a vote of shareholders during the fourth
quarter of the fiscal year covered by this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq Stock Market under the
symbol "DRKN". The following table sets forth the high and low sale prices
reported on the Nasdaq Stock Market for the quarterly periods indicated:
<TABLE>
<CAPTION>
1995 1994
Quarter High Low Quarter High Low
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First $17 5/8 $15 First $19 1/4 $15 3/4
Second 16 7/8 15 1/4 Second 19 3/4 16 1/2
Third 16 12 3/4 Third 18 1/4 16
Fourth 15 1/4 11 1/4 Fourth 18 1/2 17
</TABLE>
On March 19, 1996, the last available sale price for shares of the Common
Stock of the Company, as reported on the Nasdaq Stock Market, was $12 1/4. As
of such date, the approximate number of record holders of the Common Stock was
410.
Durakon has not paid a dividend on the Common Stock since the date on
which the Common Stock was first offered to the public. The Company's policy
is not to pay dividends, but to use excess cash to fund for future growth.
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below have been derived
from the Company's Consolidated Financial Statements which have been audited by
Coopers & Lybrand L.L.P., and should be read in conjunction with the
Consolidated Financial Statements and related Notes.
<TABLE>
<CAPTION>
1995 (1) 1994 1993 (2) 1992 1991 (3)
- ---------------------------------------------------------------------------------------------------
($ in 000's, except per
share amounts)
<S> <C> <C> <C> <C> <C>
OPERATIONS STATEMENT DATA:
Net sales $172,051 $144,483 $105,738 $86,961 $68,427
Operating income/(loss) 5,171 19,487 14,937 13,458 (2,195)
Interest income/(expense), net 358 427 195 (445) (989)
Net income/(loss) 2,299 12,101 11,974 7,632 (3,060)
Net income/(loss) per common
share .34 1.82 1.82 1.22 (0.50)
BALANCE SHEET DATA:
Working capital $ 25,696 $25,539 $27,769 $21,666 $13,024
Total assets 78,869 75,542 56,224 56,825 37,116
Long-term obligations 1,572 2,641 446 4,078 6,324
Shareholders' equity 56,556 54,237 41,673 29,202 20,052
PERCENTAGES AND RATIOS:
Gross profit 21.1% 29.0% 31.9% 35.1% 28.0%
Return on sales 1.3% 8.4% 11.3% 8.8% (4.5%)
Current ratio 2.3 2.4 2.9 2.7 2.3
Ratio of long-term debt to
total capitalization .03 .05 .01 .12 .24
</TABLE>
(1) Includes pre-tax charges of $2,900 for the loss on disposition of the ZZ
Wheelz subsidiary, $1,455 for re-engineering and consolidation of pickup
truck bedliner manufacturing operations, and $1,103 related to settlement
of a patent issue and write-off of a license agreement.
(2) Includes a pre-tax gain of $2,358 relating to the sale of a warrant to
purchase a minority share of DFM Corporation.
(3) Includes a pre-tax $900 write-down to the carrying value of a warrant to
purchase DFM Corporation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion relating to the three years ended December 31,
1995 should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes:
CORPORATE DEVELOPMENT. ($ in 000's) On December 12, 1995, the Company
decided to dispose of its ZZ Wheelz subsidiary. The operation acquired in 1994
did not fit the long-term focus of the Company. A $2,900 pre-tax charge was
recorded in the fourth quarter to write-off the investment and provide for
anticipated costs to close the facility.
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In November 1995, Jerr-Dan introduced the prototype of its new medium-duty
recovery vehicle. This new product, with an innovative composite body, is
intended to provide Jerr-Dan distributors with a complete range of towing and
recovery products for the first time in the Company's history.
Effective July 1, 1995, Jerr-Dan acquired substantially all the assets of
DeWalt Manufacturing, Inc., a manufacturer of heavy-duty towing and recovery
vehicles in Channelview, Texas. Jerr-Dan's DeWalt Division provides a proven
product line in the heavy-duty market segment previously not serviced by the
Company.
Also in July 1995, Jerr-Dan began leasing approximately 65,000 square feet
in Las Vegas, Nevada. This western warehouse has improved service to the
Company's West Coast distributors. The warehouse provides distributors with
inventory in both kit and installed configurations.
In July 1994, the Company acquired Benton Plastics, Inc. ("Benton").
Benton is a manufacturer and distributor of bedliners under the brand name
"Bodygard"(R). The total purchase price was $14,388.
NET SALES. ($ in 000's) The following table summarizes net sales by
business segment for the last three years:
<TABLE>
<CAPTION>
Segment 1995 % 1994 % 1993 %
- ------- ---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C>
Pickup truck accessories $ 81,684 47% $ 75,163 52% $ 56,399 53%
Vehicle transportation 90,367 53% 69,320 48% 49,339 47%
-------- --- -------- --- -------- ---
Total $172,051 100% $144,483 100% $105,738 100%
======== === ======== === ======== ===
</TABLE>
Net sales increased 19% to $172,051 in 1995 versus 1994. In the pickup
truck accessories segment net sales increased $6,521 or 9% from 1994. Bedliner
unit sales increased 16% from the prior year. Durakon Division unit sales were
down 5% in 1995 compared to 1994 partially due to a 5% decline in domestic
pickup truck sales from 1994. International unit sales increased 43%. Average
net selling prices were down 5% from last year at the Durakon Division due
largely to industry competition and increased sales to the Company's
international OE customers. Unit sales from the Benton Division were up 143% as
1995 net sales included a full year of activity versus five months in 1994.
Benton Division selling prices were 6% higher in 1995 due to the addition of new
product features.
In the vehicle transportation segment, 1995 net sales increased $21,047 or
30% from 1994. Equipment sales increased 13% and truck chassis sales (which
carry little mark-up) increased 52% over 1994. Unit sales of rollback car
carriers increased 21%, while the volume of wheel lift products was down 16% due
to the inability for a period of six months in 1995 to sell several models in
the light-duty product line following a patent settlement. A more advanced
light-duty wheel lift product was introduced in the third quarter of 1995 and
unit sales of this new product have exceeded sales of the former product for
comparative periods in 1995 versus 1994. Average net selling prices for both
rollback car carriers and wheel lifts were higher, up 3% and 5%, respectively,
in 1995 compared to 1994.
Net sales increased $38,745 or 37% in 1994 versus 1993. Net sales in the
pickup truck accessories segment increased $18,764 or 33% over 1993. The
increase was due to a 37% gain in unit sales, primarily due to bedliner unit
volume from the Benton Division, which was acquired in July
1994. Unit sales from comparable operations were up in the independent
aftermarket distribution channel and the international channel. Average net
selling prices did not change significantly during 1994 as higher sales prices
in the aftermarket channel offset lower prices to existing and new
international OEM customers. Net sales in the vehicle transportation segment
increased $19,981 or
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40% from 1993. The increase was due to continued increases in market
penetration for both rollback and wheel lift products. A modest price
increase in the vehicle transportation segment was achieved in 1994.
GROSS PROFIT. ($ in 000's) The following table summarizes gross profit in
dollars and as a percent of sales by segment for the last three years:
<TABLE>
<CAPTION>
Segment 1995 % 1994 % 1993 %
- ------- ---- - ---- - ---- -
<S> <C> <C> <C> <C> <C> <C>
Pickup truck accessories $ 22,137 27% $ 29,240 39% $ 24,345 43%
Vehicle transportation 14,222 16% 12,707 18% 9,341 19%
-------- --- -------- --- -------- ---
Total $ 36.359 21% $ 41,947 29% $ 33,686 32%
======== === ======== === ======== ===
</TABLE>
In 1995, gross margin in the pickup truck accessories segment declined 12
percentage points from 1994. The majority of the decline in gross margin
occurred at the Durakon Division. Selling price decreases coupled with
increased material cost (raw material cost increases and higher material usage
to improve quality), a change to prepaid customer freight in 1995, and spending
to improve manufacturing efficiency and product quality were the reasons for the
decline in gross margin. In 1995, approximately $1,898 of non-recurring costs
to improve manufacturing operations are reflected in gross profit. The impact
of these non-recurring costs is expected to be realized in lower unit production
costs beginning in the first quarter of 1996. At the Benton Division, gross
margin increased one point as selling price increases were largely offset by
cost increases.
In the vehicle transportation segment, gross margin in 1995 was 16%
compared to 18% in 1994. The margin on equipment sales was 27% in 1995, down
2% from the prior year. In 1995, the increased costs of materials and product
enhancements were not completely offset by selling price increases and
reductions realized in fabrication costs.
In 1994, the gross profit percentage for the pickup truck accessories
segment was 39% versus 43% in 1993. The decrease was due to lower margins
associated with sales from the Benton Division acquired in July 1994, and to
increased material costs and operating costs to support the expanded product
line and customer base. The gross profit in the vehicle transportation segment
was down 1% to 18% in 1994 versus 1993 due entirely to an increase in the
proportion of lower margin truck chassis sold in 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. ($ in 000's) The following
table presents selling, general and administrative expenses by business segment
and as a percent of net sales for the last three years:
<TABLE>
<CAPTION>
% Net % Net % Net
Segment 1995 Sales 1994 Sales 1993 Sales
- ------- ---- ----- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Pickup truck accessories $18,375 23% $14,905 20% $12,170 22%
Vehicle transportation 9,913 11% 7,555 11% 6,579 13%
------- -- ------- -- ------- --
Total $28,288 16% $22,460 16% $18,749 18%
======= == ======= == ======= ==
</TABLE>
Selling, general and administrative expenses (SG&A) were 26% higher in 1995
compared to 1994, but as a percent of net sales were unchanged.
In the pickup truck accessories segment, 1995 SG&A was $3,470 higher than
in 1994 and as a percentage of net sales was three points higher. The majority
of the increase was attributable to the inclusion of the Benton Division and ZZ
Wheelz for a full year which had SG&A of $3,707 versus five months in 1994 which
had SG&A of $1,568. The remainder of the increase reflects spending to
facilitate a software conversion,
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increased advertising and increased salaries and wages.
In the vehicle transportation segment, 1995 SG&A was $2,358 higher
than the prior year but as a percent of net sales was unchanged. Approximately
$1,103 in one-time charges were related to patent litigation and the
write-off of a license agreement. The balance of the increase
relates to new product development related to the new medium-duty wrecker
products and administrative expenses associated with the new DeWalt Division.
The increase of $3,711 in 1994 versus 1993 was due in part to the addition
of the Company's Benton Division and ZZ Wheelz, which had SG&A of $1,568 in the
last half of 1994. In addition, spending was $835 higher to improve the
infrastructure of the Duraliner USA distribution centers in the pickup truck
accessories segment. In the vehicle transportation segment, selling and
administrative expenses were up $770 due to increased litigation expense, staff
additions to support higher sales volume and patent amortization. As a percent
of net sales, selling, general and administrative expenses were 2% lower in 1994
versus 1993.
DISPOSITION OF SUBSIDIARY ($ in 000's) In December 1995 the Company
decided to close its ZZ Wheelz operations. The charge of $2,900 to write-off
the investment and provide for anticipated costs to close the operation was
recorded in the fourth quarter of 1995.
INTEREST INCOME/(EXPENSE), NET. ($ in 000's) Net interest income was $358
in 1995, $427 in 1994 and $195 in 1993. The reduction in net interest income
in 1995 versus 1994 reflects higher interest income on larger cash balances
offset by increased interest expense from higher debt. The improvement in 1994
versus 1993 reflects higher average cash balances.
OTHER INCOME/(EXPENSE), NET. ($ in 000's) Other income in 1995 reflects an
expense of $411 versus income of $86 and $2,215 in 1994 and 1993, respectively.
In 1995, other expense relates primarily to transaction and devaluation losses
associated with the Mexican peso. In 1994, other income includes the gain from
the sale of a bond fund, net of Mexican peso transaction and devaluation
losses. Other income in 1993 reflects the gain on the call of a warrant.
MINORITY INTEREST. ($ in 000's) Minority interest reflects the minority
shareholders' portion of the net income of Duramex which began operations in
April 1993. The minority interest was a loss in 1995 of $73 compared to a loss
of $143 in 1994 and income of $72 in 1993.
PROVISION FOR INCOME TAXES. The Company's effective tax rate was 54% in
1995, 39% in 1994 and 31% in 1993. The difference between 1995 effective rate
and the statutory rate of 35% is primarily due to the non-deductible portion of
the loss on disposition of ZZ Wheelz and a provision for state income taxes.
The difference between the 1994 effective rate and the statutory rate of 35%
was primarily due to a provision for state income taxes.
NET INCOME. ($ in 000's) Net income was $2,299 in 1995, $12,101 and
$11,974 in 1994 and 1993, respectively.
The 1995 decrease of $9,802 from 1994 was primarily the result of lower
gross margins in both business segments, non-recurring charges related to the
loss on disposition of the ZZ Wheelz business unit, costs related to
re-engineering the manufacturing operations at the pickup truck bedliner plants,
expenses to consolidate manufacturing operations in the pickup truck accessories
segment and costs associated with a patent settlement in the vehicle
transportation segment.
The 1994 increase of $127 over 1993 was as a result of the increased
sales, lower selling,
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general and administrative expenses as a percent of sales and an increase in
interest income offset by the gain on the warrant call of $2,358 recognized in
1993.
Management does not believe that inflation had a significant impact on the
Company's operations during the last three years.
LIQUIDITY AND CAPITAL RESOURCES ($ in 000's)
At year-end 1995, the Company's cash balance was $12,757, $11,628 at
year-end 1994 and $15,549 at year-end 1993. The current ratio was 2.3 at
December 31, 1995 versus 2.4 in 1994 and 2.9 in 1993. During 1995, cash of
$8,944 was provided by operations versus $12,488 in 1994 and $9,021 in 1993.
Cash used in investing activities in 1995 was $6,636 compared to $14,230 in
1994 and $2,799 in 1993. The main use of cash in 1995 was for the purchase of
equipment. In the pickup truck accessories segment capital spending totaled
$6,079 and in the vehicle transportation segment $684. In 1994, the main uses
of cash were investments in Benton Plastics and ZZ Wheelz. Financing
activities resulted in a net cash use of $1,462 in 1995 and $1,755 in 1994.
The increase in cash in 1995 was $1,129 versus a net cash use of $3,921 in
1994.
The Company's anticipated internal cash flow is expected to provide
sufficient liquidity to fund its near-term working capital needs. The Company
believes that its long-term working capital and other investment needs will be
satisfied through its internal cash flow and future borrowings, if necessary.
The Company also maintains a $20,000 revolving credit facility. There were no
borrowings against this facility as of December 31, 1995. However, letters of
credit have been issued against the credit line totaling $1,700 at December 31,
1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information included
in this Report are set forth on the Index to Consolidated Financial Statements
and Financial Statement Schedule appearing on page F-1 of this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The information called for by the items within this part will be included
in the Company's 1996 Proxy Statement, and is incorporated herein by reference,
as follows:
Captions(s) in 1996
Proxy Statement
-------------------
ITEM 10. Directors and Executive Officers "Election of Directors", "Other
of the Registrant Information Relating To Directors"
and "Executive Officers"
ITEM 11. Executive Compensation "Compensation of Executive Officers
and Directors"
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ITEM 12. Security Ownership of Certain "Election of Directors"
Beneficial Owners and Management
ITEM 13. Certain Relationships and "Certain Transactions with
Related Transactions Management"
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULE AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements:
The financial statements filed with this Report are listed on page F-1.
2. Financial Statement Schedule:
The financial statement schedule filed with this Report is listed on
page F-1. Other financial statement schedules, for which provision is
made in the applicable accounting regulations of the Securities and
Exchange Commission, are not required under the related instructions or
are inapplicable and, therefore, have been omitted.
3. Exhibits:
The exhibits filed with this Report are listed on the "Exhibit Index"
on page E-1.
(b) Reports on Form 8-K.
The Company was not required to file any current reports on Form 8-K
during the quarter ended December 31, 1995, and none was filed during
that period.
11
<PAGE> 12
DURAKON INDUSTRIES, INC. AND SUBSIDIARIES
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Durakon Industries, Inc. are
referred to in Item 8:
Page
----
Report of Independent Accountants F-2
Consolidated Balance Sheets - December 31, 1995 and 1994 F-3
Consolidated Statements of Operations - Years ended
December 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Shareholders' Equity - Years
ended December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Cash Flows - Years ended
December 31, 1995, 1994 and 1993 F-6
Notes to consolidated financial statements F-7 to F-16
The following consolidated financial statement schedule of Durakon Industries,
Inc. is included herein:
Schedule II -- Valuation and qualifying accounts S-1
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Durakon Industries, Inc.:
We have audited the consolidated financial statements and financial statement
schedule of Durakon Industries, Inc. and Subsidiaries listed in the index on
page F-1 of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Durakon
Industries, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
Coopers & Lybrand, L.L.P.
Detroit, Michigan
February 23, 1996
F-2
<PAGE> 14
DURAKON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
($ in 000's)
<TABLE>
<CAPTION>
1995 1994
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents $12,757 $11,628
Accounts receivable, less allowances of $640 and $474 17,468 15,203
Inventories 12,140 13,793
Prepaid expenses and other current assets 1,141 1,542
Deferred income taxes 2,526 1,426
------- -------
Total current assets 46,032 43,592
Property, plant and equipment less accumulated depreciation
of $20,673 and $18,999 18,346 15,607
Goodwill 13,870 15,078
Patents, less accumulated amortization of $2,369 and $1,754 507 1,122
Other assets 114 143
------- -------
$78,869 $75,542
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $1,342 $1,767
Accounts payable 10,058 9,241
Other current liabilities 8,936 7,045
------- -------
Total current liabilities 20,336 18,053
------- -------
Long-term debt 1,572 2,641
Deferred income taxes 346 330
Minority interest 59 281
------- -------
Total long-term liabilities 1,977 3,252
------- -------
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
Accumulated translation adjustment (275) (295)
Retained earnings 35,325 33,026
------- -------
Total shareholders' equity 56,556 54,237
------- -------
$78,869 $75,542
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 15
DURAKON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
($ in 000's, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $172,051 $144,483 $105,738
Cost of products sold 135,692 102,536 72,052
-------- -------- --------
Gross profit 36,359 41,947 33,686
Selling, general and
administrative expenses 28,288 22,460 18,749
Disposition of subsidiary 2,900 -- --
-------- -------- --------
Operating income 5,171 19,487 14,937
Interest income 775 612 344
Interest expense (417) (185) (149)
Other income/(expense), net (411) 86 2,215
Minority interest (73) (143) 72
-------- -------- --------
Income before income taxes 5,045 19,857 17,419
Provision for income taxes 2,746 7,756 5,445
-------- -------- --------
Net income $2,299 $12,101 $11,974
======== ======== ========
Net income per share of common stock $0.34 $1.82 $1.82
======== ======== ========
Weighted average shares (000's) 6,687 6,654 6,577
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 16
DURAKON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
($ in 000's)
<TABLE>
<CAPTION>
Shares Equity
---------- ------------------------------
Accumulated
Common Common Translation Retained
Stock Stock Adjustment Earnings
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 6,432,426 $20,251 -- $8,951
---------- -------- ---------- --------
Exercise of stock options 43,933 $333 -- --
Tax benefit of exercised options -- 164 -- --
Net income -- -- -- $11,974
---------- -------- ---------- --------
Balance at December 31, 1993 6,476,359 $20,748 -- $20,925
---------- -------- ---------- --------
Exercise of stock options 3,333 $41 -- --
Issuance of common stock 40,600 710 -- --
Tax benefit of exercised options -- 7 -- --
Net income -- -- -- $12,101
Translation adjustments -- -- ($295) --
---------- -------- ---------- --------
Balance at December 31, 1994 6,520,292 $21,506 ($295) $33,026
---------- -------- ---------- --------
Net income -- -- -- $2,299
Translation adjustments -- -- ($20) --
---------- -------- ---------- --------
Balance at December 31, 1995 6,520,292 $21,506 ($275) $35,325
========== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 17
DURAKON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
($ in 000's)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,299 $12,101 $11,974
Adjustments to reconcile net income to net
cash provided by operating activities, net of purchase
of Benton Plastics and ZZ Wheelz:
Depreciation and amortization 5,002 3,897 2,753
Increase/(decrease) in minority interest, net (222) 41 240
Increase/(decrease) in deferred income taxes (1,084) (570) 125
Gain on call of warrant -- -- (2,358)
Gain/(loss) on disposal of property, plant and equipment 440 (83) (64)
Net decrease/(increase) of other assets 15 462 (77)
Increase/(decrease) due to changes in operating assets
and liabilities:
Accounts receivable (2,454) (2,067) (2,900)
Inventories 1,462 (3,186) (1,067)
Prepaid expenses and other current assets 372 1,199 (1,380)
Accounts payable 1,180 2,302 458
Accrued expenses and other current liabilities 1,934 (1,608) 1,317
------- ------- -------
Net cash provided by operating activities 8,944 12,488 9,021
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (6,763) (3,395) (4,772)
Purchase of Benton Plastics and ZZ Wheelz -- (11,861) --
Purchase of patent right -- -- (612)
Net proceeds from call of warrant -- -- 2,458
Proceeds from cash receipt on note receivable -- 836 --
Proceeds from sale of property, plant and equipment 127 190 127
------- ------- -------
Net cash used in investing activities (6,636) (14,230) (2,799)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in long-term debt (1,659) (3,039) (4,828)
Proceeds from issuance of debt 197 1,243 336
Cash proceeds from exercise of stock options -- 41 333
------- ------- -------
Net cash used in financing activities (1,462) (1,755) (4,159)
------- ------- -------
Effect of exchange rate changes on cash 283 (424) --
------- ------- -------
CASH AND EQUIVALENTS:
Increase/(decrease) for year 1,129 (3,921) 2,063
Balance, beginning of year 11,628 15,549 13,486
------- ------- -------
BALANCE, END OF YEAR $12,757 $11,628 $15,549
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 18
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of Durakon
Industries, Inc. and its domestic wholly-owned subsidiaries and foreign
majority-owned subsidiary (the "Company"). All significant intercompany
accounts and transactions have been eliminated.
Cash and equivalents
At December 31, 1995, 1994 and 1993, substantially all cash was held at
Comerica Bank.
For purposes of the statement of cash flows, cash and equivalents include
cash on hand, amounts due from banks and debt instruments purchased with an
original maturity of three months or less.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for the pickup truck accessories
segment and the last-in, first-out (LIFO) method for the vehicle
transportation segment.
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is provided
on the straight-line method over the estimated useful lives of the assets.
Intangibles
Goodwill is being amortized using the straight-line method over periods not
exceeding 20 years. At each balance sheet date, management assesses whether
there has been an impairment in the carrying value of goodwill, primarily by
comparing current and projected sales, operating income and annual cash
flows with the related annual amortization expense. Purchase costs of
patents are being amortized using the straight-line method over the legal
lives of the patents, not to exceed 17 years.
Retirement plans
The Company has defined contribution retirement plans covering substantially
all employees. The Company's policy is to fund retirement costs accrued.
Income taxes
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards (FASB) No. 109,
"Accounting for Income Taxes". Deferred income taxes are recorded to
reflect the tax liability/benefit on future years of differences between the
tax basis and financial reporting amount of assets and liabilities at each
year-end.
Foreign Currency Translation
The assets and liabilities of the Company's foreign operation are translated
into U.S. dollars at current exchange rates, and revenues and expenses are
translated at average exchange rates for the year. Resulting translation
adjustments are reflected as a separate component of shareholders' equity.
Currency transaction gains and losses are reported in income.
F-7
<PAGE> 19
Net income per share of common stock
Net income per share of common stock is based on the weighted average number
of common shares outstanding after giving effect for common stock
equivalents arising from stock options.
Segments
The Company operates in two business segments, pickup truck bedliners and
accessories (pickup truck accessories) and vehicle transportation and towing
(vehicle transportation).
Reporting
Certain amounts in the Consolidated Financial Statements for prior years
have been reclassified to conform to 1995 presentation.
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.
Recently issued financial accounting standards
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
Of", will not have a material impact on the Company's financial statements
when adopted in 1996. SFAS 123, "Accounting for Stock-Based Compensation,"
becomes effective in 1996. The Company intends to adopt the pro-forma
disclosure provisions of SFAS 123.
F-8
<PAGE> 20
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Acquisitions ($ in 000's)
On July 29, 1994, Benton Plastics, Inc. ("Benton") was acquired for
$14,388. Benton is a manufacturer of bedliners with production
facilities in Maine and Tennessee. In 1995, manufacturing operations
were terminated in Maine.
The acquisition was accounted for as a purchase with the results of
Benton included from the acquisition date. The fair value of assets
acquired, including goodwill, was $16,753 and liabilities assumed totaled
$2,464. Goodwill of $13,273 is being amortized over 20 years on a
straight-line basis.
On June 10, 1994, G.C. Concepts, Inc. doing business as ZZ Wheelz, Inc.,
was acquired for $656 in cash plus other consideration. ZZ Wheelz
manufactures and assembles wheel covers.
The acquisition was accounted for as a purchase with the results of ZZ
Wheelz included from the acquisition date. The fair value of assets
acquired, including goodwill, was $2,751 and liabilities assumed totaled
$1,385. Goodwill of $2,138 was being amortized over 15 years on a
straight-line basis. The disposition of ZZ Wheelz resulted in the
write-off of goodwill during 1995.
3. Inventories
Inventories are summarized below ($ in 000's):
<TABLE>
<CAPTION>
December 31,
--------------------------------
1995 1994
---- ----
<S> <C> <C>
Raw materials and work in process . . . . . . . . . . . . . . $ 5,838 $ 5,908
Finished goods. . . . . . . . . . . . . . . . . . . . . . . . 6,302 7,885
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,140 $13,793
======= =======
</TABLE>
The LIFO method of inventory valuation is used to value the inventory of
the vehicle transportation segment, which represented approximately 55%
of total inventory at December 31, 1995 and 50% at December 31, 1994.
The effect of LIFO adjustments was to reduce net income by $316 or $0.05
per share in 1995. At December 31, 1995 and 1994, the Company's LIFO
reserve was $1,276 and $960, respectively.
F-9
<PAGE> 21
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Property, Plant and Equipment
A summary of property, plant and equipment is shown below ($ in 000's):
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
---- ----
<S> <C> <C>
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,911 $ 1,900
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,055 7,725
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . 29,053 24,981
------- -------
Total property, plant and equipment . . . . . . . . . . . . . . . 39,019 34,606
Less accumulated depreciation . . . . . . . . . . . . . . . . . . 20,673 18,999
------- -------
Net property, plant and equipment . . . . . . . . . . . . . . . . $18,346 $15,607
======= =======
</TABLE>
5. Other Current Liabilities
A summary of other current liabilities is shown below ($ in 000's):
<TABLE>
<CAPTION>
December 31,
------------
1995 1994
---- ----
<S> <C> <C>
Accrued compensation. . . . . . . . . . . . . . . . . . . . . . . $ 2,201 $ 2,309
Benton purchase . . . . . . . . . . . . . . . . . . . . . . . . . -- 787
Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . 1,004 575
Workers' compensation . . . . . . . . . . . . . . . . . . . . . . 233 467
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . -- 257
Reserve for disposition of subsidiary . . . . . . . . . . . . . . 2,900 --
Commission and royalties . . . . . . . . . . . . . . . . . . . . 617 443
Health insurance. . . . . . . . . . . . . . . . . . . . . . . . . 521 416
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,460 1,791
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,936 $ 7,045
======= =======
</TABLE>
6. Retirement Plans
Employer contributions to the 401(k) retirement plans amounted to $389 in
1995, $368 in 1994 and $353 in 1993.
7. Leases
Rental expense under operating leases approximated $2,396 in 1995, $2,019
in 1994 and $1,099 in 1993. At December 31, 1995, future minimum lease
commitments under these leases were as follows:
Year ending December 31 ($ in 000's):
<TABLE>
<S> <C>
1996. . . . . . . . . . . . . . . . . . . . . $1,933
1997. . . . . . . . . . . . . . . . . . . . . 1,703
1998. . . . . . . . . . . . . . . . . . . . . 1,406
1999. . . . . . . . . . . . . . . . . . . . . 1,136
2000 and thereafter . . . . . . . . . . . . . 1,360
------
$7,538
======
</TABLE>
F-10
<PAGE> 22
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Contingencies ($ in 000's)
The Company is contingently liable under the terms of agreements covering
certain of its customer's 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 $5,800 and $4,300 at December 31, 1995
and 1994, respectively. The Company has incurred no material losses
related to these agreements.
9. Long-term Debt
Long-term debt consisted of the following at December 31 ($ in 000's):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Note payable, interest at 6%, to employees of Company, $1,000 due
August 31, 1996, collateralized by a standby letter of credit . . . . . . . . . . $1,000 $2,000
Duramex note payable to bank, interest at Libor plus 2.675%, which was
8.36% and 8.55% at December 31, 1995 and 1994, respectively, due in
semi-annual installments of $51 through 1999 . . . . . . . . . . . . . . . . . . . 448 249
Note payable, interest at 9%, to employee of Company, due June 1995 . . . . . . . . -- 440
Promissory notes to individuals, interest at 10%, interest paid annually,
principal due March 26, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . 539 539
Loan payable to Pennsylvania Industrial Development Association,
interest at 2%, due in monthly installments of $3, through 2009. . . . . . . . . . 393 416
Loan payable to Machinery and Equipment Loan Fund, interest at 2%,
due in monthly installments of $4, through 2001 . . . . . . . . . . . . . . . . . 273 316
Duramex note payable to bank, interest at Libor plus 2.675%, which was
8.36% and 8.55% at December 31, 1995 and 1994, respectively, due in
semi-annual installments of $33, through 1998. . . . . . . . . . . . . . . . . . . 173 270
Note payable, net of imputed interest at 7.45%, of $11 in 1995 and
$22 in 1994, due in monthly installments of $8, through 1996 . . . . . . . . . . . 88 178
------ ------
2,914 4,408
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,342 1,767
------ ------
Total long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,572 $2,641
====== ======
</TABLE>
Maturities of long-term debt during the next five years are $1,342, $252,
$794, $187 and $84.
The Company has a $20,000 unsecured revolving credit agreement with
Comerica Bank which expires June 30, 1997. Five standby letters of
credit totaling $1,700 reduced the available balance to $18,300 at
December 31, 1995.
F-11
<PAGE> 23
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Stock Option Plan
Under the 1988 Stock Option Plan, the Company has made available 500,000
shares of common stock for key employees. The options vest and become
exercisable in equal annual installments as defined in the agreements.
Certain options which were issued in 1995 were immediately exercisable.
At December 31, 1995, there were 17,400 shares that remained available
for grant under this plan.
A summary of activity during 1995, 1994 and 1993 under the Plan follows:
<TABLE>
<CAPTION>
Number of Shares
-------------------------------------------- Per share
1995 1994 1993 option price
---- ---- ---- ------------
<S> <C> <C> <C> <C>
Outstanding at January 1 158,334 141,667 175,600 $3.25 to $16.25
Options granted 230,000 20,000 10,000 $13.625 to $16.25
Options exercised -- 3,333 43,933 $7.00 to $12.25
Options cancelled 20,000 -- -- $16.25
------- ------- --------
Outstanding at December 31 368,334 158,334 141,667 $3.25 to $16.25
======= ======= ========
Exercisable at December 31 148,334 110,000 59,999 $3.25 to $16.25
======= ======= ========
</TABLE>
In addition, the Company has a stock option agreement which was not
granted under the 1988 Plan and has made available 100,000 shares of
common stock for this agreement. During 1995, no options were exercised
under this agreement. At December 31, 1995, 100,000 shares were
exercisable at $3.25 per share.
F-12
<PAGE> 24
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Business Segments
The Company operates in two segments, pickup truck accessories and
vehicle transportation. The pickup truck accessories segment
manufactures and distributes pickup truck bedliners and other pickup
truck accessories. The vehicle transportation segment manufactures and
mounts systems on purchased and customer-supplied truck chassis, which
provide the converted trucks with the ability to transport vehicles
ranging in size from automobiles to heavy equipment. Foreign assets,
revenues and export sales each represent less than 10% of the Company's
total.
Information regarding the Company's segments follows ($ in 000's):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Net sales:
Pickup truck accessories $ 81,684 $ 75,163 $ 56,399
Vehicle transportation 90,367 69,320 49,339
-------- -------- --------
$172,051 $144,483 $105,738
======== ======== ========
Operating profit:
Pickup truck accessories $ 862 $ 14,335 $ 12,175
Vehicle transportation 4,309 5,152 2,762
-------- -------- --------
$ 5,171 $ 19,487 $ 14,937
======== ======== ========
Depreciation and amortization:
Pickup truck accessories $ 3,780 $ 3,147 $ 2,057
Vehicle transportation 1,222 750 696
-------- -------- --------
$ 5,002 $ 3,897 $ 2,753
======== ======== ========
Capital expenditures:
Pickup truck accessories $ 6,079 $ 2,371 $ 3,224
Vehicle transportation 684 1,024 1,548
-------- -------- --------
$ 6,763 $ 3,395 $ 4,772
======== ======== ========
Identifiable assets:
Pickup truck accessories $ 57,546 $ 57,129 $ 39,595
Vehicle transportation 21,323 18,413 16,629
-------- -------- --------
$ 78,869 $ 75,542 $ 56,224
======== ======== ========
</TABLE>
F-13
<PAGE> 25
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Income Taxes
The provisions for income taxes are summarized below ($ in 000's):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal income taxes:
Currently payable . . . . . . . . . . . . . . . . . . . $3,227 $6,275 $4,525
Deferred. . . . . . . . . . . . . . . . . . . . . . . . (935) 302 125
------ ------ ------
2,292 6,577 4,650
State income taxes . . . . . . . . . . . . . . . . . . . 454 1,179 795
------ ------ ------
Provision for income taxes . . . . . . . . . . . . . . . $2,746 $7,756 $5,445
====== ====== ======
</TABLE>
Temporary differences which give rise to the deferred tax assets and
liabilities as of December 31, 1995 and 1994 are as follows ($ in 000's):
<TABLE>
<CAPTION>
1995 1994
------------------------------- --------------------------------
Deferred Deferred Tax Deferred Deferred Tax
Tax Asset Liability Tax Asset Liability
--------- ------------ --------- -------------
<S> <C> <C> <C> <C>
Depreciation and goodwill amortization . . . . -- $614 -- $492
Bad debt allowance . . . . . . . . . . . . . . $224 -- $166 --
Inventory . . . . . . . . . . . . . . . . . . 493 -- 270 --
Litigation reserve . . . . . . . . . . . . . . 329 -- 201 --
Reserve for disposition of subsidiary . . . . 398 -- -- --
Vacation pay accrual . . . . . . . . . . . . . 187 -- 149 --
Reserve returns and allowances . . . . . . . . 252 -- 160 --
Warranty reserve . . . . . . . . . . . . . . . 95 -- 92 --
Patent amortization . . . . . . . . . . . . . 387 -- 284 --
Reserve employee health benefit
claims . . . . . . . . . . . . . . . . . . 205 -- 196 --
Other miscellaneous accrued and
prepaid expenses . . . . . . . . . . 224 -- 70 --
------ ---- ------ ----
Total deferred taxes . . . . . . . . . . . . $2,794 $614 $1,588 $492
====== ==== ====== ====
</TABLE>
The consolidated income tax provision was different than the amount
computed using the United States statutory income tax rate for the
reasons set forth in the following table ($ in 000's):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Tax at the statutory rate . . . . . . . . . . . . . . . $1,715 $6,950 $6,092
State income taxes . . . . . . . . . . . . . . . . . . 295 766 517
Change in valuation allowance . . . . . . . . . . . . . -- (53) (1,204)
Non-deductible loss from disposition of subsidiary . . 599 -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . . 137 93 40
------ ------ ------
Provision for income tax. . . . . . . . . . . . . . . . $2,746 $7,756 $5,445
====== ====== ======
Effective tax rate. . . . . . . . . . . . . . . . . . . 54.4% 39.1% 31.3%
====== ====== ======
</TABLE>
The Company had a long-term capital loss carryforward of approximately
$11,000 which expired in 1995.
F-14
<PAGE> 26
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Statement of Cash Flows Additional Information
Supplemental disclosures of cash flow information ($ in 000's):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 420 $ 79 $ 125
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,165 $7,440 $3,648
</TABLE>
Supplemental non-cash investing activities:
The Company received a $7 and $164 tax benefit from the exercise of stock
options in 1994 and 1993, respectively. There were no stock options
exercised in 1995.
In connection with the acquisition of Benton, the Company has recorded
$1,000 to be paid over the next year to the former owners of Benton.
In connection with the acquisition of ZZ Wheelz, the Company issued its
own stock with a fair value of $710 at the time of issuance.
14. Other Income and (Expense) ($ in 000's)
Net other expense for 1995 of ($411) represents a loss due to the change
in exchange rates of the Mexican peso of ($438) which was offset by
miscellaneous income items.
Net other income for 1994 primarily represents gain on the sale of
property, plant and equipment partially offset by an additional provision
for contingent lease transactions.
Net other income for 1993 of $2,215 represents a gain on the call of
a warrant to purchase a minority interest in DFM Corporation of $2,358,
offset primarily by expenses resulting from a margined short sale of U.S.
Government securities.
F-15
<PAGE> 27
DURAKON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Quarterly Financial Data (Unaudited)
The following presents financial data regarding the Company's quarterly
results of operations for 1995 and 1994 ($ in 000's, except per share
amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(a)
<S> <C> <C> <C> <C>
1995:
Net sales. . . . . . . . . . . . . . . . . . . . . . $44,044 $42,667 $42,596 $42,744
Gross profit . . . . . . . . . . . . . . . . . . . . 11,509 10,722 8,211 5,917
Net income/(loss) . . . . . . . . . . . . . . . . . 2,868 3,072 925 (4,566)
Net income/(loss) per share of common
stock. . . . . . . . . . . . . . . . . . . . . . . $ 0.43 $ 0.46 $ 0.14 $ (0.69)
1994:
Net sales. . . . . . . . . . . . . . . . . . . . . . $31,058 $35,432 $38,693 $39,300
Gross profit . . . . . . . . . . . . . . . . . . . . 8,929 11,063 11,149 10,806
Net income . . . . . . . . . . . . . . . . . . . . . 2,345 3,400 3,480 2,876
Net income per share of common
stock. . . . . . . . . . . . . . . . . . . . . . . $ 0.36 $ 0.51 $ 0.52 $ 0.43
</TABLE>
(a) 1995 fourth quarter adjustments, relating to the disposition
of the ZZ Wheelz subsidiary ($2,900 before tax) reduced net income
by $2,490 ($0.37 per share), the re-engineering and consolidation of
bedliner manufacturing operations charges reduced gross profit by
$1,606 and net income $1,028 ($0.15 per share), and the patent
settlement, license write-down and outside engineering ($642 before
tax) reduced net income by $398 ($0.06 per share).
16. Disposition of Subsidiary ($ in 000's, except per share amounts)
On December 12, 1995, the Company decided to dispose of its ZZ Wheelz
subsidiary in Richardson, Texas. A $2,900 charge was recorded in the
fourth quarter to write-off the investment and provided for anticipated
costs to close the facility. The operation had a net loss of $560 or
$0.08 per share in 1995.
F-16
<PAGE> 28
DURAKON INDUSTRIES, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
($ in 000's)
<TABLE>
<CAPTION>
Balance at Charged to
beginning costs and Other Charges Balance at
Year Description of year expenses accounts add (deduct) end of year
- --- ----------- ------------------------------------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1995 Allowance for doubtful
accounts. . . . . . . . . . . ($474) ($221) -- $55 (1) ($640)
Patents, net of accumulated
amortization. . . . . . . . . $1,122 ($615) -- $507
Non-compete, net of
accumulated amortization $203 ($60) -- $143
Goodwill, net of accumulated
amortization. . . . . . . . . $15,078 ($885) ($323)(4) $13,870
1994 Allowance for doubtful
accounts. . . . . . . . . . . ($374) ($174) -- $51 (1) ($474)
$23 (2)
Patents, net of accumulated
amortization. . . . . . . . . $1,345 ($254) -- $29 (2) $1,122
$2 (3)
Non-compete, net of
accumulated amortization $136 ($133) -- $200 (3) $203
Goodwill, net of accumulated
amortization. . . . . . . . . -- ($333) -- $15,411 (3) $15,078
1993 Allowance for doubtful
accounts. . . . . . . . . . . ($555) $95 -- $86 (1) ($374)
Patents, net of accumulated
amortization. . . . . . . . . $883 -- -- $612 (3) $1,345
($150)
Non-compete, net of
accumulated amortization $253 -- -- ($117) $136
</TABLE>
(1) Bad debts written off, net of recoveries.
(2) Adjustment due to acquisition of subsidiaries.
(3) Amount represents addition to goodwill, patent and non-compete agreement.
(4) Adjustments to prior acquisitions within last 18 months.
S-1
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized, on March 19, 1996.
DURAKON INDUSTRIES, INC.
By:
-----------------------------
James P. Kelly, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated on March 19, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ James P. Kelly Director (Principal Executive Officer)
-------------------------
James P. Kelly
/s/ Thomas A. Galas Senior Vice President, Chief Financial Officer
------------------------- (Principal Financial Accounting Officer)
Thomas A. Galas
/s/ David Aronow Director
-------------------------
David Aronow
/s/ Phillip Wm. Fisher Director
-------------------------
Phillip Wm. Fisher
/s/ Richard J. Jacob Director
-------------------------
Richard J. Jacob
/s/ Wesley W. Lang, Jr. Director
-------------------------
Wesley W. Lang, Jr.
/s/ Robert Teeter Director
-------------------------
Robert Teeter
/s/ William Webster Director
-------------------------
William Webster
/s/ David W. Wright Director
-------------------------
David W. Wright
</TABLE>
<PAGE> 30
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Exhibit Page Number
- ------ ---------------------- -----------
<S> <C> <C>
3(a) Articles of Incorporation of Durakon Industries, Inc., as amended (3)
3(b) By-laws of Durakon Industries, Inc., as amended (3)
10.1 Employees' Retirement Savings Plan, as amended and restated (4)
10.2 Employment Agreement, dated April 1, 1993, between Durakon
Industries, Inc. and William Webster (2)
10.3 Stock Purchase Agreement, dated July 28, 1994, by and between
Durakon Industries, Inc. and Benton Plastics, Inc. (1)
10.4 1988 Stock Option Plan, as amended (5)
10.5 $20,000,000 Revolving Credit Loan Agreement by and between
Durakon Industries, Inc. and Comerica Bank, dated October 17,
1994, as amended (1)
10.6 Promissory Note, dated July 28, 1994, by and between Durakon
Industries, Inc. and Conrad Ayotte (1)
10.7 Promissory Note, dated July 28, 1994, by and between Durakon
Industries, Inc. and Thomas Sturtevant (1)
10.8 Employment Agreement, dated July 28, 1994, by and between Durakon
Industries, Inc. and Conrad Ayotte (1)
10.9 Employment Agreement, dated July 28, 1994, by and between Durakon
Industries, Inc. and Thomas Sturtevant (1)
10.10 Lease Agreement, dated July 28, 1994, by and between CAT Realty
and Benton Plastics, Inc. (1)
10.11 Lease Agreement, dated July 28, 1994, by and between Conrad
Ayotte and Thomas Sturtevant and Benton Plastics, Inc. (1)
10.20 Consulting Agreement, dated August 1, 1994, by and between
Durakon Industries, Inc. and Robert Teeter (1)
10.22 Non-Qualified Stock Option Agreement, dated August 5, 1991,
between Durakon Industries, Inc. and Robert Teeter (3)
10.25 Indemnity Agreement, dated June 11, 1991, between Durakon
Industries, Inc. and Max M. Fisher (3)
10.26 Indemnity Agreement, dated June 11, 1991, between Durakon
Industries, Inc. and Phillip Wm. Fisher (3)
</TABLE>
E-1
<PAGE> 31
10.27 Indemnity Agreement, dated June 11, 1991, between Durakon
Industries, Inc. and Wesley W. Lang, Jr. (3)
10.28 Indemnity Agreement, dated August 8, 1991, between Durakon
Industries, Inc. and Robert Teeter (3)
10.29 Indemnity Agreement, dated June 11, 1991, between Durakon
Industries, Inc. and William Webster (3)
10.30 Indemnity Agreement, dated June 11, 1991, between Durakon
Industries, Inc. and David W. Wright (3)
10.31 Indemnity Agreement, dated October 25, 1993, between Durakon
Industries, Inc. and Richard J. Jacob (2)
10.32* Indemnity Agreement, dated May 16, 1995, between Durakon
Industries, Inc. and James P. Kelly
10.33* Indemnity Agreement, dated July 18, 1995, between Durakon
Industries, Inc. and David S. Aronow
11* Calculation of Earnings Per Share
22* Subsidiaries of the Registrant
24.1* Consent of Independent Accountants
27* Financial Data Schedule
* Filed with this Report
(1) Previously filed under the corresponding Exhibit Number as an exhibit to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1994, and incorporated herein by reference.
(2) Previously filed under the corresponding Exhibit Number as an exhibit to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1993, and incorporated herein by reference.
(3) Previously filed under the corresponding Exhibit Number as an exhibit to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1991, and incorporated herein by reference.
(4) Previously filed under the corresponding Exhibit Number as an exhibit to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1990, and incorporated herein by reference.
(5) Previously filed under the corresponding Exhibit Number as an exhibit to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1987, and incorporated herein by reference.
E-2
<PAGE> 1
EXHIBIT 10.32
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT, dated as of this 16th day of May, 1995, is
made by and between DURAKON INDUSTRIES, INC., a Michigan corporation (the
"Company"), and James P. Kelly ("Kelly"), for himself and the other Indemnitees
hereafter referred to.
In consideration of the consent of Kelly to serve as a member of the
board of directors of the Company, and to induce him so to serve, and in
further consideration of the sum of $10.00 paid to the Company, the receipt of
which is acknowledged by it, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) Indemnitee. For purposes of this Agreement, "Indemnitee" means and
includes (i) Kelly, his spouse, heirs, estate, executors, administrators and
personal representatives, and (ii) any other entity owned or controlled by the
aforementioned person or for which the aforementioned person is an advisor or
consultant.
(b) Expenses. For purposes of this Agreement, "Expense" includes all
direct and indirect costs of any type or nature whatsoever (including, without
limitation, all attorneys' fees and related disbursements, other out-of-pocket
costs and reasonable compensation for time spent by the Indemnitee for which he
or it is not otherwise compensated by the Company or any third party) actually
and reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a proceeding or establishing or enforcing a
right to the indemnification under this Agreement, the Business Corporation Act
of Michigan or otherwise; provided, however, that expenses shall not include
any judgements, fines, ERISA excise taxes or penalties or amounts paid in
settlement of a proceeding.
(c) Proceeding. For the purposes of this Agreement, "Proceeding" means
any threatened, pending, or completed action, suit or other proceeding, formal
or informal; whether civil, criminal, administrative, investigation or of any
other type whatsoever.
<PAGE> 2
(d) Subsidiary. For purposes of this Agreement, "Subsidiary" means any
corporation of which at least fifty (50%) percent of the outstanding voting
securities is owned directly or indirectly by the Company.
(e) Other. For purposes of this Agreement, references to Kelly's
service as a director shall include his service on a committee of the board of
directors and shall also include his service in any capacity which imposes
duties on or involves services by him with respect to an employee benefit plan,
its participants or beneficiaries; and Kelly shall be deemed to have acted in
the Company's best interests if he acted in a manner he reasonably believed to
be in the interest of the participants or beneficiaries of an employee benefit
plan.
2. Third Party Actions.
(a) If an Indemnitee was or is a party or is threatened to be made a
party to any proceeding (other than an action by or in the right of the
Company) by reason of the fact that Kelly is or was a director or officer of
the Company or a Subsidiary, or by reason of anything done or not done by him
while serving in any such capacity, the Company shall indemnify the Indemnitee
against any and all expenses and liabilities of any type whatsoever (including,
but not limited to, judgements, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) actually and reasonably incurred by such Indemnitee
in connection with the investigation, defense, settlement or appeal of such
proceeding unless Kelly engaged in material, willful misconduct of a culpable
nature in the performance of his duties to the Company and could not reasonably
have believed such misconduct to have been not opposed to the Company's best
interests.
(b) Direct and Derivative Actions. If an Indemnitee was or is a party
or is threatened to be made a party to any proceeding by or in the right of the
Company to procure a judgment in its favor by reason of the fact that Kelly is
or was a director or officer of the Company or a Subsidiary, or by reason of
anything done or not done by him while serving in any such capacity, the
Company shall indemnify the Indemnitee against any judgements and amounts paid
in settlement of any such proceeding and all expenses actually and reasonably
incurred by such Indemnitee in connection with the investigation, defense,
settlement, or appeal of such proceeding
- 2 -
<PAGE> 3
unless Kelly engaged in material, willful misconduct of a culpable nature in
the performance of his duties to the Company and could not reasonably have
believed such misconduct to have been not opposed to the Company's best
interests; provided that the Company shall not be required to indemnify any
Indemnitee against an accounting under Section 16(b) of the Securities Exchange
Act of 1934 of profits made from the purchase or sale by the Indemnitee of
securities.
(c) No Presumption. The termination of any proceeding by judgement,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Kelly was guilty of
the misconduct referred to in Sections 2(a) and 2(b).
(d) Other Involvement in Proceedings. If an Indemnitee is involved in
a proceeding (including involvement as a witness) other than as a party or as a
person who is threatened to be made a party, by reason of the fact that Kelly
is or was an officer or director of the Company or a Subsidiary, or by reason
of anything done or not done by him while serving in any such capacity, the
Company shall indemnify the Indemnitee against any and all expenses and
liabilities actually and reasonably incurred by such Indemnitee in connection
with such proceeding.
3. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Agreement or otherwise to indemnification by the Company for
some or a portion of any expenses or liabilities of any type whatsoever
(including, but not limited to, judgements, fines, ERISA excise taxes or
penalties, and amounts paid in settlement) incurred by such Indemnitee in the
investigation, defense or appeal of a proceeding but not entitled, however, to
indemnification for all of the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for such total amount except as to the
portion thereof to which the Indemnitee is not entitled.
4. Mandatory Advancement of Expenses. The Company shall advance all
expenses incurred by an Indemnitee in connection with the investigation,
defense, settlement or appeal of any proceeding to which the Indemnitee is a
party or is threatened to be made a party or with
- 3 -
<PAGE> 4
respect to which the Indemnitee is otherwise involved (including involvement as
a witness) by reason of the fact that Kelly is or was a director or officer of
the Company or a Subsidiary. Kelly hereby undertakes, and each other Indemnitee
shall undertake, to repay such amounts advanced only if, and to the extent
that, it shall ultimately be determined that Kelly or such other Indemnitee is
not entitled to be indemnified by the Company as authorized hereby. The
advances to be made hereunder shall be paid by the Company to Kelly or the
other Indemnitee within twenty (20) days following delivery of a written
request therefor to the Company.
5. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by an Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof; provided that the Indemnitee's
failure to so promptly notify the Company shall not relieve the Company of its
obligations (whether hereunder or otherwise) to indemnify the Indemnitee.
(b) If, at the time of the receipt of a notice of the commencement of a
proceeding pursuant to Section 5(a) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(c) If the Company shall be obligated to pay the expenses of any
proceeding against the Indemnitee, the Company may, if it so desires, ask to be
allowed to assume the defense of such proceeding, with counsel approved by the
Indemnitee and paid for by the Company. While the granting or refusal of such
request shall be within the Indemnitee's discretion, the Indemnitee shall not
arbitrarily or capriciously refuse.
- 4 -
<PAGE> 5
(d) Liberal Construction. This Agreement shall be liberally
construed in favor of indemnification, reimbursement and advancement of
expenses, and there shall be a rebuttable presumption that an Indemnitee is
entitled to the same and the Company shall bear the burden of asserting, and of
proving by a preponderance of the evidence, that the Indemnitee is not so
entitled.
(e) Suit by Indemnitee. If a claim for indemnification is not paid in
full by the Company within twenty (20) days after a written demand therefore
has been received by the Company, the Indemnitee making the same may at any
time thereafter bring suit against the Company to recover the unpaid amount of
such claim. Neither of the following shall be a defense to any suit by an
Indemnitee or be entitled to any weight at all:
(i) The failure of the Company (or of its board of directors or a
committee thereof, independent legal counsel, or the shareholders) to
have made a determination that indemnification, reimbursement or
advancement of expenses is proper;
(ii) An actual determination by the Company (or by its board of
directors or a committee thereof, independent legal counsel, or the
shareholders) that an Indemnitee is not entitled to indemnification,
reimbursement or advancement of expenses.
6. Limitation of Actions and Release of Claims. No proceeding shall be
brought and no cause of action shall be asserted by or on behalf of the Company
or any Subsidiary against an Indemnitee after the expiration of one (1) year
from the act or omission of the Indemnitee upon which such proceeding is based;
however, in a case where the Indemnitee fraudulently conceals the facts
underlying such cause of action, no proceeding shall be brought and no cause of
action shall be asserted after the expiration of one (1) year from the earlier
of (a) the date the Company or Subsidiary discovers such facts, or (b) the date
the Company or Subsidiary could have discovered such facts by the exercise of
reasonable diligence. Any claim or cause of action of the Company or any
Subsidiary, including claims predicated upon the negligent act or omission of
the Indemnitee, shall be extinguished and deemed released unless asserted by
filing
- 5 -
<PAGE> 6
of a legal action within such period. This Section 6 shall not apply to any
cause of action which has accrued on the date hereof and of which the Company
has no actual knowledge apart from the Indemnitee's knowledge.
7. Non-exclusivity. The provisions for indemnification and advancement
of expense set forth in this Agreement are not exclusive of, and shall be in
addition to, any other rights which an Indemnitee may have under any provision
of law, the Company's Articles of Incorporation or Bylaws, the vote of the
Company's shareholders or disinterested directors, other agreements, or
otherwise.
8. Interpretation of Agreement. This Agreement is to be interpreted
and enforced so as to provide indemnification to an Indemnitee to the fullest
extent now or hereafter permitted by law. An Indemnitee's rights hereunder
shall apply to claims made against such Indemnitee arising out of acts or
omissions which occurred prior to the date hereof as well as those which occur
after the date hereof.
9. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, (a) the validity, legality and enforceability of the remaining
provisions of the Agreement (including without limitation, all portions of any
sections of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (b) to
the fullest extent possible, the provisions of this Agreement, (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable and to give effect to Section 7 hereof.
10. Modification. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the party against
which the same is sought to be enforced.
- 6 -
<PAGE> 7
11. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (a) on
the date of delivery if delivered by hand, or (b) on the third business day
after being deposited in the United States registered or express mail, postage
prepaid. Addresses for notice to either party are as shown on the signature
page of this Agreement, or as subsequently modified by written notice. Each
party agrees to receipt of any notice received promptly upon request.
12. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Michigan, as applied to
contracts between Michigan residents entered into and to be performed entirely
within Michigan.
13. Consent to Jurisdiction. The Company and each Indemnitee hereby
irrevocably consent to the jurisdiction of the courts of the State of Michigan
and the Company irrevocably consents to the jurisdiction of any court,
wheresoever located, in which an Indemnitee brings any action or proceeding
which arises out of or relates to this Agreement. The Company agrees not to
initiate any such action or proceeding in any state other than Michigan.
The parties hereto have entered into this Indemnity Agreement effective
as of the date and year first above written.
DURAKON INDUSTRIES, INC.
By: _________________________________________
William Webster
Its: Chairman of the Board of Directors
2101 N. Lapeer Road
Lapeer, MI 48446
_____________________________________________
James P. Kelly
Address: 6218 Golfside Court
Grand Blanc, Michigan 48439
- 7 -
<PAGE> 1
EXHIBIT 10.33
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT, dated as of this 18th day of July, 1995, is
made by and between DURAKON INDUSTRIES, INC., a Michigan corporation (the
"Company"), and David S. Aronow ("Aronow"), for himself and the other
Indemnitees hereafter referred to.
In consideration of the consent of Aronow to serve as a member of the
board of directors of the Company, and to induce him so to serve, and in
further consideration of the sum of $10.00 paid to the Company, the receipt of
which is acknowledged by it, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) Indemnitee. For purposes of this Agreement, "Indemnitee" means
and includes (i) Aronow, his spouse, heirs, estate, executors, administrators
and personal representatives, and (ii) any other entity owned or controlled by
the aforementioned person or for which the aforementioned person is an advisor
or consultant.
(b) Expenses. For purposes of this Agreement, "Expense" includes all
direct and indirect costs of any type or nature whatsoever (including, without
limitation, all attorneys' fees and related disbursements, other out-of-pocket
costs and reasonable compensation for time spent by the Indemnitee for which he
or it is not otherwise compensated by the Company or any third party) actually
and reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a proceeding or establishing or enforcing a
right to the indemnification under this Agreement, the Business Corporation Act
of Michigan or otherwise; provided, however, that expenses shall not include
any judgements, fines, ERISA excise taxes or penalties or amounts paid in
settlement of a proceeding.
(c) Proceeding. For the purposes of this Agreement, "Proceeding"
means any threatened, pending, or completed action, suit or other proceeding,
formal or informal; whether civil, criminal, administrative, investigation or
of any other type whatsoever.
<PAGE> 2
(d) Subsidiary. For purposes of this Agreement, "Subsidiary" means
any corporation of which at least fifty (50%) percent of the outstanding voting
securities is owned directly or indirectly by the Company.
(e) Other. For purposes of this Agreement, references to Aronow's
service as a director shall include his service on a committee of the board of
directors and shall also include his service in any capacity which imposes
duties on or involves services by him with respect to an employee benefit plan,
its participants or beneficiaries; and Aronow shall be deemed to have acted in
the Company's best interests if he acted in a manner he reasonably believed to
be in the interest of the participants or beneficiaries of an employee benefit
plan.
2. Third Party Actions.
(a) If an Indemnitee was or is a party or is threatened to be made a
party to any proceeding (other than an action by or in the right of the
Company) by reason of the fact that Aronow is or was a director or officer of
the Company or a Subsidiary, or by reason of anything done or not done by him
while serving in any such capacity, the Company shall indemnify the Indemnitee
against any and all expenses and liabilities of any type whatsoever (including,
but not limited to, judgements, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) actually and reasonably incurred by such Indemnitee
in connection with the investigation, defense, settlement or appeal of such
proceeding unless Aronow engaged in material, willful misconduct of a culpable
nature in the performance of his duties to the Company and could not reasonably
have believed such misconduct to have been not opposed to the Company's best
interests.
(b) Direct and Derivative Actions. If an Indemnitee was or is a
party or is threatened to be made a party to any proceeding by or in the right
of the Company to procure a judgment in its favor by reason of the fact that
Aronow is or was a director or officer of the Company or a Subsidiary, or by
reason of anything done or not done by him while serving in any such capacity,
the Company shall indemnify the Indemnitee against any judgements and amounts
paid in settlement of any such proceeding and all expenses actually and
reasonably incurred by such Indemnitee in connection with the investigation,
defense, settlement, or appeal of such proceeding
2
<PAGE> 3
unless Aronow engaged in material, willful misconduct of a culpable nature in
the performance of his duties to the Company and could not reasonably have
believed such misconduct to have been not opposed to the Company's best
interests; provided that the Company shall not be required to indemnify any
Indemnitee against an accounting under Section 16(b) of the Securities Exchange
Act of 1934 of profits made from the purchase or sale by the Indemnitee of
securities.
(c) No Presumption. The termination of any proceeding by judgement,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Aronow was guilty
of the misconduct referred to in Sections 2(a) and 2(b).
(d) Other Involvement in Proceedings. If an Indemnitee is involved in
a proceeding (including involvement as a witness) other than as a party or as a
person who is threatened to be made a party, by reason of the fact that Aronow
is or was an officer or director of the Company or a Subsidiary, or by reason
of anything done or not done by him while serving in any such capacity, the
Company shall indemnify the Indemnitee against any and all expenses and
liabilities actually and reasonably incurred by such Indemnitee in connection
with such proceeding.
3. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Agreement or otherwise to indemnification by the Company for
some or a portion of any expenses or liabilities of any type whatsoever
(including, but not limited to, judgements, fines, ERISA excise taxes or
penalties, and amounts paid in settlement) incurred by such Indemnitee in the
investigation, defense or appeal of a proceeding but not entitled, however, to
indemnification for all of the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for such total amount except as to the
portion thereof to which the Indemnitee is not entitled.
4. Mandatory Advancement of Expenses. The Company shall advance all
expenses incurred by an Indemnitee in connection with the investigation,
defense, settlement or appeal of any proceeding to which the Indemnitee is a
party or is threatened to be made a party or with
3
<PAGE> 4
respect to which the Indemnitee is otherwise involved (including involvement as
a witness) by reason of the fact that Aronow is or was a director or officer of
the Company or a Subsidiary. Aronow hereby undertakes, and each other
Indemnitee shall undertake, to repay such amounts advanced only if, and to the
extent that, it shall ultimately be determined that Aronow or such other
Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. The advances to be made hereunder shall be paid by the Company to
Aronow or the other Indemnitee within twenty (20) days following delivery of a
written request therefor to the Company.
5. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by an Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof; provided that the Indemnitee's
failure to so promptly notify the Company shall not relieve the Company of its
obligations (whether hereunder or otherwise) to indemnify the Indemnitee.
(b) If, at the time of the receipt of a notice of the commencement of
a proceeding pursuant to Section 5(a) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(c) If the Company shall be obligated to pay the expenses of any
proceeding against the Indemnitee, the Company may, if it so desires, ask to be
allowed to assume the defense of such proceeding, with counsel approved by the
Indemnitee and paid for by the Company. While the granting or refusal of such
request shall be within the Indemnitee's discretion, the Indemnitee shall not
arbitrarily or capriciously refuse.
4
<PAGE> 5
(d) Liberal Construction. This Agreement shall be liberally
construed in favor of indemnification, reimbursement and advancement of
expenses, and there shall be a rebuttable presumption that an Indemnitee is
entitled to the same and the Company shall bear the burden of asserting, and of
proving by a preponderance of the evidence, that the Indemnitee is not so
entitled.
(e) Suit by Indemnitee. If a claim for indemnification is not paid in
full by the Company within twenty (20) days after a written demand therefore
has been received by the Company, the Indemnitee making the same may at any
time thereafter bring suit against the Company to recover the unpaid amount of
such claim. Neither of the following shall be a defense to any suit by an
Indemnitee or be entitled to any weight at all:
(i) The failure of the Company (or of its board of directors or a
committee thereof, independent legal counsel, or the shareholders) to
have made a determination that indemnification, reimbursement or
advancement of expenses is proper;
(ii) An actual determination by the Company (or by its board of
directors or a committee thereof, independent legal counsel, or the
shareholders) that an Indemnitee is not entitled to indemnification,
reimbursement or advancement of expenses.
6. Limitation of Actions and Release of Claims. No proceeding shall
be brought and no cause of action shall be asserted by or on behalf of the
Company or any Subsidiary against an Indemnitee after the expiration of one (1)
year from the act or omission of the Indemnitee upon which such proceeding is
based; however, in a case where the Indemnitee fraudulently conceals the facts
underlying such cause of action, no proceeding shall be brought and no cause of
action shall be asserted after the expiration of one (1) year from the earlier
of (a) the date the Company or Subsidiary discovers such facts, or (b) the date
the Company or Subsidiary could have discovered such facts by the exercise of
reasonable diligence. Any claim or cause of action of the Company or any
Subsidiary, including claims predicated upon the negligent act or omission of
the Indemnitee, shall be extinguished and deemed released unless asserted by
filing
5
<PAGE> 6
of a legal action within such period. This Section 6 shall not apply to any
cause of action which has accrued on the date hereof and of which the Company
has no actual knowledge apart from the Indemnitee's knowledge.
7. Non-exclusivity. The provisions for indemnification and
advancement of expense set forth in this Agreement are not exclusive of, and
shall be in addition to, any other rights which an Indemnitee may have under
any provision of law, the Company's Articles of Incorporation or Bylaws, the
vote of the Company's shareholders or disinterested directors, other
agreements, or otherwise.
8. Interpretation of Agreement. This Agreement is to be interpreted
and enforced so as to provide indemnification to an Indemnitee to the fullest
extent now or hereafter permitted by law. An Indemnitee's rights hereunder
shall apply to claims made against such Indemnitee arising out of acts or
omissions which occurred prior to the date hereof as well as those which occur
after the date hereof.
9. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, (a) the validity, legality and enforceability of the remaining
provisions of the Agreement (including without limitation, all portions of any
sections of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, and (b) to
the fullest extent possible, the provisions of this Agreement, (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable and to give effect to Section 7 hereof.
10. Modification. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the party against
which the same is sought to be enforced.
6
<PAGE> 7
11. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (a) on
the date of delivery if delivered by hand, or (b) on the third business day
after being deposited in the United States registered or express mail, postage
prepaid. Addresses for notice to either party are as shown on the signature
page of this Agreement, or as subsequently modified by written notice. Each
party agrees to receipt of any notice received promptly upon request.
12. Governing Law. This Agreement shall be governed exclusively by
and construed according to the laws of the State of Michigan, as applied to
contracts between Michigan residents entered into and to be performed entirely
within Michigan.
13. Consent to Jurisdiction. The Company and each Indemnitee hereby
irrevocably consent to the jurisdiction of the courts of the State of Michigan
and the Company irrevocably consents to the jurisdiction of any court,
wheresoever located, in which an Indemnitee brings any action or proceeding
which arises out of or relates to this Agreement. The Company agrees not to
initiate any such action or proceeding in any state other than Michigan.
The parties hereto have entered into this Indemnity Agreement effective
as of the date and year first above written.
DURAKON INDUSTRIES, INC.
By: ________________________________________
James P. Kelly
Its: President
2101 N. Lapeer Road
Lapeer, MI 48446
____________________________________________
David S. Aronow
Address: 1891 Trombly
Detroit, Michigan 48211
7
<PAGE> 1
EXHIBIT 11
DURAKON INDUSTRIES, INC.
CALCULATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per
share amounts)
YEAR ENDED DECEMBER 31,
------------------------
1995 1994
------- -------
<S> <C> <C>
Net earnings available to common stockholders $2,299 $12,101
======= =======
PRIMARY
Average number of shares oustanding 6,687 6,500
Add: Dilutive effect of stock options based
upon treasury stock method -- 154
------- -------
Total 6,687 6,654
======= =======
Per share amount $0.34 $1.82
======= =======
FULLY DILUTED
Average number of shares outstanding 6,687 6,500
Add: Dilutive effect of stock options based
upon treasury stock method -- 154
------- -------
Total 6,687 6,654
======= =======
Per share amount $0.34 $1.82
======= =======
</TABLE>
<PAGE> 1
SUBSIDIARIES OF DURAKON INDUSTRIES, INC.
EXHIBIT 22
NAME JURISDICTION
- ------------------- --------------
Jerr-Dan Corporation Pennsylvania
Durakon FSC, Inc. U.S. Virgin Islands
Durakon Mexicana, S.A. de C.V. Mexico
Benton Plastics, Inc. Tennessee
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Durakon Industries, Inc. on Form S-8 (File No. 33-50146), of our report dated
February 23, 1996, on our audits of the consolidated financial statements and
financial statement schedule of Durakon Industries, Inc. as of December 31,
1995 and 1994, and for the years ended December 31, 1995, 1994, and 1993 which
report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND, L.L.P.
Detroit, Michigan
March 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 12,757
<SECURITIES> 0
<RECEIVABLES> 18,108
<ALLOWANCES> 640
<INVENTORY> 12,140
<CURRENT-ASSETS> 46,032
<PP&E> 39,019
<DEPRECIATION> 20,673
<TOTAL-ASSETS> 78,869
<CURRENT-LIABILITIES> 20,336
<BONDS> 1,977
0
0
<COMMON> 21,506
<OTHER-SE> 35,050
<TOTAL-LIABILITY-AND-EQUITY> 78,869
<SALES> 172,051
<TOTAL-REVENUES> 172,051
<CGS> 135,692
<TOTAL-COSTS> 163,980
<OTHER-EXPENSES> 411
<LOSS-PROVISION> 106
<INTEREST-EXPENSE> 417
<INCOME-PRETAX> 5,045
<INCOME-TAX> 2,746
<INCOME-CONTINUING> 2,299
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,299
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
