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
Commission File Number 0-6611
SIMPSON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1225111
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47603 Halyard Drive, Plymouth, Michigan 48170
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (313) 207-6200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ 1.00 par value
(Title of Class)
Common Stock Purchase Rights
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
annual, quarterly and other reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the
registrant has been required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the registrant's voting stock held
by non-affiliates of the registrant as of February 21, 1996,
computed by reference to the last sale price for such stock on
that date as reported on the NASDAQ National Market System, was
$163,049,969.
At February 21, 1996, there were outstanding 18,010,694 shares
of the registrant's common stock, $1.00 par value each.
Portions of the Proxy Statement for 1996 Annual Meeting of
Shareholders have been incorporated by reference in this Annual
Report on Form 10-K (Part III).
PART I
Item 1. BUSINESS
Introduction
Simpson Industries, Inc. (the "Company") was organized under
Michigan law in 1945. The Company's executive offices are
located in Plymouth, Michigan, and the eleven plants at which
its manufacturing operations are conducted are located in
Michigan, Ohio, Indiana, North Carolina, Ontario (Canada) and
Federal District of Mexico (Mexico). Reference in this report
to the Company includes Simpson Industries, Inc., its
predecessors, divisions and subsidiaries, unless otherwise
indicated by the context.
Principal Products and Markets
The Company manufactures vibration control and other products
for automobile, light-truck and diesel engines, air conditioning
compressor components, wheel-end and suspension components and
assemblies, and transmission and driveline components which are
machined from castings and forgings. These products are
produced principally for original equipment manufacturers of
automobiles, light trucks, diesel engines and heavy duty
equipment in North America.
The Company's operations are organized into two management
groups --- Automotive Group and Heavy Duty Group. The Company
maintains product design and process development staffs which
work with customers' engineers, principally in the design,
testing and development of new products, as well as in the
on-going refinement of existing products. The Company also
conducts its own research and development activities which are
separate from the product development activities conducted in
cooperation with its customers. The Company expended $2,309,000
in 1995, $2,033,000 in 1994 and $1,575,000 in 1993 for its
research and development.
Competition in the sale of all of the Company's products is
primarily based on engineering, product design, process
capability, quality, cost, delivery and responsiveness. The
Company believes that its performance record in these respects
places it in a strong competitive position. The Company
believes that, in the manufacture of its products, it competes
with numerous supplier companies, some of which are larger and
have greater financial resources than the Company. In addition,
many of the Company's larger customers are capable of performing
their own machining work.
The Company's customers to which sales exceeded 10% of total net
sales include General Motors Corporation, Ford Motor Company,
Chrysler Corporation and Consolidated Diesel Company (and its
parent companies Cummins Engine Co., Inc. and Case Corporation).
Substantially all of the Company's sales are based on
competitive proposals on requests from customers. Sales of all
products to General Motors Corporation, Ford Motor Company,
Chrysler Corporation and Consolidated Diesel Company (and its
parent companies Cummins Engine Co., Inc. and Case Corporation)
during the years ended December 31, 1995, 1994 and 1993
accounted for 74.3%, 80.1%, and 83.9%, respectively, of the
Company's total sales during those periods. In recent years,
sales to other significant customers, in particular Caterpillar
Incorporated, Mitsubishi Motors Corporation and other Japanese
manufacturers, have grown in importance as the Company has
broadened its customer base and more narrowly focused its
product direction. However, the loss of all or a substantial
portion of sales to major customers could have a detrimental
effect on the Company's business. The Company believes that
such a loss is unlikely because the Company's products, which
generally have a life of five to ten years, require a
substantial initial investment in engineering, equipment and
tooling. Moreover, sales to automotive customers consist of a
large number of different products as well as different types of
the same products, which are sold to separate divisions and
operating groups within each customer's organization. These
customer operating units generally act independently when making
their purchasing decisions.
Because the Company principally ships to its customers'
scheduled needs, information concerning its backlog is not
meaningful to an understanding of its business. Purchase orders
for machined products that do not necessarily represent firm
contracts are generally received from larger customers.
Customers issue short-term releases against the purchase orders
from time to time during the year and these releases are firm
orders that typically remain open for acceptance by the Company
for a period of 30 days or less.
The basic raw materials for the Company's products include
aluminum and ferrous castings, steel forgings, steel bar stock
and rubber, all of which are available from a large number of
sources. The Company has been purchasing such materials from
several sources.
The Company holds various patents and, from time to time, in the
ordinary course of its business, files patent applications.
However, the Company does not consider any individual patent or
patent application to be material to the operation of its
business.
The Company's operations, in common with those of manufacturers
generally, are subject to numerous federal, state and local laws
and regulations pertaining to the discharge of materials into
the environment or otherwise relating to the protection of the
environment. Compliance with such laws and regulations has not
had and is not anticipated to have a material effect on the
capital expenditures, earnings or competitive position of the
Company.
At December 31, 1995, the Company employed 2,050 people on an
active basis.
Since most of the Company's machined products are for engines,
transmissions and drive trains, they are generally not affected
by style changes and their production and delivery continue at a
relatively uniform rate. However, the Company's operations are
affected by the cyclical nature of the United States automobile,
light-truck and heavy-duty vehicle markets.
The Company's operations are conducted within one business
segment and sales attributable to customers outside the United
States from U.S. operations were $48,700,000 in 1995,
$41,900,000 in 1994 and $15,900,000 in 1993.
Item 2. PROPERTIES
The following table sets forth the location and approximate size
of the Company's facilities. Principally, owned properties are
facilities involved in the manufacture of the Company's products
and are owned by the Company and its subsidiaries free of
encumbrances. All of these properties, as well as the related
machinery and equipment, are considered to be well-maintained,
suitable and adequate for their intended purpose.
PROPERTIES IN ACTIVE USE
Approximate Approximate
Location Land Area Floor Space
Gladwin, Michigan............ 5.0 Acres 71,000 Square Feet
Jackson, Michigan............ 11.0 93,000
Litchfield, Michigan......... 22.8 230,000
Plymouth, Michigan........... 5.5 68,000
Middleville, Michigan........ 3.5 72,000
Fremont, Indiana............. 13.7 99,000
Bluffton, Indiana............ 12.5 119,000
Edon, Ohio................... 15.2 134,000
Troy, Ohio................... 12.2 93,000
Greenville, North Carolina... 12.6 90,000
Thamesville, Ontario......... 6.0 59,000
Iztapalapa, Mexico........... 2.8 86,000
TOTAL IN ACTIVE USE........... 122.8 1,214,000
Item 3. LEGAL PROCEEDINGS
No material legal proceeding is pending to which the Company or
any of its subsidiaries is a party, or of which any of their
property is subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted by the Company to a vote of security
holders through the solicitation of proxies or otherwise, during
the fourth quarter of 1995.
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
STOCK PRICE AND DIVIDEND INFORMATION
The Company's common stock is traded in the over-the-counter
market as a National Market Issue under the symbol SMPS. Stock
prices are quoted in the automated quotation system operated by
the National Association of Securities Dealers (NASDAQ). The
quarterly range of bid prices per share, as reported by NASDAQ,
and the dividends paid thereon during the years ended December
31, 1995 and 1994 are shown in the accompanying table. Such
prices may represent interdealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
At December 31, 1995 there were 3,351 shareholders of record of
the Company's common stock.
Bid Price Per Share Dividend
Quarter Ended High Low Paid Per
Share
March 31, 1994 15 21/32 12 21/32 $.09
June 30, 1994 14 21/32 12 .09
September 30, 1994 13 1/2 10 .10
December 31, 1994 13 3/8 7 7/8 .10
March 31, 1995 10 1/8 9 .10
June 30, 1995 11 1/4 9 3/8 .10
September 30, 1995 12 1/8 8 5/8 .10
December 31, 1995 9 7/8 8 .10
Item 6. Selected Financial Data
Five Year Summary
(Dollar amounts in millions, except per share and per employee)
1995 1994 1993 1992 1991
Operating Data
Net sales $395.1 $356.6 $262.5 $222.8 $191.9
Cost of products sold 354.4 319.6 234.2 197.3 175.2
Gross profit 40.7 37.0 28.3 25.5 16.7
as a % of sales 10.3 10.4 10.8 11.5 8.7
Operating earnings 28.8 26.8 19.4 16.7 9.2
as a % of sales 7.3 7.5 7.4 7.5 4.8
Net earnings 15.3 14.4 6.4* 8.0 4.5
as a % of sales 3.9 4.0 2.5 3.6 2.4
Net earnings per share 0.85 0.80 0.36 0.47 0.31
Dividend per share 0.40 0.38 0.37 0.37 0.37
Weighted average shares
(millions) 18.0 18.0 17.9 16.9 14.7
At Year End
Current assets $82.0 $70.5 $70.9 $76.9 $51.3
Working capital 40.3 31.7 34.5 49.7 30.4
Total assets 232.5 207.0 186.8 170.0 138.1
Long-term debt 62.3 50.4 39.0 37.0 38.5
Shareholders' equity 105.1 98.0 91.5 91.8 64.1
Book value per share 5.84 5.47 5.12 5.16 4.39
% Debt/equity 59 51 43 40 60
% Debt/total capital 38 35 31 30 38
Additional Statistics
New program launches 10 23 20 N/A N/A
Sales per share $21.91 $19.81 $14.64 $13.16 $13.08
Depreciation 18.9 16.3 14.2 13.4 12.4
Capital investment 31.5 38.2 37.5 22.4 15.8
% return on average equity 15.1 15.2 7.0 10.2 7.0
Sales per employee 186,706 182,240 163,034 148,451 134,633
Operating earnings per
employee 13,594 13,704 12,041 11,147 6,488
Number of employees, year end 2,050 2,135 1,768 1,507 1,471
Stock Activity
Price Range 8 - 7 7/8 - 10 1/2 - 8 - 4 19/32 -
12 1/8 15 21/32 14 21/32 13 5/32 9 5/32
Price at year end 9 9 1/4 14 3/32 10 13/32 8 21/32
* - Includes $3-million net charge for accounting changes.
N/A - Not available.
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operation
1995 Compared to 1994
In 1995 net sales reached a record level at $395,069,000,
reflecting an 11% increase over 1994/s $356,643,000. This
increase was primarily driven by 10 new program launches in 1995
and the full year effect of the 23 new product programs launched
in 1994 generating significant new volume. Base volumes on
previously existing programs, while remaining fairly strong,
declined in the latter part of the year. North American
production of automobiles and light trucks decreased 2% from the
prior year, while production levels increased for medium and
heavy-duty diesel engines for vehicles and non-vehicular use.
Management expects sales for 1996 to be comparable to 1995 as
light vehicle and heavy-duty truck markets continue to
experience some softness.
Operating earnings increased 7% from $26,818,000 to $28,764,000
for 1995. The operating margin, at 7.3% decreased slightly
from 7.5% in 1994, due principally to a shift in product mix in
late 1994 and margin pressure caused by higher fixed costs and
relatively flat volume in the second half of the year.
Offsetting factors include lower new program launch costs than
in 1994 and productivity gains on more mature production lines.
Investment and other income was $1,147,000 in 1995, up $530,000
from 1994, due to higher average invested balances. Interest
expense increased $1,170,000 from 1994 as a result of additional
long-term borrowing issued early in the year.
Income tax expense for 1995 represents an effective rate of
37.3% compared to 37.8% for 1994, which is lower due to lower
foreign taxes.
1994 Compared to 1993
Net sales for 1994, at $356,643,000 were 36% above the
$262,485,000 level of 1993. The major reason for the sales
increase from 1993 to 1994 was the volume on several significant
new product programs in addition to an 8% increase in North
American auto and light truck production and heavy-duty diesel
engine production increases.
Operating earnings, as a percentage of sales, were 7.5% and 7.4%
for 1994 and 1993, respectively. This margin improved slightly
yet was reduced by start-up expenses incurred in connection with
the launch of 23 new major programs. Additionally, material
costs increased as a percentage of sales due to a shift to
higher-material-content components along with increases in
aluminum costs, not yet recoverable from customers. Offsetting
some of these effects were the impact of higher volume on base
business and productivity gains on existing production lines,
coupled with control of administrative and selling expenses.
Investment and other income was $617,000 in 1994, up from
$232,000 from 1993. Interest expense increased $1,014,000 from
1993 as a result of increased long-term debt in 1994.
The effective rate for income tax expense was 37.8% for 1994
compared to 42.1% for 1993. The 1993 expense of $6,850,000
included $1,300,000 of deferred tax on the expected repatriation
of current and prior earnings of a Canadian subsidiary, a
$200,000 charge for the adjustment of deferred tax balances to
the new higher federal tax rate, and the mitigating impact of
tax-exempt investment earnings.
In the first quarter of 1993, the Company adopted new accounting
pronouncements related to retiree medical benefits and income
taxes. The net impact of the cumulative effects of the two
changes was to reduce net income by $3,000,000.
Liquidity and Capital Resources
Net cash generated from operations was $35,781,000 in 1995
compared to $20,778,000 in 1994 and $17,042,000 in 1993. The
cash flows were primarily provided from earnings and
depreciation expense reduced by working capital needed to
support the significant growth in 1994 and 1993.
During 1995, $31,510,000 was invested in capital equipment and
plant expansions compared to $38,239,000 in 1994. The
investment was lower in 1995 due to the completion in 1994 of
expansions at the Fremont, Indiana, and Troy, Ohio plants, as
well as investments made in 1994 in support of a greater number
of major new programs for 1995 and 1996. Capital expenditures
for 1996 are expected to approximate $25,000,000 and will
principally support the completion of the Technology Center in
Plymouth, Michigan, new business, and infrastructure
enhancements around the organization.
During 1995, the Company entered into bank term loan agreements
for $20,000,000 and $4,050,000. The $20,000,000 debt agreement
carries an interest rate of 8.45% and is payable over a 10-year
period. The $4,050,000 debt agreement carries an interest rate
of 8.82% and is payable over 8 years. During 1995 the Company
repaid a $10,000,000 bank term loan and additional cash was used
to prepay $750,000 of higher-cost debt in addition to the
$1,500,000 scheduled repayment. During 1994, the Company drew
down the remaining $15,000,000 under a $20,000,000 unsecured
loan agreement, originated in 1993, at an interest rate of 6.75%
and payable over 15 years. Prepayments of $1,500,000 of higher
cost debt were also made in 1994 and 1993.
The Company has paid uninterrupted cash dividends each year
since becoming publicly-owned in 1972. Dividends paid in 1995
were $7,192,000 compared to $6,930,000 in 1994 and $6,665,000 in
1993, reflecting the increased dividend rate in mid-1994. The
per share dividend rate for years 1995, 1994 and 1993 was $.40
per share, $.38 per share and $.37 per share, respectively.
The Company maintains a revolving credit facility and other
short-term borrowing arrangements which total $24,623,000 of
which $3,022,000 was committed as letters of credit at December
31,1995. The Company had no short-term borrowings at December
31, 1995 or December 31, 1994.
The Company's long-term debt (excluding current installments)
was $62,270,000 at December 31, 1995 compared to $50,375,000 at
December 31, 1994. Interest rates on the long-term debt range
from 6.75% to 9.98%. The Company is subject to restrictions on
additional borrowing and maintenance of minimum net worth and
working capital requirements.
The Company believes that existing cash balances, cash from
operations, and borrowings available under its revolving credit
facility and other short-term arrangements will be sufficient to
meet its anticipated cash needs for the foreseeable future.
Impact of Inflation
The Company does not expect that it will be significantly
affected by inflation in 1996.
Impact of FASB Statements
The Company has not yet adopted Statement of Financial
Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
or Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation," which become
effective in 1996. Neither statement is expected to have a
material effect upon future financial statements.
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year Ended December 31
1995 1994 1993
Net sales $395,069 $356,643 $262,485
Costs and expenses:
Cost of products sold 354,436 319,557 234,191
Administrative and selling 11,869 10,268 8,908
366,305 329,825 243,099
Operating Earnings 28,764 26,818 19,386
Investment and other income, net 1,147 617 232
Interest expense (5,514) (4,344) (3,330)
Earnings Before Income Taxes
and Cumulative Effect of
Accounting Changes 24,397 23,091 16,288
Income taxes 9,095 8,722 6,850
Earnings Before Cumulative
Effect of
Accounting Changes 15,302 14,369 9,438
Cumulative effect of
accounting changes:
Retiree medical benefits,
net of income tax benefit --- --- (4,300)
Income taxes --- --- 1,300
Net Earnings $ 15,302 $ 14,369 $ 6,438
Net earnings per share
before cumulative
effect of accounting changes $.85 $.80 $.53
Cumulative effect of
accounting changes:
Retiree medical benefits,
net of income tax benefit --- --- (.24)
Income taxes --- --- .07
Net Earnings Per Share $.85 $.80 $.36
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<S> <C> <C> <C>
Year Ended December 31
1995 1994 1993
OPERATING ACTIVITIES
Net earnings $15,302 $14,369 $ 6,438
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Cumulative effect of
accounting changes, net --- --- 3,000
Depreciation 18,921 16,330 14,215
Provision for deferred
income taxes 1,234 (874) 1,017
Amortization of restricted stock 330 272 256
(Gain) loss on disposition of assets (113) (41) 435
Changes in operating assets and
liabilities:
Accounts receivable 985 (14,660) (10,568)
Inventories (1,660) (2,797) (4,240)
Other assets (4,052) 5,443 (4,207)
Accounts payable and
accrued expenses 4,834 2,736 10,696
Cash Provided By
Operating Activities 35,781 20,778 17,042
INVESTING ACTIVITIES
Sale of marketable securities 2,491 83 30,323
Capital expenditures (31,510) (38,239) (37,515)
Proceeds from disposal of property
and equipment 1,069 478 321
Cash Used In
Investing Activities (27,950) (37,678) (6,871)
FINANCING ACTIVITIES
Cash dividends paid (7,192) (6,930) (6,665)
Principal repayments of
long-term debt (12,250) (3,000) (3,000)
Proceeds from long-term borrowings 24,050 15,000 5,000
Cash provided by stock
transactions, net 42 78 294
Cash Provided By (Used In)
Financing Activities 4,650 5,148 (4,371)
Effect of foreign currency
exchange rate changes (1,312) (1,420) (446)
Increase (Decrease) In Cash
and Cash Equivalents 11,169 (13,172) 5,354
Cash and cash equivalents at beginning
of year 2,321 15,493 10,139
Cash And Cash Equivalents At End
of Year $13,490 $ 2,321 $15,493
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31
1995 1994
ASSETS
Current Assets
Cash and cash equivalents $ 13,490 $ 2,321
Marketable securities --- 2,491
Accounts receivable 47,218 48,203
Inventories 12,881 11,221
Customer tooling in process 1,334 1,057
Prepaid expenses and other current assets 7,068 5,245
Total Current Assets 81,991 70,538
Property, Plant and Equipment, at cost
Land 3,146 1,667
Buildings and improvements 45,777 35,078
Machinery and equipment 205,651 192,135
254,574 228,880
Less accumulated depreciation 107,908 93,847
Net Property, Plant and Equipment 146,666 135,033
Other Assets 3,854 1,413
$232,511 $206,984
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installments of long-term debt $ 2,030 $ 2,125
Accounts payable 21,353 20,679
Compensation and amounts withheld 9,876 8,980
Taxes, other than income taxes 2,942 2,492
Other accrued expenses 5,532 4,611
Total Current Liabilities 41,733 38,887
Long-Term Debt, excluding current
installments 62,270 50,375
Accrued Retirement Benefits 12,439 10,414
Deferred Income Taxes 10,992 9,269
Shareholders' Equity
Common stock, par value $1 per share:
Authorized - 35,000,000 shares
Outstanding - 17,981,485 shares
(1994 - 17,928,914 shares) 17,981 17,929
Additional paid-in capital 23,646 23,201
Retained earnings 68,896 60,786
Unamortized value of restricted stock (1,815) (1,690)
Cumulative foreign currency translation
adjustments (3,499) (2,187)
Excess pension cost (132) ---
Total Shareholders' Equity 105,077 98,039
$232,511 $206,984
See accompanying notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative
Unamortized Foreign
Additional Value Of Currency Excess
Common Paid-In Retained Restricted Translation Pension
Stock Capital Earnings Stock Adjustments Cost Total
Balance at January 1, 1993 $11,863 $27,988 $53,574 $(1,311) $ (321) $91,793
Net earnings for 1993 6,438 6,438
Cash dividends - $.37 per share (6,665) (6,665)
Exercise of stock options, net 35 259 294
Restricted stock awards, net 16 339 (355) ---
Amortization of restricted stock 256 256
Translation adjustment for the year (446) (446)
Excess pension cost adjustment $(123) (123)
Balance at December 31, 1993 11,914 28,586 53,347 (1,410) (767) (123) 91,547
Net earnings for 1994 14,369 14,369
Cash dividends - $.38 per share (6,930) (6,930)
3-for-2 stock distribution 5,975 (5,977) (2)
Exercise of stock options, net 14 66 80
Restricted stock awards, net 26 526 (552) ---
Amortization of restricted stock 272 272
Translation adjustment for the year (1,420) (1,420)
Excess pension cost adjustment 123 123
Balance at December 31, 1994 17,929 23,201 60,786 (1,690) (2,187) --- 98,039
Net earnings for 1995 15,302 15,302
Cash dividends - $.40 per share (7,192) (7,192)
Exercise of stock options, net 7 35 42
Restricted stock awards, net 45 410 (455) ---
Amortization of restricted stock 330 330
Translation adjustment for the year (1,312) (1,312)
Excess pension cost adjustment (132) (132)
Balance at December 31, 1995 17,981 23,646 68,896 (1,815) (3,499) (132) 105,077
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Significant Accounting Policies
Description of the Business: The Company is a supplier of
precision-machined powertrain and chassis products to the global
automotive and heavy duty diesel engine markets, supplying in
excess of 700 different components and assemblies to original
equipment manufacturers located principally in North America.
Principles of Consolidation: The consolidated financial
statements include the accounts of the Company and all
subsidiaries after elimination of intercompany accounts and
transactions.
Foreign Currency Translation: Translation adjustments from
foreign subsidiaries are reflected in the financial statements
as a separate component of shareholders' equity. Foreign
currency gains and losses resulting from transactions are
included in determining net earnings.
Cash Equivalents: Cash equivalents include all liquid
investments purchased with a maturity of three months or less.
Financial Instruments: Financial instruments consist primarily
of cash and cash equivalents, marketable securities, accounts
receivable, accounts payable and long-term debt. At December
31, 1995, the fair value of these financial instruments
approximates the carrying amount with the exception of long-term
debt as discussed in Note C.
Inventories: Inventories are stated at the lower of cost or
market. Costs are determined by the last-in, first-out (LIFO)
method for domestic inventories and by the first-in, first-out
(FIFO) method for foreign inventories.
Depreciation: Depreciation is computed using the straight-line
method at annual rates which are sufficient to amortize the cost
over the estimated useful lives.
Customer Tooling: Costs incurred for customer-owned tooling in
excess of amounts billed to date are recorded as customer
tooling in process. Costs for customer-owned tooling which will
be recovered as parts are shipped are included with other
assets.
Retiree Medical Benefits: Effective January 1, 1993, the Company
adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions," which established a new accounting principle for the
cost of retiree medical benefits. Prior to 1993, the Company
recognized those benefits on the pay-as-you-go method. The
cumulative effect of the change in accounting for retiree
medical benefits was included in determining net earnings in
1993.
Income Taxes: Effective January 1, 1993, the Company has
determined income tax expense and deferred tax balances in
accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," and has included the
cumulative effect of that change in accounting in determining
net earnings for 1993. Income taxes for years prior to 1993
were determined in accordance with APB Opinion No. 11. No
deferred income taxes have been provided for the income tax
liability of approximately $350,000 which would be incurred on
repatriation of the permanently reinvested portion of unremitted
earnings of the foreign subsidiaries.
Net Earnings Per Share: Net earnings per share are computed
based upon the weighted average shares of common stock and
common stock equivalents (stock options) outstanding during the
year as adjusted for a 3-for-2 stock distribution in 1994. The
average common and common equivalent shares used in the
computation of earnings per share was 18,035,060 in 1995;
18,000,795 in 1994; and 17,935,467 in 1993.
Use of estimates: The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make reasonable estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported net earnings for
the period. Ultimate resolution of uncertainties could cause
actual results to differ from these estimates.
Note B - Inventories
The components of inventories are summarized as follows:
(In thousands)
1995 1994
Finished and in-process products $ 7,971 $ 7,930
Raw materials 4,910 3,291
$12,881 $11,221
The LIFO inventories comprise approximately 96% of total
inventories at December 31, 1995 and 1994.
The replacement cost of inventories exceeded the balance sheet
carrying amounts by approximately $5,500,000 and $5,100,000 at
December 31, 1995 and 1994, respectively.
Note C - Debt
Long-term debt at December 31 consisted of the following
obligations:
(In thousands)
1995 1994
Note payable to insurance company at 8.8% $ 5,250 $ 7,500
Note payable to insurance company at 9.98% 15,000 15,000
Bank term note at 9.25% --- 10,000
Bank term note at 6.75% 20,000 20,000
Bank term note at 8.45% 20,000 ---
Bank term note at 8.82% 4,050 ---
64,300 52,500
Less current installments 2,030 2,125
Long-term debt, excluding current
installments $62,270 $50,375
The $5,250,000 note requires semi-annual interest payments and
repayment of principal in four annual installments ending June
15, 1999.
The $15,000,000 note requires semi-annual interest payments and
repayment of principal in ten equal annual installments
commencing in August 1997 and matures August 15, 2006.
The $20,000,000 bank term note at 6.75% requires quarterly
interest payments and repayment of principal in ten equal annual
installments commencing in December 1999 and matures December
31, 2008.
The $20,000,000 bank term note at 8.45% requires quarterly
interest payments and repayment of principal in twenty equal
quarterly installments commencing in July 2000 with the final
installment due February 7, 2005.
The $4,050,000 bank term note at 8.82% requires monthly interest
payments and repayment of principal in eighty-four equal monthly
installments commencing in February 1996 with the final
installment due January 2003.
As of December 31, 1995 the estimated fair value of long-term
debt, discounted at current interest rates, was $71,300,000.
Under the terms of its loan agreements, the Company is subject
to restrictions concerning additional borrowings and maintenance
of minimum net worth and working capital. At December 31, 1995,
retained earnings of approximately $18,346,000 were
unrestricted.
The Company has a revolving bank loan agreement under which it
may borrow up to $12,000,000 through April 1, 2001 with interest
at the lower of the bank's prime interest rate or a Eurodollar
rate. Commitment fees are paid on the available credit.
The Company also has short-term credit lines with banks under
which it may borrow up to $12,623,000, of which $3,022,000 was
committed as letters of credit at December 31,1995. The
contract amount of the letters of credit approximate their fair
value. The lines do not have termination dates, but are reviewed
periodically.
No compensating balances are required by any of the loan
agreements.
Principal maturities of long-term debt during the four years
following 1996 are as follows: 1997 - $3,579,000; 1998 -
$3,579,000; 1999 - $4,829,000; and 2000 - $6,079,000.
Interest paid approximates interest expense for each year.
Note D - Income Taxes
As of January 1, 1993, the Company adopted Statement No. 109,
which requires an asset and liability approach to determining
deferred tax assets and liabilities based on differences between
financial reporting and tax bases of assets and liabilities.
Deferred taxes are measured using the enacted laws and tax rates
that are expected to be in effect when the differences are
anticipated to reverse.
The components of earnings before income taxes were as follows:
(In thousands)
1995 1994 1993
Domestic $21,772 $19,849 $13,635
Foreign 2,625 3,242 2,653
$24,397 $23,091 $16,288
The provisions for income tax expense were as follows:
(In thousands) 1995 1994 1993
Current:
Federal $6,439 $7,430 $4,552
Foreign 1,109 1,584 961
State 313 582 320
7,861 9,596 5,833
Deferred:
Federal 1,078 (684) 644
Foreign 73 (44) 70
State 83 (146) 103
Change in tax rate --- --- 200
1,234 (874) 1,017
$9,095 $8,722 $6,850
Income taxes paid $7,650 $9,434 $6,045
A reconciliation of income tax expense to the amount computed by
applying the statutory federal income tax rate to earnings
before income taxes follows:
(In thousands) 1995 1994 1993
Income taxes at federal
statutory rate $8,539 $7,982 $5,600
Provision for repatriation of
foreign earnings --- --- 1,300
State income tax, net of
federal benefit 257 285 277
Change in tax rate --- --- 200
Foreign operating loss 196 435 ---
Other, net 103 20 (527)
$9,095 $8,722 $6,850
The tax effects of temporary differences that give rise to significant deferred
tax assets and liabilities at December 31 are as follows:
1995 1994
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
(In thousands) Assets Liabilities Assets Liabilities
Plant and equipment $ --- $14,458 $ --- $12,250
Accrued pension benefits 946 --- 691 ---
Accrued retiree medical
benefits 3,436 --- 3,106 ---
Other accrued expenses 2,725 --- 2,103 ---
Foreign net operating loss
carryforward 696 --- 506 ---
Other items 372 990 431 816
8,175 15,448 6,837 13,066
Valuation allowance (696) --- (506) ---
$7,479 $15,448 $6,331 $13,066
As of December 31,1995,the Company has unrecognized foreign net operating loss
carryforwards of approximately $2,000,000 that begin expiring in 2003.
Deferred income tax assets of $3,023,000 and $2,534,000 are included in other
current assets at December 31, 1995 and 1994, respectively.
<PAGE>
Note E - Pension Plans
The Company has non-contributory defined benefit pension plans
covering substantially all employees, subject to eligibility
requirements. Benefits are based upon a percentage of
compensation or monthly rates times years of service. Plan
assets are held by a trustee and invested in marketable debt and
equity securities and short-term investments. Benefits for
certain employees are provided through multi-employer defined
benefit plans. The Company also has an unfunded supplemental
executive retirement plan for senior management with benefits
based on compensation and years of service. Contributions to
pension plans are sufficient to provide for both current service
costs and amortization of past service costs over a reasonable
period.
Net pension expense for 1995, 1994 and 1993 included the
following components:
1995 1994 1993
Assumptions used were:
Discount rate 8.5% 7.5% 8.5%
Rate of increase in
compensation levels 5% 5% 5%
Expected annual long-term
rate of return on assets 9% 9% 9%
(In thousands)
Benefits earned during the year $1,548 $1,656 $1,343
Interest cost on projected
benefit obligation 2,142 1,982 1,827
Actual return on assets (2,591) (316) (3,020)
Net amortization and deferral 804 (1,313) 1,210
Multi-employer plans 574 506 430
$2,477 $2,515 $1,790
The following table sets forth the plan's funded status at
September 30:
1995 1994
Assumptions used were the
same as above, except:
Discount rate 7.75% 8.5%
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Plans in Which Plans in Which
Assets Accum. Assets Accum.
Exceed Benefits Exceed Benefits
(In thousands) Accum. Exceed Accum. Exceed
Benefits Assets Benefits Assets
Actuarial present value of:
Vested benefit obligation $6,712 $13,911 $5,004 $11,956
Accumulated benefit obligation $7,125 $14,318 $5,299 $12,183
Projected benefit obligation $10,270 $19,512 $7,589 $16,106
Plan assets at fair value 8,148 11,912 7,442 11,645
Deficiency of assets under projected
benefit obligation (2,122) (7,600) (147) (4,461)
Unrecognized net loss 1,760 3,550 507 1,448
Unrecognized net asset (407) (97) (508) (150)
Unrecognized prior service cost 581 432 168 480
Additional minimum liability --- (569) --- (327)
(Accrued) prepaid pension liability
included in the balance sheets $ (188) $(4,284) $ 20 $(3,010)
</TABLE>
The Company has recorded an additional minimum liability at
December 31, 1995 and 1994, representing the excess of the
unfunded accumulated benefit obligations over the fair value of
plan assets and accrued pension liabilities. The additional
liability has been offset by intangible assets to the extent of
previously unrecognized prior service cost, with the excess of
$132,000 (net of tax) charged directly to shareholders' equity
in 1995.
Certain employees participate in Company-sponsored 401(k)
savings plans. Under the plans, the Company contributes a
defined amount to individual employee accounts based on the
respective employee's contribution. Contributions approximated
$1,340,000; $1,050,000 and $900,000 in 1995, 1994 and 1993,
respectively.
Note F - Retiree Medical Benefits
The Company provides medical benefits to certain retired
employees, their covered dependents, and beneficiaries.
Generally, employees who have attained age 55 and who have
rendered 10 years of service are eligible for these benefits.
Certain medical plans are contributory and other medical plans
are noncontributory.
The retiree medical benefit cost for 1995, 1994 and 1993
consisted of the following:
1995 1994 1993
Assumed discount rate 8.5% 7.5% 8.5%
(In thousands)
Benefits earned during the year $ 464 $ 547 $335
Interest cost on accumulated
retiree medical benefits 770 739 572
Net amortization 12 88 ---
$1,246 $1,374 $907
The Company's retiree medical benefits are not funded. The
following table presents the actuarial present value of the
obligation at September 30 reconciled with amounts recognized in
the balance sheet:
1995 1994
Assumed discount rate 7.75% 8.5%
(In thousands)
Accumulated retiree medical
benefits obligation:
Retirees $ 3,002 $2,910
Fully eligible, active
plan participants 1,212 863
Other active employees 6,302 5,446
10,516 9,219
Unrecognized net loss (1,068) (666)
Unamortized prior service cost (74) (79)
$ 9,374 $8,474
Other actuarial assumptions used for the Company's retiree
health care plans include:
(Dollars in thousands) 1995 1994 1993
Medical cost trend rate (a) 11% 12% 13%
Effect of a 1% point increase in
the medical cost trend rate on
the accumulated retiree medical
benefit obligation $1,761 $1,517 $1,353
Effect of a 1% point increase
in the medical cost trend rate
on the aggregate of the service
and interest cost $245 $193 $135
(a) The medical cost trend rate is assumed to decrease 1% per
year, to 6% for 2000 and remaining at that level thereafter.
The unrecognized net loss is amortized over the average
remaining service period of 15 years of active plan
participants.
Note G - Long-Term Incentive Plans
The Company has long-term incentive plans under which employees
or directors may be granted stock options or other long-term
incentives. The 1984 Plan, which allowed for options to be
granted for up to 1,687,500 common shares, was terminated in
1993. Options and restricted shares previously granted under
the 1984 Plan remain outstanding for up to 10 years. Stock
appreciation rights (SARs), which provide that optionees may
receive cash in lieu of shares, were also granted in conjunction
with stock option grants.
In 1993, the Company adopted the 1993 Executive Long-Term
Incentive Plan for employees. The 1993 Plan permits the grant
of stock options, restricted stock, stock appreciation rights,
performance shares and performance units. The authorized share
pool for making grants under the 1993 Plan is 1,350,000 common
shares. Also in 1993, the Company adopted the 1993 Non-Employee
Director Stock Option Plan. Under this plan, nonqualified stock
options may be granted to non-employee directors for up to
150,000 common shares.
Options granted have varying exercise dates within five years
after grant date and generally expire after ten years. At
December 31, 1995 there were 1,539,475 of common stock reserved
for issuance under the plans of which 1,146,830 are available
for future grants.
<PAGE>
Incentive plan activity is summarized as follows:
<TABLE>
<S> <C> <C> <C>
Option Restricted
Shares Price Range Shares
1994:
Outstanding January 1, 1994 312,413 $ 4.45-12.33 164,904
Granted/awarded 63,600 12.50-14.67 37,800
Exercised (53,513) 4.45- 8.42 ---
Restrictions lapsed --- --- (32,535)
Canceled/forfeited (600) 6.67-12.25 (3,069)
Outstanding 321,900 4.45-14.67 167,100
Exercisable 188,850 4.45-11.00 ---
1995:
Granted/awarded 101,360 9.50-10.94 66,560
Exercised (22,365) 6.67-14.67 ---
Restrictions lapsed --- --- (29,597)
Canceled/forfeited (8,250) 6.67-14.67 (18,472)
Outstanding 392,645 4.45-14.67 185,591
Exercisable 222,825 4.45-14.67 ---
</TABLE>
<PAGE>
Note H - Shareholder Rights Plan
In 1987 the Company adopted a Shareholder Rights Plan designed
to discourage partial or two-tier tender offers which could
result in unequal treatment of shareholders. Under the Plan,
the right to purchase one share of common stock was distributed
for each outstanding share of the Company's common stock. This
plan was amended in 1989 to provide that the Rights become
exercisable if a person or group acquires, in a transaction not
approved by the Board of Directors, 20% or more of the Company's
common stock. In addition, the amendment permits the Board of
Directors to declare a person or group owning 10% or more of the
Company's common stock an "Adverse Person," under certain
circumstances which also cause the Rights to become exercisable.
When exercisable, each Right entitles shareholders to purchase
one share of the Company's common stock at a specified exercise
price. The Company will be entitled to redeem the Rights at
$.05 per Right up to, and including, the tenth business day
after the announcement that a 20% position has been acquired.
If the Company is acquired or certain other transactions occur
after the Rights become exercisable, each Right will entitle its
holder to purchase, for the exercise price, a number of the
acquiring or surviving Company's common shares having a market
value of twice the exercise price. Rights were issued in 1987 to
shareholders and attached to each share issued thereafter until
the earlier of the dates the Rights become exercisable, expire
or are redeemed. Rights expire May 11, 1997, unless extended by
the Board of Directors.
Note I - Commitments and Contingencies
The Company has been identified as a potentially responsible
party under federal environmental regulations to share in the
cost of cleanups at five waste disposal sites along with many
other companies. While management believes the Company's
responsibility in these matters is minimal, it has established
reserves which it believes are adequate to cover potential
liabilities.
Note J - Major Customers
The Company's operations are conducted within one business
segment. Export sales to customers from the United States were
$48,700,000.
Net sales to major customers were:
(In thousands) 1995 1994 1993
General Motors Corporation $109,200 $109,800 $100,600
Ford Motor Company 92,900 89,300 50,600
Chrysler Corporation 55,000 54,400 40,000
Consolidated Diesel Company
and its parent companies,
Cummins Engine Company, Inc.
and Case Corporation 36,500 32,300 29,000
Aggregate receivables for these customers at December 31, 1995
and 1994 approximate the same percent of total receivables as
aggregate sales to these customers bear to total sales.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Simpson Industries, Inc.
We have audited the accompanying consolidated balance sheets of
Simpson Industries, Inc. and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Simpson Industries, Inc. and subsidiaries at
December 31, 1995 and 1994, and the results of their operation
and their cash flows for each of the years in the three-year
period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in notes A and D to the Consolidated Financial
Statements, the Company changed its method of accounting for
income taxes in 1993 to adopt the provisions of the Financial
Accounting Standard Board's Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." As discussed
in notes A and F to the Consolidated Financial Statements, the
Company also adopted the provisions of the Financial Accounting
Standard Board's Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" in 1993.
KPMG Peat Marwick LLP
Detroit, Michigan
January 26, 1996
SUMMARY OF QUARTERLY RESULTS OF OPERATION
(In thousands, except per share amounts)
Quarter Ended
Mar.31 Jun.30 Sep.30 Dec.31
1995
Net sales $107,237 $103,600 $86,338 $97,894
Gross profit 12,381 11,912 6,625 9,715
Net earnings 5,562 4,911 1,435 3,394
Net earnings per share .31 .27 .08 .19
1994
Net sales $82,701 $91,315 $85,877 $96,750
Gross profit 9,546 10,680 7,428 9,432
Net earnings 4,084 4,478 2,465 3,342
Net earnings per share .23 .25 .14 .18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
NONE
PART III
The information called for by the items within this part is
included in the Company's 1996 Proxy Statement, and is
incorporated herein by reference, as follows:
Pages in
1996 Proxy
Statement
Item 10. Directors and Executive Officers
of the Registrant 1-3, 12
Item 11. Executive Compensation 4-10
Item 12. Security Ownership of Certain
Beneficial Owners and Management 11
Item 13. Certain Relationships and Related
Transactions N/A
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) (2) All 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.
(3) Exhibits. The following exhibits designated with a "+"
symbol represent the Company's management contracts or
compensatory plans or arrangements for executive
officers:
3.1 Restated Articles of Incorporation, as amended
(previously filed as Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1988 and incorporated herein by
reference)
3.2 Bylaws, as amended (previously filed as Exhibit
3.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994 and
incorporated herein by reference)
4.1 Rights Agreement between Simpson Industries, Inc.
and NBD Bank, N.A., as Rights Agent, dated as of
December 18, 1989 (previously filed as Exhibit
4(a) to the Company's Current Report on Form 8-K
dated January 12, 1990 and incorporated herein by
reference)
Letter from Simpson Industries, Inc. to State
Street Bank and Trust, N.A., dated July 8, 1994,
appointing the latter as successor Rights Agent;
and letter from State Street Bank and Trust, N.A.,
to Simpson Industries, Inc., dated July 10, 1994,
accepting such appointment (previously filed as
Exhibit 4.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994,
and incorporated herein by reference)
10.1 Term Loan Agreement with Manufacturers National
Bank of Detroit, dated as of June 5, 1990, as
amended (previously filed as Exhibit 10. 1 to the
Company's Quarterly Reports on Form 10-Q for the
quarters ended June 30, 1990 and September 30,
1991, and incorporated herein by reference)
Amendment No. 3 to Term Loan Agreement with
Comerica Bank (successor in interest by reason of
merger to Manufacturers Bank, N.A., formerly known
as Manufacturers National Bank of Detroit), dated
as of December 17, 1993 (previously filed as
Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1993 and incorporated herein by reference)
Amendment No. 4 to Term Loan Agreement with
Comerica Bank (successor in interest by reason of
merger to Manufacturers Bank, N.A., formerly known
as Manufacturers National Bank of Detroit), dated
as of November 1, 1994 (previously filed as
Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994, and incorporated herein by reference)
10.2 Revolving Credit and Term Loan Agreement with
Manufacturers National Bank of Detroit and
Continental Bank, N.A., dated as of October 5,
1989, as amended (previously filed as Exhibits
10.11, 10.2 and 10.2, respectively, to the
Company's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1989, September 30,
1991 and September 30, 1992, and incorporated
herein by reference)
Amendment No. 1 to Amended and Restated Revolving
Credit Agreement with Comerica Bank (successor in
interest by reason of merger to Manufacturers Bank
N.A., formerly known as Manufacturers National
Bank of Detroit) and Bank of America Illinois
(formerly known as Continental Bank, N.A.), dated
as of December 17, 1993 (previously filed as
Exhibit 10.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1993 and incorporated herein by reference)
Amendment No. 2 to Amended and Restated Revolving
Credit Agreement with Comerica Bank (successor in
interest by reason of merger to Manufacturers Bank
N.A., formerly known as Manufacturers National
Bank of Detroit) and Bank of America Illinois
(formerly known as Continental Bank, N.A.), dated
as of November 1, 1994 (previously filed as
Exhibit 10.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994, and incorporated herein by reference)
10.3 Note Agreement with Aetna Life Insurance Company,
dated June 12, 1986 (previously filed as Exhibit
10.3 to the Company's Current Report on Form 8-K,
dated June 12, 1986 and incorporated herein by
reference)
Amendment to Note Agreement with Aetna Life
Insurance Company, dated November 17, 1994
(previously filed as Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, and incorporated herein
by reference)
10.4+ 1984 Stock Option Plan, as amended (previously
filed as Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1988 and incorporated herein by
reference)
10.8+ Supplemental Executive Retirement Plan (previously
filed as Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1988, and incorporated herein by
reference)
10.10+ Letter Agreement, dated September 12, 1989, with
Roy E. Parrott (previously filed as Exhibit 10.10
to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1989 and
incorporated herein by reference)
+ Amendment to Letter Agreement with Roy E. Parrott,
dated March 15, 1994 (previously filed as Exhibit
10.10 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, and
incorporated herein by reference)
10.11 Note Agreement with Massachusetts Mutual Life
Insurance Company, dated August 15, 1991
(previously filed as Exhibit 10.11 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991 and incorporated
herein by reference)
10.13+ Simpson Industries, Inc. 1993 Executive Long-Term
Incentive Plan (previously filed as Exhibit 10. 13
to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, and
incorporated herein by reference)
10.14+ Simpson Industries, Inc. 1993 Non-Employee
Director Stock Option Plan (previously filed as
Exhibit 10. 14 to the Company's Annual report on
Form 10-K for the fiscal year ended December 31,
1992, and incorporated herein by reference)
10.15 Term Loan Agreement with Comerica Bank, dated as
of December 17, 1993 (previously filed as Exhibit
10. 15 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 and
incorporated herein by reference)
Amendment to Term Loan Agreement with Comerica
Bank, dated as of November 1, 1994 (previously
filed as Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1994, and incorporated herein by
reference)
10.16+ Letter Agreement, dated October 25, 1994, with
Robert W. Navarre (previously filed as Exhibit 10.
16 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994 and
incorporated herein by reference)
10.17+ Letter Agreement, dated December 16, 1994, with
Kathryn L. Williams (previously filed as Exhibit
10.17 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, and
incorporated herein by reference)
10.19+ Letter Agreement, dated December 16, 1994, with
James A. Hug (previously filed as Exhibit 10.19 to
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, and
incorporated herein by reference)
10.20 Term Note Agreement with Comerica Bank, dated as
of January 25, 1995 (previously filed as Exhibit
10.20 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, and
incorporated herein by reference)
10.21 Term Note Agreement with Comerica Bank, dated as
of February 7, 1995 (previously filed as Exhibit
10.21 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, and
incorporated herein by reference)
10.22* Terms of Employment, dated February 21, 1995, with
James B. Painter
11* Statement regarding Computation of per share
earnings
21* Subsidiaries of registrant
23* Consent of independent public accountants
27.1* Financial Data Schedule
*Filed with this report
(b) No reports on Form 8-K were filed during the last quarter of
the Company's fiscal year ended December 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIMPSON INDUSTRIES, INC.
By: /s/ Roy E. Parrott
Roy E. Parrott,
President and Chief Executive
Officer
Date: February 22, 1996
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 indicated on February 22, 1996.
Signature Title
/s/ Roy E. Parrott President and Chief Executive Officer
Roy E. Parrott and Director
(principal executive officer)
/s/ Kathryn L. Williams Vice President and Chief Financial
Kathryn L. Williams Officer
(principal financial officer)
/s/ James E. Garpow Treasurer and Assistant Secretary
James E. Garpow (principal accounting officer)
/s/ Robert W. Navarre Chairman of the Board and Director
Robert W. Navarre
/s/ Michael E. Batten Director
Michael E. Batten
/s/ Susan F. Haka Director
Susan F. Haka
/s/ George R. Kempton Director
George R. Kempton
/s/ Walter J. Kirchberger Director
Walter J. Kirchberger
/s/ Ronald L. Roudebush Director
Ronald L. Roudebush
/s/ F. Lee Weaver Director
F. Lee Weaver
/s/ Frank K. Zinn Director and Secretary
Frank K. Zinn
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibits
10.22 Terms of Employment, dated February 21, 1995, with James B.
Painter
11 Statement regarding computation of per share earnings
21 Subsidiaries of registrant
23 Consent of independent public accountants
27.1 Financial Data Schedule
February 21, 1995
Mr. James B. Painter
2923 Homewood Drive
Troy, Michigan 48098-1785
Dear Jim:
Our discussions with you over the past several weeks have left all of
us with a very positive impression of your experience base,
knowledge, personal qualities and sense of commitment. Accordingly,
I am delighted to extend to you an offer of employment as Vice
President of both the Heavy Duty Products Group and the Materials
Management function. This assignment will make you a Corporate
Officer of Simpson Industries, Inc. In this position you will be
reporting directly to me as President and CEO. The terms and
conditions of the offer are as follows:
Salary: $150,000 Annually
Bonus Guarantee:
Within the first thirty days of employment with Simpson Industries,
you will receive a lump sum payment of $36,200. This is in lieu of
the bonus payment and savings plan match you forfeit by your mid-year
departure from your current employer. This amount is subject to all
applicable federal and state taxes.
Relocation Assistance:
Assistance is available to you to cover the cost of fulfilling your
lease requirements on your apartment in Newark, Ohio. This
assistance includes breaking your existing lease and the loss of a
security deposit. The Company will also pay for the transfer of your
furnishings in this apartment back to your home in Troy, Michigan.
Vacation:
Officers are entitled to four weeks of vacation per year.
COBRA
Simpson will reimburse the COBRA expenses you incur prior to becoming
eligible for the Simpson Health Care Plan.
Short-Term Incentive Plan:
Upon your first day of employment, you will participate (subject to
the approval of the Board of Directors) in the Company's Short-Term
Incentive Plan. Participation will be in the top tier of the plan
(Tier I), which has a target annual bonus of 50% and a maximum annual
bonus of 75%.
Long-Term Incentive Plan:
You will qualify for participation in the Company's Long-Term
Incentive Plan. Effective with the Board of Directors approval, 4,000
shares of Restricted Stock will be granted to you, subject to the
terms and conditions of the Simpson Industries 1993 Long-Term
Incentive Plan.
Under this plan you will be eligible for annual stock option grants
and awards of "restricted stock." Subject to Board approval, future
awards will be granted in the first quarter of 1996.
Executive Lease Car Program:
You will be eligible for one vehicle under the terms and conditions
of the Executive Lease Car Program.
Comprehensive Health Plan:
You will be eligible to participate in the Simpson Industries
Medical/Dental plan, including a company funded flexible spending
account. Eligibility for this plan commences after three months of
employment. After completing three months of employment you will be
eligible to receive a prorated flexible spending account benefit (the
annual benefit is $600/family). After 1995 the flexible spending
account benefit will be discontinued.
Short-Term Disability:
Employees with less than two years of service are eligible for three
months of salary continuation. Employees with two or more years of
service receive a full year of benefits, which are reduced each
ninety days to a benefit of 70% in the last quarter of the year.
The period between three months of salary continuation under the
Short Term Disability Plan and the onset of Long-Term Disability
benefits will be covered at 90% of base pay subject to all applicable
federal and state taxes.
Long-Term Disability:
If you are totally and permanently disabled after a year of
short-term benefits, long-term disability benefits begin for
employees with two or more years of service. For employees with less
than two years of service, long term disability benefits begin after
six months of total disability. The plan will and any social
security and Workers' Compensation benefits when added together
provide 60% of base salary up to a maximum monthly benefit income of
$8,000.
Life Insurance:
The Company will contribute an annual premium amount to provide you
with life insurance equal to two times your base salary as of
September 30th of each year. You select the amount of coverage
desired (subject to simplified issue for amounts over $150,000) and
determine whether or not to supplement the premium amount to provide
additional annuity buildup. Eligibility for this benefit commences
on the first day of the month following one month of employment.
The policy is owned by the employee and goes with them when leaving
the Company.
Travel Accident Policy:
This policy also commences on the first day of the month following
one month of employment and provides up to $200,000 if the employee
is killed or permanently injured within one year from the date of an
accident during business travel.
Survivor Income Benefits:
The survivor income benefit, or SIB, provides that any employee who
has been at Simpson for one month is covered under the plan. Your
spouse or eligible children will receive monthly benefits equal to
50% of base pay. The Company benefit and any social security
benefits your family might be eligible for when added together make
up the 50% of pay your family receives from this plan. Payments will
continue for ten years or until your spouse reaches age 62, whichever
occurs first.
Pension:
The pension plan is a defined benefit plan and is based on career
average earnings. Benefits are calculated as follows:
1.70% of annual pay to $36,270* (for each year of service)
plus 2.05% of annual pay over $36,270* (for each year of service)
*Will change annually along with changes in the average national
wage.
Normal retirement is at age 65 with 5 years of vested service. This
benefit becomes vested after five years of service.
Supplemental Executive Retirement Plan:
Provides supplemental retirement benefit equal to 4% per year of
officer service (maximum 15 years) times average of highest three of
last five years of service, reduced by: 1) early retirement if under
65; 2) social security benefit; 3) pension benefits from previous
employers; and 4) benefit from Simpson Defined Benefit Plan.
Benefits under this plan become vested after completion of five years
of service.
Savings Plan:
The Company provides a Savings Plan with a 401(k) feature that allows
contributions by the participant of up to 25% of base pay. The first
6% is eligible for a Company match of not less than 25 cents on the
dollar, to a maximum of $1.00, depending on the Company performance.
Eligibility for plan participation commences on the first on the
month following three months of employment.
Change of Control Agreement:
In the event your employment is terminated as a result of a change in
control of the Company, your salary and benefits will be extended for
up to 24 months. This benefit and its terms and conditions are
subject to the discretion of the Board of Directors.
Severance:
In the event your employment is severed within an 18-month period
beginning April 1, 1995, for any reason other than "just cause,"
Simpson Industries, Inc. will provide 12 months of base salary,
benefits and outplacement service. These benefits would be
discontinued if you obtain other employment.
Jim, I and the other members of our management team are looking
forward to your joining Simpson Industries, on or before April 1,
1995. We are confident that you will make a significant contribution
to the Company's success and at the same time have an opportunity for
both personal and professional growth and reward.
If this accurately reflects your understanding of the offer and if
these terms and conditions are agreeable to you, please sign the
original copy of this letter and return it to me.
On behalf of myself and the Board of Directors, Jim, we look forward
to welcoming you to Simpson Industries.
Best Regards,
/s/ ROY E. PARROTT
Roy E. Parrott
/S/ JAMES B. PAINTER 2/22/95
James B. Painter Date
Year Ended December 31
1995 1994 1993
Primary
Average shares outstanding 17,971,416 17,916,388 17,843,837
Net effect of dilutive stock
options based on the treasury
stock method using average stock
price 63,644 84,407 91,630
Average number of common and
common equivalent shares 18,035,060 18,000,795 17,935,467
Net earnings before cumulative
effect of accounting changes
applicable to common stock and
common stock equivalents $15,302,000 $14,369,000 $9,438,000
Cumulative effect of accounting
changes (3,000,000)
Net earnings applicable to common
stock and common stock equivalents $15,302,000 $14,369,000 $6,438,000
Earnings per share before
cumulative effect of accounting
changes $.85 $.80 $.53
Cumulative effect of accounting
changes (.17)
Earnings per share $.85 $.80 $.36
Fully Diluted
Average shares outstanding 17,971,416 17,916,388 17,843,837
Net effect of dilutive stock
options based on the treasury
stock method using the year-end
market price, if higher than the
average market price 66,774 86,921 98,241
Average number of common and
common equivalent shares 18,038,190 18,003,309 17,942,078
Net earnings before cumulative
effect of accounting changes
applicable to common stock and
common stock equivalents $15,302,000 $14,369,000 $9,438,000
Cumulative effect of accounting
changes (3,000,000)
Net Earnings $15,302,000 $14,369,000 $6,438,000
Earnings per share before
cumulative effect of accounting
changes $.85 $.80 $.53
Cumulative effect of accounting
changes (.17)
Earnings per share $.85 $.80 $.36
State of Jurisdiction Percent
Name of Subsidiary Incorporation Ownership
R. J. Simpson Manufacturing
Company (Canada) Ltd. Ontario 100%
Simpson Industries, S.A. de C.V. Federal District of Mexico 99%
The Board of Directors and Shareholders
Simpson Industries, Inc.:
We consent to incorporation by reference in the registration (No.
33-39679) on Form S-8 pertaining to the Simpson Industries, Inc.
Savings Plan, in the registration statement (No. 33-39678) on Form
S-8 pertaining to the Simpson Industries, Inc. - Fremont Operation
Savings Plan, and in the registration statement (No. 2-95425) on
Form S-8 pertaining to the Simpson Industries, Inc. 1984 Stock
Option Plan, of our report dated January 26, 1996, relating to the
consolidated balance sheets of Simpson Industries, Inc., and
subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders/ equity, and
cash flows for each of the years in the three-year period ended
December 31, 1995, which report appears in the December 31, 1995,
annual report on Form 10-K of Simpson Industries, Inc. Our report
refers to the changes in accounting for income taxes and
postretirement benefits other than pensions in 1993.
Detroit, Michigan
March 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS
AS OF AND FOR THE PERIOD ENDING DECEMBER 31, 1995,
AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<PERIOD-START> JAN-01-1995
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 13,490
<SECURITIES> 0
<RECEIVABLES> 47,218
<ALLOWANCES> 0
<INVENTORY> 12,881
<CURRENT-ASSETS> 81,991
<PP&E> 254,574
<DEPRECIATION> 107,908
<TOTAL-ASSETS> 232,511
<CURRENT-LIABILITIES> 41,733
<BONDS> 0
0
0
<COMMON> 17,981
<OTHER-SE> 87,096
<TOTAL-LIABILITY-AND-EQUITY> 232,511
<SALES> 395,069
<TOTAL-REVENUES> 396,216
<CGS> 354,436
<TOTAL-COSTS> 11,869
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,514
<INCOME-PRETAX> 24,397
<INCOME-TAX> 9,095
<INCOME-CONTINUING> 15,302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,302
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
</TABLE>
