=============================================================================
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, 1998 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: (734) 207-6200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class Title of Class
-------------- --------------
Common Stock, $ 1.00 par value Common Stock Purchase Rights
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 March 1, 1999, computed by reference
to the last sale price for such stock on that date as reported on the NASDAQ
National Market System, was $161,791,000.
At March 1, 1999, there were outstanding 18,177,179 shares of the
registrant's common stock, $1.00 par value each.
Portions of the Proxy Statement for the 1999 Annual Meeting of Shareholders
have been incorporated by reference in this Annual Report on Form 10-K
(Part III).
<PAGE>
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 sixteen plants at which its manufacturing operations are conducted are
located in Michigan, Ohio, Indiana, North Carolina, Tennessee, Ontario
(Canada), Federal District of Mexico (Mexico), Halifax (United Kingdom), Lyon
(France), Barcelona (Spain) and Sao Paulo (Brazil). The Company also has
interests in joint ventures in Pune (India) and Seoul (South Korea).
Reference in this report to the Company includes Simpson Industries, Inc.,
and 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, oil pumps, water pumps
and other modular engine assemblies and transmission and driveline components
that 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 and Europe.
The Company's operations are organized into three self-sustaining business
groups --- Noise Vibration and Harshness Products, Wheel-End and Suspension
Products, and Modular Engine Products. 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 $4,313,000 in 1998, $3,668,000 in 1997 and $2,944,000 in
1996 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 whom sales exceeded 10% of total net sales include
General Motors Corporation, Ford Motor Company and DaimlerChrysler
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 and DaimlerChrysler
Corporation during the years ended December 31, 1998, 1997 and 1996 accounted
for 54.3%, 60.1% and 63.5%, respectively, of the Company's total sales during
those periods. In recent years, sales to other significant customers, in
particular Consolidated Diesel Corporation, Caterpillar Incorporated, Cummins
Engine Company Inc., Peugeot and Renault 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 decision.
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.
<PAGE>
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, 1998, the Company employed 2,518 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
and European 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
$ 55,200,000 in 1998, $63,400,000 in 1997 and $57,800,000 in 1996.
Executive Officers
Set forth below is certain information concerning the current executive
officers of the Company, which group includes the Company's principal
officers.
Name and Age Office(s) and Length of Service
------------ -------------------------------
Roy E. Parrott, 58 .................. Director since 1989; Chief Executive
Officer since 1994, Chairman since
1997 and President from 1989 to
1999
George A. Thomas, 49................. President and Chief Operating Officer
since 1999
Vinod M. Khilnani, 46 ............... Vice President and Chief Financial
Officer since 1997; and Treasurer
during 1997
Jeoffery A. Burris, 39 .............. Vice President - N.V.H. Products
since 1998, Engine/Noise, Vibration
and Harshness from 1997 to 1998;
and Vice President - Materials
Management since 1996
George G. Gilbert, 50 ............... Vice President Strategic
Development & Emerging Markets
since 1998; Vice President -
Technology Service since 1995; Vice
President - Transmission & Chassis
Group from 1993 to 1995; and Vice
President - Engine Products Group
from 1990 to 1993
James A. Hug, 52 .................... Vice President - Transmission &
Chassis Products since 1997; Vice
President - Automotive Group from
1995 to 1997; Vice President -
Heavy Duty Products Group from 1992
to 1995; and Vice President - Heavy
Duty Products Group - South from
1990 to 1992
James B. Painter, 49................. Vice President - Engine Products
since 1998; Vice President -
Heavy-Duty Group from 1995 to 1998;
and Vice President - Materials
Management during 1995
<PAGE>
Mr. Thomas was an executive with the automotive supply operations of TRW,
Inc. from 1972 until he joined the Company on March 1, 1999.
Prior to joining the Company in July 1997, Mr. Khilnani served as Vice
President and Chief Financial Officer of Dayton Superior Corporation from
December, 1996; Executive Director - Treasury and Investment Evaluations for
Cummins Engine Company from 1995 to 1996; Vice President - Finance and MIS of
Onan Corporation and Power Generation Group of Cummins Engine from 1993 to
1995 and of Holset Engineering Company (UK) from 1991 to 1993.
Prior to joining the Company in January 1996, Mr. Burris served as Purchasing
Manager of Brake Steering and Suspension at Ford Motor Company since 1994,
and was previously Supervisor of Purchasing Business Process Improvement and
Systems Development at Ford Motor Company since 1991.
Prior to joining the Company in March 1995, Mr. Painter served as General
Manager, Specialty Axle Group, Rockwell Process International Automotive
Operations from 1993 to 1995; President, Rockwell Clutch Company, Inc. from
1991 to 1993.
Executive officers of the Company are appointed annually by the Board of
Directors and serve at the pleasure of the Board.
Item 2. PROPERTIES
The Company's facilities are principally involved in the manufacture of the
Company's products and are owned by the Company and its subsidiaries free of
encumbrances, with the exception of the facilities located in Tennessee and
Brazil, which are leased by the Company. 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. The following table sets
forth the location and approximate size of the Company's facilities.
PROPERTIES IN ACTIVE USE
Approximate Approximate
Location Land Area Floor Space
-------- ----------- -----------
Litchfield, Michigan .......... 22.8 Acres 230,000 Square Feet
Plymouth, Michigan ............ 5.5 68,000
Middleville, Michigan ......... 3.5 95,000
Fremont,Indiana ............... 13.7 105,000
Bluffton, Indiana ............. 12.5 176,000
Edon, Ohio .................... 15.2 134,000
Troy, Ohio .................... 12.2 100,000
Greenville, North Carolina .... 12.6 113,000
Thamesville, Ontario .......... 6.0 62,000
Lyon, France .................. 3.8 83,000
Halifax, England .............. 1.7 54,000
Barcelona, Spain .............. 2.2 55,000
Iztapalapa, Mexico ............ 2.8 86,000
Memphis,Tennessee ............. n/a 28,000
Sao Paulo, Brazil ............. n/a 73,000
----- -----------
TOTAL IN ACTIVE USE ................ 114.5 1,462,000
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.
<PAGE>
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 1998.
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 on the NASDAQ National Market Issue
under the symbol SMPS.
Stock prices are quoted in the automated quotation system operated by the
National Association of Securities Dealers Automated Quotation System. The
quarterly range of bid prices per share, as reported by NASDAQ, and the
dividends paid thereon during the years ended December 31, 1998 and 1997 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, 1998 there were 4,009 individual shareholders of record of
Simpson common stock. Other Simpson common shares outstanding were held in
bank, money management, company and brokerage house "nominee" accounts for an
estimated 5,100 additional shareholders as beneficial owners.
Bid Price per Share Dividend Paid
------------------- -------------
Quarter Ended High Low Per Share
- ------------- ---- --- ---------
March 31, 1997 $11 1/8 $ 9 1/2 $ .10
June 30, 1997 11 1/4 9 1/8 .10
September 30, 1997 12 3/4 10 .10
December 31, 1997 12 1/4 10 7/8 .10
March 31, 1998 14 11 1/2 .10
June 30, 1998 15 3/8 11 7/8 .10
September 30, 1998 13 7/8 9 1/8 .10
December 31, 1998 12 1/8 8 3/4 .10
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Five Year Summary
(Dollar amounts in millions, except per share and per employee)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data
- --------------
Net sales $496.4 $451.5 $408.0 $395.1 $356.6
Cost of products sold 446.9 406.5 365.3 354.4 319.6
Gross profit 49.5 45.0 42.7 40.7 37.0
as a % of sales 10.0% 10.0% 10.5% 10.3% 10.4%
Operating earnings
before provisions for
restructuring and
plant closings $ 34.1 $ 30.9 $ 29.6 $ 28.8 $ 26.8
as a % of sales 6.9% 6.8% 7.3% 7.3% 7.5%
Net earnings $ 14.8(1) $ 10.1(2) $ 17.6(3) $ 15.3 $ 14.4
as a % of sales 3.0% 2.2% 4.3% 3.9% 4.0%
Net earnings per
share (diluted) $ 0.80 $ 0.55 $ 0.97 $ 0.85 $ 0.80
Dividend per share 0.40 0.40 0.40 0.40 0.38
Weighted average
shares (millions) 18.4 18.2 18.1 18.0 18.1
At Year End
- -----------
Working capital $ 32.2 $ 36.4 $ 45.0 $ 40.3 $ 31.7
Total assets 340.6 341.5 249.0 232.5 207.0
Long-term debt 105.5 118.6 58.6 62.3 50.4
Shareholders' equity 124.6 117.9 116.0 105.1 98.0
Book value per share 6.85 6.50 6.42 5.84 5.47
%Debt/equity 89% 104% 54% 61% 54%
%Debt/total capital 47 51 35 38 35
Additional Statistics
- ---------------------
New program launches 15 13 6 10 23
Content per N.A.
light vehicle $ 22 $ 22 $ 22 $ 22 $ 20
EBITDA (4) 60.3(5) 54.3(6) 50.1 47.7 43.1
Depreciation and
amortization expense 26.1 23.4 20.5 18.9 16.3
Capital investment 19.6 29.0 26.3 31.5 38.2
% return on
average equity 12.2% 8.6% 15.9% 15.1% 15.2%
Sales per employee $204,512 $197,687 $190,654 $186,706 $182,240
Operating earnings
per employee 14,067(5) 13,537(6) 13,832 13,594 13,704
Number of employees,
year end 2,518 2,355 2,115 2,050 2,135
Stock Activity
- --------------
Price Range $8 3/4-15 3/8 $9 1/8-12 3/4 $8 3/8-11 1/8 $8-12 1/8 $7 7/8-15 21/32
Price at year end 9 11/16 11 3/4 10 57/64 9 9 1/4
<FN>
Notes:
(1) 1998 includes $1.9 million for net restructuring provision.
(2) 1997 includes $5.7 million for provision for net plant closing costs.
(3) 1996 includes $1.1 million for federal tax credits.
(4) EBITDA includes operating income plus depreciation and amortization.
(5) Before provision for restructuring of $2.5 million.
(6) Before provision for plant closings of $8.8 million.
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
The following table summarizes the Company's results of operations as a
percentage of net sales for the years ending December 31, 1996, 1997, and
1998.
1998 1997 1996
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of products sold 90.0 90.0 89.5
Administrative and selling 2.7 2.9 3.2
Amortization of intangible assets 0.4 0.2 --
Provision for restructuring and plant closings 0.5 1.9 --
----- ----- -----
Operating income 6.4 5.0 7.3
Investment and other income, net -- (0.1) (0.3)
Interest expense 1.9 1.7 1.3
----- ----- -----
Earnings before income taxes 4.5 3.4 6.3
Income taxes 1.5 1.2 2.0
----- ----- -----
Net earnings 3.0% 2.2% 4.3%
1998 Compared to 1997
Net sales in 1998 grew to a record $496,419,000, a 9.9% increase over the
prior year's net sales of $451,518,000. This increase was due to the full
year impact of revenues related to the June 1997 acquisition of the Vibration
Attenuation (VA) Business, as well as significant growth in shipments to the
medium- and heavy-duty truck markets. North American light vehicle production
declined slightly in 1998, due largely to the mid-summer strike at General
Motors.
Cost of products sold as a percent of sales for 1998 was 90%, unchanged from
1997. In 1998, fifteen new programs were launched, up from thirteen new
launches in 1997. Administrative and selling expenses decreased from 2.9% of
sales in 1997 to 2.7% of sales in 1998 due to continued expense control and
leverage from volume increases. Amortization expense doubled as a percent of
sales, from 0.2% in 1997 to 0.4% in 1998, reflecting the mid-year 1997
acquisition of the VA Business.
Plant closing and restructuring costs declined from 1.9% of sales in 1997 to
0.5% of sales in 1998. In 1997, the Company recorded a provision for plant
closing costs of $8,769,000 relating to the consolidation of its Jackson and
Gladwin, Michigan plants with other North American operations. In 1998, the
Company announced a worldwide workforce reduction and recorded a pre-tax
charge of $2,500,000, primarily to cover the expenses of severance-related
payments. The action was initiated to improve the Company's long-term
competitiveness and global cost structure, while maintaining a strong
commitment to its new product development and customer support activities.
Operating earnings increased from 5.0% of sales in 1997 to 6.4% of sales in
1998. Excluding the Plant closing/restructuring charges, operating earnings
increased 10.4%, from $30,919,000 in 1997 to $34,146,000 in 1998.
Investment and other income decreased $228,000 in 1998 from $524,000 in 1997
to $296,000 in 1998, primarily due to lower average invested cash balances
and lower interest rates. Interest expense increased $2,137,000, reflecting
the full year impact of the debt incurred for the VA acquisition. 1998 income
tax expense reflects an effective rate of 34.0%. The effective income tax
rate in 1997 was 33.8%.
1997 Compared to 1996
Net sales in 1997 totaled $451,518,000, an 11% increase over 1996 sales of
$407,999,000. Two-thirds of the sales increase was attributable to the
Company's acquisition of the VA business in June 1997.
<PAGE>
Internal growth accounted for the rest of the growth, which was a result of
stronger North American light trucks and mid-range/heavy duty diesel engine
markets.
1997 cost of products sold as a percent of sales was 90.0%, up slightly from
89.5% in 1996. The increase was largely due to a significant increase in new
program launches, from six in 1996 to thirteen in 1997. In addition, 1997
cost of products sold reflected additional equipment moving and consolidation
expenses associated with the closure of its Jackson, Michigan plant. During
1997, the company recorded a provision for plant closing costs of $8,769,000.
Administrative and selling expenses decreased from 3.2% of sales in 1996 to
2.9% of sales in 1997. First time expenses for amortization of goodwill and
intangibles resulted from the acquisition of the VA Business during the
second half of 1997.
Operating earnings, excluding the provision for plant closings, totaled
$30,919,000 in 1997, a 4.6% increase versus 1996 operating earnings of
$29,573,000.
Investment and other income decreased from $1,425,000 in 1996 to $524,000 in
1997, reflecting lower average invested cash balances. Interest expense
increased $2,097,000, to $7,451,000, due to additional debt incurred to fund
the VA acquisition.
The Company's effective tax rate in 1997 was 33.8%. The Company's effective
tax rate in 1996 was 31.3%. In 1996, the Company used $1,100,000 in federal
tax credits relating to prior years.
Liquidity and Capital Resources
The Company's capital requirements relate primarily to capital expenditures,
debt service and the cost of acquisitions. Historically, the Company's
primary sources of financing have been cash from operations, borrowings under
its revolving line of credit and the issuance of long-term debt and equity.
Net cash generated from operations was $40,901,000 in 1998, versus
$30,115,000 in 1997, and $50,794,000 in 1996. The cash flows were primarily
provided by net earnings and non-cash charges for depreciation and
amortization. Working capital was $32,196,000 as of December 31, 1998, as
compared to $36,366,000 at December 31, 1997, and $45,038,000 on December 31,
1996.
During 1998 the Company invested $19,571,000 in capital equipment and plant
expansions compared to $28,977,000 in 1997, and $26,296,000 in 1996. Capital
expenditures for 1999 are expected to be in the $40-$44 million range and
will principally support investments in new and replacement business both
domestically and internationally.
The Company has paid uninterrupted cash dividends each year since becoming
publicly owned in 1972. Dividends paid in 1998 were $7,316,000 compared to
$7,252,000 in 1997 and $7,229,000 in 1996. The dividend rate for all three
years was $ .40 per share.
In June 1998, the Company amended its revolving credit agreements, which
allow for borrowings of up to $50 million. At December 31, 1998, borrowings
outstanding under the agreements were $7.5 million at an interest rate of
6.0%, and associated committed letters of credit were $1,052,000. As of
December 31, 1998, $41.4 million of the $50.0 million revolving credit
facilities were available. The borrowings are classified as long-term based
on management's intent and ability to maintain this level of borrowing for a
period in excess of one year.
The Company also maintains unsecured, short-term credit lines with banks
under which it may borrow $23,100,000, of which $500,000 was committed as
letters of credit at December 31, 1998. The Company had no short-term
borrowings at December 31, 1998.
The Company believes its liquidity, capital resources and cash flows from
operations are sufficient to fund planned capital expenditures, working
capital requirements and debt service in the absence of additional
significant acquisitions.
<PAGE>
The Company intends to fund future acquisitions with cash, securities or a
combination of cash and securities. To the extent the Company uses cash for
all or part of any such acquisitions, it expects to raise such cash primarily
from cash generated from operations, borrowings under the revolving credit
agreements or, if feasible and attractive, issuance of long-term debt or
additional Common Stock.
Status of Year 2000 Activities
Many computer systems and software products refer to years in terms of their
final two digits only. Such programs may interpret the year 2000 to mean the
year 1900 instead. If not corrected, these programs could cause date-related
transaction failures. Although we currently believe that our systems are Year
2000 compliant in all material respects, our current systems may contain
undetected errors or defects with Year 2000 date functions that may result in
material costs.
In 1997, we developed a compliance assurance process to address the problem.
A project team, headed by the Vice President-Information Technology, has
performed a detailed assessment of all-internal computer systems, and
computing-related equipment in all facilities. Our primary vendors, material
suppliers, service suppliers and banks have been asked to verify their Year
2000 readiness. We plan to conduct audits at key supplier locations by June
30, 1999. Our computer operations provider and disaster recovery site have
advised us they will be compliant by the same date.
Our central computing hardware and operating software have been updated and
are now compliant. While many of our machine tools use programmable logic
controllers, they operate independently and are not connected to a computer
network. These controllers will be tested by March 31, 1999.
Costs: In late 1996, we purchased and began implementation of the Y2K ready
J. D. Edwards Enterprise Requirement Planning System at an investment of over
$2 Million to replace existing business systems and to strengthen internal
controls, all of which is Year 2000 compliant. Purchase of this system was
not accelerated because of Year 2000 and implementation costs are not
material. Internal costs specifically associated with modifying our business
systems software were not material and are expensed as incurred.
Year 2000 Risks: In light of our relatively new business systems and
computing infrastructure and the fact that manufacturing operations are not
computer integrated, we believe the internal risks are manageable. However,
we are subject to external forces that might generally affect industry and
commerce, such as utility or transportation Year 2000 compliance failures and
related service interruptions. Further, to the extent the operations of any
of our major customers are affected, it could have a material adverse effect
on our business, results of operations and financial condition.
Contingency Plans: Contingency plans will be completed by May 1999. Several
automated and manual approaches are being considered to offset anticipated
problems in the supply chain.
Impact of FASB Statements
The Company has not yet adopted Statement of Financial Accounting Standard
No. 133 "Accounting for Derivative Instruments and Hedging Activities", which
becomes effective in 1999. This statement is not expected to have a material
effect upon future financial statements.
Impact of Inflation
The Company does not expect to be significantly impacted by inflation in
1999.
FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of
the Securities Exchange Act of 1934. These statements, including those
relating to future outlook and operating performance, Y2K compliance, capital
expenditures and other statements regarding the belief or current
expectations of the company involve risks and uncertainties. Accordingly,
actual results may differ materially as a result of various factors
including, but not limited to, general economic conditions in the markets in
which the company operates, fluctuation in demand for the company's products,
the activities of competitors, and
<PAGE>
various other factors outside of the company's control. The company does not
intend to update these forward-looking statements.
Item 8. Financial Statements and Supplementary Data
Consolidated Statements Of Operations
(In thousands, except per share amounts) Year Ended December 31
----------------------------
1998 1997 1996
---- ---- ----
Net sales $496,419 $451,518 $407,999
Costs and expenses:
Cost of products sold 446,914 406,513 365,253
Administrative and selling 13,397 13,152 13,173
Amortization of intangible assets 1,962 934 --
Provision for restructuring
and plant closings 2,500 8,769 --
-------- -------- --------
464,773 429,368 378,426
-------- -------- --------
Operating Earnings 31,646 22,150 29,573
Investment and other income, net 296 524 1,425
Interest expense (9,588) (7,451) (5,354)
-------- -------- --------
Earnings Before Income Taxes 22,354 15,223 25,644
Income taxes 7,599 5,144 8,037
-------- -------- --------
Net Earnings $ 14,755 $ 10,079 $ 17,607
======== ======== ========
Basic Earnings Per Share $ .81 $ .56 $ .97
======== ======== ========
Diluted Earnings Per Share $ .80 $ .55 $ .97
======== ======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements Of Cash Flows
(In thousands) Year Ended December 31
----------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 14,755 $ 10,079 $ 17,607
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 26,115 23,427 20,497
Provision for restructuring and plant closings 2,500 6,424 --
Provision for deferred income taxes (665) (828) (102)
Amortization of restricted stock 487 356 363
Loss (gain) on disposition of assets 223 249 217
Changes in operating
Assets and liabilities:
Accounts receivable (6,070) (12,118) 6,186
Inventories (2,404) (2,466) (1,153)
Other assets 6,006 (6,381) (655)
Accounts payable and accrued expenses (46) 11,373 7,834
--------- --------- ---------
Cash Provided by Operating Activities 40,901 30,115 50,794
INVESTING ACTIVITIES
Acquisition of business, net of cash acquired -- (75,293) --
Capital expenditures (19,571) (28,977) (26,296)
Proceeds from disposal of property and equipment 450 2,105 171
--------- --------- ---------
Cash Used in Investing Activities (19,121) (102,165) (26,125)
FINANCING ACTIVITIES
Cash dividends paid (7,316) (7,252) (7,229)
Notes payable - net (1,211) -- --
Principal repayments of long-term debt (16,780) (55,079) (2,078)
Proceeds from long-term borrowings 5,000 115,000 --
Repurchase of common stock (2,774) -- --
Exercise of stock options, net 327 -- 243
--------- --------- ---------
Cash (Used in) Provided by
Financing Activities (22,754) 52,669 (9,064)
Effect of foreign currency exchange
rate changes (1,116) (1,286) (193)
--------- --------- ---------
Increase (Decrease) In Cash and
Cash Equivalent (2,090) (20,667) 15,412
Cash and cash equivalents at beginning of year 8,235 28,902 13,490
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 6,145 $ 8,235 $ 28,902
========= ========= =========
Supplemental Disclosures:
Cash paid during the year for:
Interest $ 9,808 $ 5,625 $ 5,354
Income Taxes 8,436 8,538 7,995
Non cash transactions: The Company
issued shares of common stock
and a note payable in connection with
the acquisition of Stahl International.
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Consolidated Balance Sheets
(In thousands, except share amounts) December 31
----------------------
1998 1997
---- ----
ASSETS
Current Assets
Cash and cash equivalents $ 6,145 $ 8,235
Accounts receivable 72,785 66,055
Inventories 22,866 19,827
Customer tooling in process 1,749 7,888
Prepaid expenses and other
current assets 10,994 12,689
--------- ---------
Total Current Assets 114,539 114,694
Property, Plant and Equipment, at cost
Land 4,642 4,867
Buildings and improvements 59,165 55,536
Machinery and equipment 264,802 253,096
--------- ---------
328,609 313,499
Less accumulated depreciation 158,724 139,353
--------- ---------
Net Property, Plant and Equipment 169,885 174,146
Intangible Assets - net 52,192 49,951
Other Assets 3,938 2,757
--------- ---------
$ 340,554 $ 341,548
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current installments of long-term debt $ 4,829 $ 3,579
Accounts payable 52,039 45,803
Compensation and amounts withheld 11,694 11,350
Taxes, other than income taxes 2,483 3,072
Other current liabilities 11,298 14,524
--------- ---------
Total Current Liabilities 82,343 78,328
Long-Term Debt, excluding current installments 105,534 118,564
Accrued Retirement Benefits and Other 17,312 14,663
Deferred Income Taxes 10,797 12,121
Shareholders' Equity
Common stock, par value $1 per share:
Authorized - 55,000,000 shares
Outstanding - 18,176,750 shares
(1997 - 18,129,202 shares) 18,177 18,129
Additional paid-in capital 25,468 24,792
Retained earnings 89,540 82,101
Unamortized value of restricted stock (2,220) (2,147)
Accumulated other comprehensive income (6,397) (5,003)
--------- ---------
Total Shareholders' Equity 124,568 117,872
--------- ---------
$ 340,554 $ 341,548
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements Of Shareholders' Equity
and Comprehensive Income
(In thousands)
Unamortized Accumulated
Additional Value of Other
Common Paid-In Retained Restricted Comprehensive Comprehensive
Stock Capital Earnings Stock Income Income Total
----- ------- -------- ---------- ------------- ------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $17,981 $23,646 $68,896 $(1,815) $ (3,631) $105,077
Net earnings for 1996 17,607 $ 17,607 17,607
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (193) (193)
Excess pension cost adjustment 124 124
--------
Other comprehensive income (69) (69)
--------
Comprehensive income $ 17,538
--------
Cash dividends - $.40 per share (7,229) (7,229)
Exercise of stock options, net 35 208 243
Restricted stock awards, net 64 512 (576) --
Amortization of restricted stock 363 363
------ ------ ------ ------ ------ -------- -------
Balance at December 31, 1996 18,080 24,366 79,274 (2,028) (3,700) 115,992
Net earnings for 1997 10,079 $ 10,079 10,079
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (1,286) (1,286)
Excess pension cost adjustment (17) (17)
--------
Other comprehensive income (1,303) (1,303)
--------
Comprehensive income $ 8,776
--------
Cash dividends - $.40 per share (7,252) (7,252)
Restricted stock awards, net 49 426 (475) --
Amortization of restricted stock 356 356
------ ------ ------ ------ ------ -------- -------
Balance at December 31, 1997 18,129 24,792 82,101 (2,147) (5,003) 117,872
Net earnings for 1998 14,755 $ 14,755 14,755
Other comprehensive income,
net of tax
Foreign currency translation
adjustment (1,116) (1,116)
Excess pension cost adjustment (278) (278)
--------
Other comprehensive income (1,394) (1,394)
--------
Comprehensive income $ 13,361
--------
Cash dividends - $.40 per share (7,316) (7,316)
Issuance of shares for acquisition 200 2,411 2,611
Exercise of stock options, net 46 281 327
Repurchase of common stock (239) (2,535) (2,774)
Restricted stock awards, net 41 519 (560) --
Amortization of restricted stock 487 487
------- ------- ------- ------- -------- --------- --------
Balance at December 31, 1998 $18,177 $25,468 $89,540 $(2,220) $ (6,397) $124,568
<FN>
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 and Europe.
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, accounts receivable, accounts payable and long-term debt.
At December 31, 1998, the fair value of these financial instruments
approximates the carrying amount with the exception of long-term debt as
discussed in Note F.
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.
Amortization: Cost in excess of fair-market value of net assets acquired
(goodwill), arising from acquisitions (see Note B), is amortized on a
straight-line basis over 40 years. Specific intangibles including a supply, a
non-compete and various license agreements and various patents are amortized
on a straight-line basis over the estimated periods benefited with periods
ranging from 2.5 to 40 years. The carrying value of intangible assets is to
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An
impairment would be recognized when the expected undiscounted future
operating cash flow derived from such intangible assets is less than their
carrying value. The Company believes that no impairment exists at
December 31, 1998.
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.
Income Taxes: Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. No
deferred income taxes have been provided for the income tax liability, which
would be incurred on repatriation of the permanently reinvested portion of
unremitted earnings of the foreign subsidiaries.
<PAGE>
Net Earnings Per Share: Basic earnings per share are computed based upon the
weighted average shares of common stock outstanding during the year. Diluted
earnings per share are calculated to give effect to common stock equivalents
(stock options) outstanding during the year.
Stock Based Compensation: The Company applies "Accounting for Stock-Based
Compensation," prescribed by SFAS No. 123, by making the required disclosures
only. This standard does not have an effect on the Company's financial
position or results of operations.
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.
Comprehensive Income: On January 1,1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting and presentation of comprehensive income and its components in a
full set of financial statements. Comprehensive income consists of net
income, net foreign currency translation adjustments, and excess pension
costs and is presented in the consolidated statements of shareholders' equity
and comprehensive income. The statement requires only additional disclosures
in the consolidated financial statements; it does not affect the Company's
financial position or results of operations. Prior year financial statements
have been reclassified to conform to the requirements of SFAS No. 130.
Note B -- Business Acquisitions
On April 1, 1998, the Company purchased Stahl International, Inc. ("Stahl")
for 200,074 shares of common stock and a $1,000,000 note payable for a total
of $3.7 million. Stahl, located in Memphis, Tennessee, manufactures torsional
vibration dampers and flywheels for all types of diesel engines. The
acquisition was accounted for as a purchase transaction and accordingly, the
results of the Stahl business' operations are included in the consolidated
financial statements since the date of acquisition. The purchase cost of $3.7
million has been allocated to assets and liabilities acquired based upon
their estimated fair values at the acquisition date. The excess of purchase
price over assets acquired (goodwill) of $2.9 million is being amortized over
40 years. Pro forma unaudited financial data are not presented, as the effect
is insignificant.
On June 27, 1997, the Company, through a wholly owned subsidiary, purchased
the Vibration Attenuation division of Holset Engineering Company Limited ("VA
Business") from Cummins Engine Company. The VA Business has operations in the
United Kingdom, France, Spain, Mexico, Korea, Brazil and the United States.
The VA Business manufactures rubber and viscous dampers and supplies three
main markets including heavy truck, light truck and automotive and
industrial.
The acquisition was accounted for as a purchase transaction and accordingly,
the results of the VA Business' operations are included in the consolidated
financial statements since the date of acquisition. The final purchase cost
of $77.4 million has been allocated to assets acquired and liabilities
assumed based upon their estimated fair values at the acquisition date. The
excess of the purchase price over net assets acquired (goodwill) approximated
$39.7 million and is being amortized over 40 years.
<PAGE>
The following pro forma unaudited financial data is presented to illustrate
the estimated effects of (i) the VA Business acquisition and (ii) the
completion of the new credit agreements as if the transactions had occurred
as of January 1, 1997 (in thousands, except per share data).
(Unaudited)
Twelve Months Ended
Dec 31, 1997
-------------------
Net sales $487,505
Net income 8,496
Net earnings per share:
Basic $ .47
Diluted $ .47
The pro forma information above does not purport to be indicative of the
results that actually would have been achieved if the transactions had
occurred at the beginning of the period presented, and is not intended to be
a projection of future results or trends.
Note C -- Provision for Restructuring and Plant Closings
In the fourth quarter of 1998, in connection with management's continuing
efforts to reduce costs and improve efficiencies, the Company recorded a
provision for reduction of its worldwide salary workforce of approximately
$2.5 million. The reduction is for approximately 10% of its salary workforce
and is expected to result in the elimination of 50 positions. These
reductions will be completed during the second quarter of 1999. In the third
quarter of 1997, the Company recorded a provision for plant closings of
approximately $8.8 million. The principal actions in the plant-closing plan
involved the closure of two manufacturing facilities.
The major components of the provisions are as follows:
(In thousands)
1998 1997
---- ----
Severance and related costs $2,500 $4,965
Write-down of property, plant
and equipment -- 2,191
Other -- 1,613
------ ------
Total Provision $2,500 $8,769
====== ======
These charges were recorded in the appropriate period in accordance with the
requirements of Emerging Issues Task Force Pronouncement 94-3. At December
31, 1998, approximately $4.2 million of accruals are available for remaining
costs.
Note D -- Inventories
The components of inventories are summarized as follows:
(In thousands) 1998 1997
---- ----
Finished and in-process products $10,329 $11,294
Raw materials 12,537 8,533
------- -------
$22,866 $19,827
======= =======
<PAGE>
The LIFO inventories comprise approximately 75% and 84% of total inventories
at December 31, 1998 and 1997, respectively.
The replacement cost of inventories exceeded the balance sheet carrying
amounts by approximately $5,200,000 and $5,900,000 at December 31, 1998 and
1997, respectively.
Note E -- Intangible Assets
The components of intangible assets are summarized as follows:
(In thousands) 1998 1997
---- ----
Goodwill $43,072 $38,728
Supply, non-compete, and license
agreements and various patents 12,276 12,200
------- -------
55,348 50,928
Less accumulated amortization 3,156 977
------- -------
Net Intangible Assets $52,192 $49,951
======= =======
Note F -- Debt
Long-term debt at December 31 consisted of the following obligations:
(In thousands) 1998 1997
---- ----
8.8% Note payable due 1999 $ 750 $ 2,250
9.98% Note payable due 2005 9,750 12,000
6.75% Bank term note due 2008 20,000 20,000
8.45% Bank term note due 2005 20,000 20,000
8.82% Bank term note due 2003 2,363 2,893
7.03% Series A Notes due 2012 35,000 35,000
6.96% Series B Notes due 2012 15,000 15,000
Revolving Credit Agreement 7,500 15,000
-------- --------
110,363 122,143
Less current installments 4,829 3,579
-------- --------
Long-term debt, excluding current installments $105,534 $118,564
======== ========
As of December 31, 1998, the estimated fair value of long-term debt,
discounted at current interest rates, was $121,000,000.
In June 1998, the Company amended revolving credit agreements which allow for
borrowings of up to $25 million under a five-year agreement and up to $25
million under a 364-day agreement. Borrowings under the credit agreements
bear interest, at the election of the Company, at a floating rate of interest
equal to (a) the higher of ABN AMRO's prime lending rate and the federal
funds rate plus .5% or (b) the Eurodollar rate plus the applicable borrowing
margin. At December 31, 1998, the outstanding borrowings under these
agreements are at an interest rate of approximately 6.0% and there was
$1,052,000 committed as letters of credit.
Under the terms of its loan agreements, the Company is subject to
restrictions concerning additional borrowings and maintenance of minimum net
worth. At December 31, 1998, under the most restrictive
<PAGE>
covenant retained earnings of approximately $19,100,000 were unrestricted.
The Company was in compliance with all such covenants at December 31, 1998.
The Company also has uncommitted short-term credit lines with banks under
which it may borrow up to $23,100,000, of which $500,000 was committed as
letters of credit at December 31,1998. 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 1999
are as follows: 2000 - $6,079,000; 2001 - $8,079,000; 2002 - $9,442,000; and
2003 $16,412,000.
Note G -- Income Taxes
The components of earnings before income taxes were as follows:
(In thousands) 1998 1997 1996
---- --- ----
Domestic $ 19,502 $ 9,963 $ 23,047
Foreign 2,852 5,260 2,597
-------- -------- --------
$ 22,354 $ 15,223 $ 25,644
======== ======== ========
The provisions for income tax expense were as follows:
(In thousands) 1998 1997 1996
---- ---- ----
Current:
Federal $ 5,799 $ 4,976 $ 6,730
Foreign 1,953 691 822
State 512 305 587
-------- -------- --------
8,264 5,972 8,139
-------- -------- --------
Deferred:
Federal (599) (1,647) 66
Foreign (70) 947 (330)
State 4 (128) 162
-------- -------- --------
(665) (828) (102)
-------- -------- --------
$ 7,599 $ 5,144 $ 8,037
======== ======== ========
<PAGE>
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) 1998 1997 1996
---- ---- ----
Income taxes at federal
statutory rate $ 7,824 $ 5,235 $ 8,975
State income tax, net of
federal benefit 338 116 487
Foreign operating loss 1,697 84 (310)
Federal tax credits (950) (100) (1,100)
Foreign Sales Corporation (450) -- --
Differences between domestic and
effective foreign tax rates (812) (254) (107)
Other, net (48) 63 92
------- ------- -------
$ 7,599 $ 5,144 $ 8,037
======= ======= =======
The tax effects of temporary differences that give rise to significant
deferred tax assets and liabilities at December 31 are as follows:
1998 1997
--------------------- --------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
(In thousands) Assets Liabilities Assets Liabilities
-------- ---------- -------- -----------
Plant and equipment $ -- $ 17,858 $ -- $ 17,133
Accrued retirement benefits 6,557 -- 5,398 --
Other accrued expenses 2,851 -- 4,028 --
Foreign net operating loss
carryforward 1,782 -- 468 --
Federal tax credits 2,144 -- 1,866 --
Other items 733 177 530 929
-------- -------- -------- --------
14,067 18,035 12,290 18,062
Valuation allowance (2,407) -- (1,268) --
-------- -------- -------- --------
$ 11,660 $ 18,035 $ 11,022 $ 18,062
======== ======== ======== ========
Based upon the level of historical taxable income and projections for future
taxable income over the periods which the deferred tax assets are deductible,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences, net of the existing valuation
allowances at December 31, 1998.
As of December 31,1998, the Company has unrecognized foreign net operating
loss carryforwards of approximately $5,300,000 that begin expiring in 2003.
Deferred income tax assets of $4,422,000 and $5,081,000 are included in other
current assets at December 31, 1998, and 1997, respectively.
Note H - Pension and Other Postretirement Benefits
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.
<PAGE>
In addition to the Company's defined benefit pension plans, 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 Company's retiree medical benefits are not funded.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 38,471 $ 32,506 $ 10,577 $ 9,701
Service cost 2,508 2,210 595 598
Interest cost 2,849 2,613 777 759
Benefits paid (1,858) (2,812) (716) (484)
Actuarial (gains) and losses 2,830 4,031 (292) 3
Plan amendments 131 -- -- --
Foreign exchange rate changes (233) (78) -- --
-------- -------- -------- --------
Benefit obligation at end of year 44,698 38,470 10,941 10,577
Change in plan assets
Fair value of plan assets at
beginning of year 28,929 23,649
Actual return on plan assets 885 5,295
Contributions by the employer 1,554 2,732
Benefits paid (1,676) (2,657)
Foreign exchange rate changes (166) (90)
-------- --------
Fair value of plan assets at end
of year 29,526 28,929
Funded status (15,172) (9,541) (10,941) (10,577)
Unrecognized net loss 8,334 4,062 55 344
Unrecognized net asset (181) (323) -- --
Unrecognized prior service cost 1,193 1,197 55 60
-------- -------- -------- --------
Net amount recognized $ (5,826) $ (4,605) $(10,831) $(10,173)
======== ======== ======== ========
Amounts recognized in the statement
of financial position consist of:
Prepaid benefit cost $ -- $ 7 $ -- $ --
Accrued benefit liability (6,764) (4,845) (10,831) (10,173)
Intangible asset 461 195 -- --
Accumulated other comprehensive
income 477 38 -- --
-------- -------- -------- --------
Net amount recognized $ (5,826) $ (4,605) $(10,831) $(10,173)
======== ======== ======== ========
<CAPTION>
Pension Benefits Other Benefits
---------------- --------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Weighted-average assumptions
as of December 31
Discount rate 7% 7.5% 8% 7% 7.5% 8%
Expected return on plan assets 10% 10% 10%
Rate of compensation increase 4% 4.5% 5% 4% 4.5% 5%
</TABLE>
<PAGE>
For measurement purposes in 1996, the medical cost trend was assumed to be
8.0% and to decrease .5% per year to 5.0% in 2002 and remaining at that level
thereafter.
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
Components of net periodic --------------------------- ------------------------
benefit cost 1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2,508 $ 2,210 $ 2,114 $ 595 $ 598 $ 612
Interest cost 2,849 2,613 2,307 777 759 693
Expected return on plan assets (2,490) (2,174) (3,046) -- -- --
Net amortization and deferral 310 62 1,391 2 3 5
Multi-employer plans 72 510 544 -- -- --
------- ------- ------- ------- ------- -------
Net periodic benefit cost $ 3,249 $ 3,221 $ 3,310 $ 1,374 $ 1,360 $ 1,310
======= ======= ======= ======= ======= =======
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost
components $372 $(291)
Effect on postretirement benefit obligation 2,076 (1,684)
</TABLE>
In the United Kingdom, Simpson International (UK) Limited is in the process
of obtaining final approval from Inland Revenue for a defined benefit pension
plan. Approval is expected in the first half of 1999.
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 $1,390,000, $1,330,000 and $1,490,000 in 1998,
1997 and 1996 respectively.
Note I -- 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, 1998 there were
1,244,700 shares of common stock reserved for issuance under the plans of
which 657,630 are available for future grants.
<PAGE>
The Company applies APB Opinion No. 25 in accounting for its stock
compensation plans. Accordingly, no compensation cost has been recognized for
the stock options granted in 1998, 1997 or 1996. Had compensation cost for
these options been determined on the basis of fair value pursuant to SFAS No.
123, The Company's pro forma net income and earnings per share would have
been as indicated below:
1998 1997 1996
---- ---- ----
Net income As reported $14,755 $10,079 $17,607
Pro forma $14,536 $ 9,874 $17,413
Basic Earnings
per share As reported $ .81 $ .56 $ .97
Pro forma $ .80 $ .54 $ .96
Diluted earnings
per share As reported $ .80 $ .55 $ .97
Pro forma $ .79 $ .54 $ .96
The fair value of each option grant is estimated on the date of grant using
the Black Scholes option-pricing model with the following weighted average
assumptions used for grants in 1998, 1997 and 1996, respectively: dividend
yield of 3.8% for all years; expected volatility of 35%, 37% and 40%;
risk-free interest rates of 5.8%, 6.5% and 6.1%; and an expected life of 7.1,
7.0 and 6.8 years.
Incentive plan activity is summarized as follows:
Stock Option Plans
Weighted
Option Average Restricted
Shares Exercise Price Shares
------ -------------- ----------
1997:
Outstanding
January 1,1997 442,115 $ 9.44 214,343
Granted/awarded 100,760 9.76 64,020
Exercised (1,485) 6.67 --
Restrictions lapsed -- -- (33,039)
Canceled/forfeited (10,000) 9.94 (14,986)
Outstanding 531,390 9.50 230,338
Exercisable 287,774 -- --
Weighted-average
fair value of options
granted during the year $ 9.76
1998:
Granted/awarded 106,080 $ 12.75 66,840
Exercised (50,400) 4.68 --
Restrictions lapsed -- -- (46,227)
Canceled/forfeited -- -- (26,500)
Outstanding 587,070 10.50 224,451
Exercisable 333,778 -- --
Weighted-average
fair value of options
granted during the year $ 12.75
<PAGE>
Note J -- Shareholder Rights Plan
In 1997, 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. The
Plan provides 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 or commences a tender or exchange offer
which would result in a person or group acquiring 20% or more of the
Company's common stock. In addition, the Plan 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 causes 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 $.005 per Right until a person or group has
been declared an "Adverse Person" or the close of business on the tenth
business day after a public announcement that a 20% position has been
acquired. If a 20% position is acquired, a person or group is declared an
"Adverse Person," the Company is acquired or certain other events occur after
the Rights become exercisable, each Right will entitle its holder to
purchase, for the exercise price, a number of the Company's or acquiring
company's common shares having a market value of twice the exercise price.
Rights were issued in 1997 to shareholders and will be attached to each share
issued thereafter until the Rights become exercisable, expire or are
redeemed. Rights expire May 9, 2007, unless extended by the Board of
Directors.
Note K -- Earnings Per Share
In thousands, except per
share amounts 1998 1997 1996
---- ---- ----
Net earnings applicable to
common stock and common
stock equivalents $14,755 $10,079 $17,607
Basic Earnings per Share
Weighted average shares
outstanding 18,285 18,123 18,067
Earnings Per Share $ .81 $ .56 $ .97
======= ======= =======
Diluted Earnings per Share
Weighted average shares
outstanding 18,285 18,123 18,067
Net effect of dilutive
stock options 89 79 48
------- ------- -------
18,374 18,202 18,115
Earnings Per Share $ .80 $ .55 $ .97
======= ======= =======
Options to purchase 64,560, 43,020, and 75,480 shares of common stock were
outstanding during 1998 through 1996 respectively, at prices ranging from
$12.33 to $14.67. These shares were not included in the computation of
diluted EPS because the options' exercise price was greater than the
average market price of the common shares.
<PAGE>
Note L - Comprehensive Income
The accumulated balances for each classification of comprehensive income are
as follows:
Accumulated
Foreign Minimum Other
Currency Pension Comprehensive
(In thousands) Items Liability Income
-------- --------- -------------
Balance at January 1, 1996 $(3,499) $ (132) $(3,631)
Net of tax amount (193) 124 (69)
------- ------- -------
Balance at December 31, 1996 (3,692) (8) (3,700)
Net of tax amount (1,286) (17) (1,303)
------- ------- -------
Balance at December 31, 1997 (4,978) (25) (5,003)
Net of tax amount (1,116) (278) (1,394)
------- ------- -------
Balance at December 31, 1998 $(6,094) $ (303) $(6,397)
The income tax effect related to the above items is not significant.
Note M -- Segment Information
Reporting Segment
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," during 1998. SFAS No. 131 established
standards for reporting information about operating segments in annual
financial statements and related disclosures about products and geographic
areas. The Company manages its business under three similar product groups
that are aggregated together as one segment in the global vehicular industry.
These groups have similar long-term financial performance and economic
characteristics. The products from all three groups utilize similar
manufacturing processes. The production of the finished parts from the three
focused groups uses similar machining equipment which may be interchanged
from group to group. The Company distributes and sells final product to the
same type of customers from all its three product groups.
Geographic segments
The Company operated entirely in North America prior to 1997. With the
acquisition of the Holset VA business during 1997, the Company expanded its
operations to Europe. The Company's geographic data for the years ended
December 31, 1998 and 1997 are as follows:
1998 1997
---- ----
Net sales
North America $ 431,657 $ 421,117
Europe 64,762 30,401
--------- ---------
Total $ 496,419 $ 451,518
Operating income
North America $ 31,342 $ 29,474
Europe 2,804 1,445
Restructuring/plant closings (2,500) (8,769)
--------- ---------
31,646 $ 22,150
<PAGE>
Identifiable assets
North America $ 256,284 $ 256,589
Europe 84,270 84,959
--------- ---------
Total $ 340,554 $ 341,548
Net sales to major customers were: 1998 1997 1996
(In thousands) ---- ---- ----
General Motors Corporation $123,700 $126,500 $108,800
Ford Motor Company 85,100 88,500 86,700
DaimlerChrysler Corporation 61,000 56,500 63,400
Consolidated Diesel Company
and its parent companies,
Cummins Engine Company
Inc. and Case Corporation 52,400 47,000 38,800
Caterpillar Inc. 41,800 36,100 35,900
Aggregate receivables for these customers at December 31, 1998 and 1997
approximate the same percent of total receivables as aggregate sales to these
customers bear to total sales.
Note N -- 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 two
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.
<PAGE>
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, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 1998. 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998 in conformity with generally
accepted accounting principles.
KPMG LLP
Detroit, Michigan
January 27, 1999
<PAGE>
Summary of Quarterly Results of Operations
(In thousands, except per share amounts)
Quarter Ended
Mar.31 Jun.30 Sep.30 Dec.31
------ ------ ------ ------
1998
Net sales $ 125,556 $ 128,704 $ 110,016 $ 132,143
Gross profit 13,623 14,856 6,284 14,742
Net earnings 4,905 5,686 929 3,235
Net earnings per share
Basic .27 .31 .05 .18
Diluted .27 .31 .05 .18
1997
Net sales $ 105,874 $ 110,274 $ 112,327 $ 123,043
Gross profit 10,816 13,040 9,472 11,677
Net earnings 4,387 5,418 (3,337) 3,611
Net earnings per share
Basic .24 .30 (.18) .20
Diluted .24 .30 (.18) .20
Net earnings for the quarter ended December 31, 1998 were decreased by $1,900
($.10 per share for both basic and diluted) for the provision for
restructuring.
Net earnings for the quarter ended September 30, 1997 were decreased by
$5,700 ($.31 per share for both basic and diluted) for the provision for
plant closings.
Item 9. Changes in and Disagreements with Accountants and Financial
Disclosure
NONE
<PAGE>
PART III
The information called for by the items within this part is included in the
Company's Proxy Statement for the 1999 Annual Meeting of Shareholder's, and
is incorporated herein by reference, as follows:
Pages in 1999
Proxy Statement
---------------
Item 10. Directors ..................................... 1-4
Item 11. Executive Compensation ........................ 5-11
Item 12. Security Ownership of Certain Beneficial Owners
and Management ................................ 11-12
Item 13. Certain Relationships and Related Transactions N/A
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The Consolidated Financial Statements of the Company and its
subsidiaries, included in Item 8 herein by reference:
Consolidated Balance Sheets - December 31, 1998 and
1997
Consolidated Statements of Shareholders' Equity and
Comprehensive Income - years ended December 31, 1998,
1997 and 1996
Consolidated Statements of Operations years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows - years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements - December
31, 1998
(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
31,1997 and incorporated herein by reference)
3.2 Bylaws, as amended (previously filed as Exhibit 3.2 to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31,1997 and incorporated herein by
reference)
4.2 Rights Agreement, dated as of February 28, 1997, between
Simpson Industries, Inc. and Harris Trust and Savings
Bank, as Rights Agent (previously filed as Exhibit 4.2
to the Company's Current Report on Form 8-K, dated April
22, 1997 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)
Amendment No. 2 to Note Agreement with Aetna Life
Insurance Company, dated as of June 17, 1997 (previously
filed as Exhibit 10.3 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997 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)
<PAGE>
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)
Amendment No. 1 to Note Agreement with Massachusetts
Mutual Life Insurance Company, dated as of June 17, 1997
(previously filed as Exhibit 10.11 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 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)
Amendment No. 2 to Term Loan Agreement with Comerica
Bank, dated as of June 17, 1997 (previously filed as
Exhibit 10.15 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and
incorporated herein by reference)
10.18+ Letter Agreement, dated December 16,1994, with George G.
Gilbert (previously filed as Exhibit 10.18 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)
Amendment No. 2 to Term Loan Agreement with Comerica
Bank, dated as of June 17, 1997 (previously filed as
Exhibit 10.20 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and
incorporated herein by reference)
<PAGE>
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)
Amendment No. 2 to Term Loan Agreement with Comerica
Bank, dated as of June 17, 1997 (previously filed as
Exhibit 10.21 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and
incorporated herein by reference)
10.23+ Letter Agreement, dated March 1, 1996, with James B.
Painter (previously filed as Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and incorporated herein by
reference)
10.24 Credit Agreement, dated June 17, 1997, among Simpson
Industries and certain other Borrowers, certain
Commercial Lending Institutions, ABN AMRO Bank N.V. and
Comerica Bank (previously filed as Exhibit 10.24 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 and incorporated herein by
reference)
Amendment to Credit Agreement, dated August 22, 1997
among Simpson Industries, Inc. and certain other
Borrowers, certain Commercial Lending Institutions, ABN
AMRO Bank N.V. and Comerica Bank (previously filed as
Exhibit 10.24 to the Company's Annual Report on Form
10-K for the year December 31,1997, and incorporated
herein by reference)
Amendment to Credit Agreement, dated June 16, 1998,
among Simpson Industries, Inc. and certain other
Borrowers, certain Commercial Lending Institutions, ABN
AMRO Bank N.V. and Comerica Bank (previously filed as
Exhibit 10.24 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30,1998, and
incorporated herein by reference)
10.25 Credit Agreement, dated June 17, 1997, among Simpson
Industries and certain other Borrowers, certain
Commercial Lending Institutions, ABN AMRO Bank N.V. and
Comerica Bank (previously filed as Exhibit 10.25 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 and incorporated herein by
reference)
Amendment to Credit Agreement, dated August 22, 1997
among Simpson Industries, Inc. and certain other
Borrowers, certain Commercial Lending Institutions, ABN
AMRO Bank N.V. and Comerica Bank (previously filed as
Exhibit 10.25 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997, and
incorporated herein by reference)
Amendment to Credit Agreement, dated June 16, 1998,
among Simpson Industries, Inc. and certain other
Borrowers, certain Commercial Lending Institutions, ABN
AMRO Bank N.V. and Comerica Bank (previously filed as
Exhibit 10.25 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998, and
incorporated herein by reference)
10.26 Note Agreement, dated August 1, 1997 with Northwestern
Mutual Life Insurance Company, Chubb Life Insurance
Company of America, Chubb Colonial Life Insurance
Company, Allstate Life Insurance Company and United of
Omaha Life Insurance Company (previously filed as
Exhibit 10.26 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997 and
incorporated herein by reference)
10.27+ Letter Agreement, dated September 1, 1997, with Vinod M.
Khilnani (previously filed as Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, and incorporated herein by
reference)
<PAGE>
10.28+* Letter Agreement dated February 5, 1999, with George A.
Thomas
10.29+* Letter agreement dated March 1, 1999 with George A.
Thomas
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, 1998.
<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,
Chairman and Chief Executive Officer
Date: March 1, 1999
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 March 1, 1999.
Signature Title
--------- -----
/s/ Roy E. Parrott Chairman and Chief Executive
Roy E. Parrott Officer and Director
(principal executive officer)
/s/ Vinod M. Khilnani Vice President, Chief Financial Officer
Vinod M. Khilnani (principal financial officer)
(principal accounting officer)
/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/ Robert W. Navarre Director
Robert W. Navarre
/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
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 31,1997 and incorporated herein by
reference)
3.2 Bylaws, as amended (previously filed as Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31,1997 and incorporated herein by reference)
4.2 Rights Agreement, dated as of February 28, 1997, between Simpson
Industries, Inc. and Harris Trust and Savings Bank, as Rights Agent
(previously filed as Exhibit 4.2 to the Company's Current Report on
Form 8-K, dated April 22, 1997 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)
Amendment No. 2 to Note Agreement with Aetna Life Insurance Company,
dated as of June 17, 1997 (previously filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 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)
Amendment No. 1 to Note Agreement with Massachusetts Mutual Life
Insurance Company, dated as of June 17, 1997 (previously filed as
Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference)
<PAGE>
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)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as
of June 17, 1997 (previously filed as Exhibit 10.15 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
and incorporated herein by reference)
10.18+ Letter Agreement, dated December 16,1994, with George G. Gilbert
(previously filed as Exhibit 10.18 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)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as
of June 17, 1997 (previously filed as Exhibit 10.20 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
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)
Amendment No. 2 to Term Loan Agreement with Comerica Bank, dated as
of June 17, 1997 (previously filed as Exhibit 10.21 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
and incorporated herein by reference)
10.23+ Letter Agreement, dated March 1, 1996, with James B. Painter
(previously filed as Exhibit 10.23 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, and
incorporated herein by reference)
10.24 Credit Agreement, dated June 17, 1997, among Simpson Industries and
certain other Borrowers, certain Commercial Lending Institutions,
ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit
10.24 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 and incorporated herein by reference)
<PAGE>
Amendment to Credit Agreement, dated August 22, 1997 among Simpson
Industries, Inc. and certain other Borrowers, certain Commercial
Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank
(previously filed as Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the year December 31,1997, and incorporated herein by
reference)
Amendment to Credit Agreement, dated June 16, 1998, among Simpson
Industries, Inc. and certain other Borrowers, certain Commercial
Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank
(previously filed as Exhibit 10.24 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30,1998, and incorporated
herein by reference)
10.25 Credit Agreement, dated June 17, 1997, among Simpson Industries and
certain other Borrowers, certain Commercial Lending Institutions,
ABN AMRO Bank N.V. and Comerica Bank (previously filed as Exhibit
10.25 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 and incorporated herein by reference)
Amendment to Credit Agreement, dated August 22, 1997 among Simpson
Industries, Inc. and certain other Borrowers, certain Commercial
Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank
(previously filed as Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, and incorporated
herein by reference)
Amendment to Credit Agreement, dated June 16, 1998, among Simpson
Industries, Inc. and certain other Borrowers, certain Commercial
Lending Institutions, ABN AMRO Bank N.V. and Comerica Bank
(previously filed as Exhibit 10.25 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1998, and incorporated
herein by reference)
10.26 Note Agreement, dated August 1, 1997 with Northwestern Mutual Life
Insurance Company, Chubb Life Insurance Company of America, Chubb
Colonial Life Insurance Company, Allstate Life Insurance Company and
United of Omaha Life Insurance Company (previously filed as Exhibit
10.26 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by reference)
10.27+ Letter Agreement, dated September 1, 1997, with Vinod M. Khilnani
(previously filed as Exhibit 10.27 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, and
incorporated herein by reference)
10.28+* Letter Agreement dated February 5, 1999, with George A. Thomas
10.29+* Letter agreement dated March 1, 1999 with George A. Thomas
21 * Subsidiaries of registrant
23 * Consent of independent public accountants
27.1 * Financial Data Schedule
* Filed with this report
Exhibit 10.28
February 5, 1999
Mr. George A. Thomas
13695 Timberwyck
Shelby Township, Michigan 48315
Dear George:
As a part of your employment offer, you will be extended a severance package.
The terms of this package are as follows:
In the event your employment with Simpson Industries, Inc., is severed within
a 12-month period beginning March 1, 1999, for any reason other than "just
cause", you will receive 12 months of base salary and certain benefits. The
benefits include Health / Dental, Life Insurance and Lease Car. These
benefits will terminate at the earlier of 12 months or when such coverage
begins at a new employer. In each case, participation in these benefit plans
is subject to the terms and conditions of those plans (including employee
cost sharing, etc.) Finally, you will also be granted outplacement benefits.
Sincerely,
Roy E. Parrott
Exhibit 10.29
March 1, 1999
Mr. George A. Thomas
Simpson Industries, Inc.
47603 Halyard Drive
Plymouth, Michigan 48170-2429
Dear George:
Simpson Industries, Inc. (the "Company") considers a dedicated and
vital management team to be essential for protecting and enhancing the best
interests of the Company and its shareholders. In this connection, the
Company recognizes that the possibility of a change in control may exist and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders. Accordingly,
the Board of Directors of the Company (the "Board") has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's senior management,
including yourself, to their assigned duties without distraction in the face
of the potentially disturbing circumstances arising from the possibility of
change in control of the Company.
This letter agreement sets forth the severance benefits which the
Company agrees will be provided to you in the event your employment with the
Company is terminated subsequent to a "Change in Control of the Company" (as
defined in Section 3 hereof) under the circumstances described below.
1. Company's Right to Terminate. The Company may terminate your
employment at any time, subject to providing the benefits hereinafter
specified in accordance with the terms hereof and subject to any other
benefits which the Company has agreed in writing to provide you.
2. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect until December 31, 1999; provided,
however, that commencing on January 1, 2000 and each January 1 thereafter,
the term of this Agreement shall automatically be extended for one additional
year unless at least 30 days prior to such January 1 date, the Company shall
have given notice that it does not wish to extend this Agreement; and
provided, further, that this Agreement shall continue in effect beyond the
term provided herein if a change in control of the Company as defined in
Section 3 hereof, shall have occurred during such term.
3. Change in Control. No benefits shall be payable hereunder
unless there shall have been a change in control of the Company, as set forth
below, and your employment by the Company shall thereafter have been
terminated in accordance with Section 4 below. For purposes of this
Agreement, a "Change in Control of the Company" shall mean a Change in
Control of a nature that would be required to be reported in response to the
requirements of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act") provided that,
without limitation, such a Change in Control shall be deemed to have occurred
if (i) any "person" [as such term is used in Sections 13(d) and 14(d) of the
Exchange Act] is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25 percent or more of the combined voting power of the Company's
then outstanding securities; or (ii) during any period of two consecutive
calendar years, individuals who at the beginning of such period constitute
the Board cease for any reason to constitute at least a majority thereof
unless the election or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period.
4. Termination Following Change in Control. If any of the events
described in Section 3 hereof constituting a Change in Control of the Company
shall have occurred, you shall be entitled to the benefits provided in
Section 5 hereof upon the subsequent termination of your employment within
two years from the date of such
<PAGE>
Change in Control unless such termination is (a) because of your death, (b)
by the Company for Cause or Disability or (c) by you other than for Good
Reason.
(i) Disability. Termination by the Company of your
employment based on "Disability" shall mean termination because of
your absence from your duties with the Company on a full time
basis for 180 consecutive calendar days, as a result of your
incapacity due to physical or mental illness, unless within 30
days after Notice of Termination (as hereinafter defined) is given
following such absence you shall have returned to the full time
performance of your duties.
(ii) Cause. Termination by the Company of your
employment for "Cause" shall mean termination upon (A) the willful
and continued failure by you to substantially perform your duties
with the Company (other than any such failure resulting from your
incapacity due to physical or mental illness), after a demand for
substantial performance is delivered to you by the Chief Executive
Officer of the Company or by the Chairman of the Board of
Directors which specifically identifies the manner in which such
executive believes that you have not substantially performed your
duties, or (B) the willful engaging by you in misconduct which is
materially injurious to the Company, monetarily or otherwise. For
purposes of this paragraph, no act, or failure to act, on your
part shall be considered "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a Notice of Termination from the Chief
Executive Officer of the Company after reasonable notice to you
and an opportunity for you, together with your counsel, to be
heard before the Chief Executive Officer, finding that in the good
faith opinion of such executive you were guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this
paragraph and specifying the particulars thereof in detail.
(iii) Good Reason. Termination by you of your
employment for "Good Reason" shall mean termination based on:
(A) the assignment to you of any
duties inconsistent with your position, duties,
responsibilities and status with the Company
immediately prior to a Change in Control, or a
change in your reporting responsibilities,
titles or offices as in effect immediately prior
to a Change in Control, or any removal of you
from or any failure to re-elect you to any of
such positions, except in connection with the
termination of your employment for Cause or
Disability or as a result of your death or by
you other than for Good Reason;
(B) a reduction by the Company in
your base salary as in effect on the date hereof
or as the same may be increased from time to
time;
(C) a failure by the Company to
continue the Company's incentive bonus plans as
the same may be modified from time to time but
substantially in the form currently in effect
(the "Plans"), or a failure by the Company to
continue you as a participant in the Plans on at
least the present basis or to pay you the
amounts which you would be entitled to receive
based on the Company's performance in accordance
with the Plans;
(D) the Company's requiring you to be
based anywhere other than your present location
or the Company's principal executive offices
except for required travel on the Company's
business to an extent substantially consistent
with your present business travel obligations,
or in the event you consent to any such
relocation, the failure by the Company to pay
(or reimburse you for) all reasonable moving
expenses incurred by you or to indemnify you
against any loss realized in the sale of your
principal residence in connection with any such
relocation;
<PAGE>
(E) the failure by the Company to
continue in effect any benefit, retirement or
compensation plan, savings and profit sharing
plan, stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health
and accident plan, dental plan or disability
plan in which you are participating at the time
of a Change in Control of the Company (or plans
pro- viding you with no less favorable
benefits), the taking of any action by the
Company which would adversely affect your
participation in or materially reduce your
benefits under any of such plans or deprive you
of any material fringe benefit enjoyed by you at
the time of the Change in Control, or the
failure by the Company to provide you with the
number of paid vacation days to which you are
then entitled in accordance with the Company's
normal vacation policy in effect on the date
hereof;
(F) the failure by the Company to
obtain the assumption of the agreement to
perform this Agreement by any successor as
contemplated in Section 6 hereof; or
(G) any purported termination of your
employment which is not effected pursuant to a
Notice of Termination satisfying the
requirements of paragraph (iv) below [and, if
applicable, paragraph (ii) above]; and for
purposes of this Agreement, no such purported
termination shall be effective.
(iv) Notice of Termination. Any purported
termination by the Company pursuant to paragraph (i) or
(ii) above or by you pursuant to paragraph (iii) above
shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of your employment under the
provision so indicated.
(v) Date of Termination. "Date of Termination"
shall mean (A) if your employment is terminated for
Disability, 30 days after Notice of Termination is given
(provided that you shall not have returned to the
performance of your duties on a full-time basis during
such 30 day period), (B) if your employment is terminated
pursuant to paragraph (ii) above, the date specified in
the Notice of Termination, and (C) if your employment is
terminated for any other reason, the date on which a
Notice of Termination is given; provided if within 30 days
after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination,
the Date of Termination shall be the date on which the
dispute is finally determined, either by mutual written
agreement of the parties, by a binding and final
arbitration award or by a final judgment, order or decree
of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been
perfected).
5. Compensation upon Termination or During Disability.
(i) During any period that you fail to perform
your duties hereunder as a result of incapacity due to
physical or mental illness, you shall continue to receive
your full base salary at the rate then in effect and any
bonus payments under the Plans paid during such period
until this Agreement is terminated pursuant to paragraph
4(i) hereof. Thereafter, your benefits shall be determined
in accordance with the Company's long-term disability plan
then in effect.
(ii) If your employment shall be terminated for
Cause, the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at
the time Notice of Termination is given and the Company
shall have no further obligation to you under this
Agreement.
<PAGE>
(iii) If your employment by the Company shall be
terminated (A) by the Company other than for Cause or
Disability or (B) by you for Good Reason, then you shall
be entitled to the benefits provided below:
(A) the Company shall pay you your
full base salary through the Date of Termination
at the rate in effect at the time Notice of
Termination is given and the amount, if any,
with respect to any year then ended which
pursuant to the Plans would have accrued to you
on the basis of the Company's performance but
which has not yet been paid to you;
(B) From the date of Termination
through a period of 24 months following the
Change in Control or until your normal
retirement date (whichever first occurs), you
shall be entitled to receive as severance pay
(i) a monthly payment equal to your monthly
salary for the last full month immediately
preceding termination, plus 1/12 of the average
of the short-term incentive bonus payments paid
to you or accrued with respect to each of the
two years preceding termination; (ii) continued
treatment as an "employee" under any stock
option, employee benefit or other compensation
arrangement (for the remaining period); (iii)
full benefits under each employee welfare
benefit plan in which you were entitled to
participate immediately prior to date of
termination; (iv) the right to immediately
exercise in full all outstanding stock options;
(v) full credit under the Company's retirement
plans for service through the remaining period.
(C) The Company shall also pay to you
all legal fees and expenses incurred by you as a
result of any controversy over this Agreement,
to the extent you are successful in legal
proceedings against the Company.
(iv) Notwithstanding the foregoing, no payments
shall be provided under subsection (iii) to the extent
that they would (A) constitute an "excess parachute
payment" under Section 280G of the Internal Revenue Code,
(B) disqualify an employee benefit plan or trust under the
Internal Revenue Code, or (C) cause an employee benefit
plan or trust to violate the Employee Income Retirement
Security Act of 1974, as amended.
6. Successors; Binding Agreement.
(i) The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. Failure of the Company to obtain such agreement
prior to the effectiveness of any succession shall be a
breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on
the same terms as you would be entitled hereunder if you
terminated your employment for Good Reason, except that
for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement
provided for in this paragraph 6 or which otherwise
becomes bound by all the terms and provisions of this
Agreement by operation of law.
(ii) This Agreement shall inure to the benefit
of and be enforceable by your personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should
die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your
devisee, legatee or other designee or, if there be no such
designee, to your estate.
<PAGE>
7. Notice. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed
by United States certified or registered mail, returned receipt requested,
postage prepaid, addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notices to the Company shall be
directed to the attention to the Chief Executive Officer of the Company with
a copy to the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.
8. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by you and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of the State of Michigan.
9. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force
and effect.
10. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration in Oakland County, Michigan in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.
To confirm your acceptance, kindly sign and return to the
Company the enclosed copy of this letter which will then constitute our
agreement on this subject.
Sincerely,
SIMPSON INDUSTRIES, INC.
By:
Roy E. Parrott, President
Agreed to this 1st day of March, 1999
George A. Thomas
EXHIBIT 21
Subsidiaries of Registrant
State or
Jurisdiction of Percent
Name of Subsidiary Incorporation Owned
- ------------------ --------------- -------
R.J.Simpson Manufacturing Company Ontario, Canada 100%
(Canada) Ltd.
Simpson Industries, S.A. de C.V. Federal District 99%
of Mexico
Dampers SAS Lyon, France 100%
Simpson International (U.K.) Ltd. Halifax, England 100%
Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Simpson Industries, Inc.
We consent to the incorporation by reference in the registration statement
(No. 33-39679) on Form S-8 pertaining to the Simpson Industries, Inc. Savings
Plan, to incorporation by reference in the registration statement (No.
33-39678) on Form S-8 pertaining to the Simpson Industries, Inc. Fremont
Operation Savings Plan, to incorporation by reference in the registration
statement (No. 2-95425) on Form S-8 pertaining to the Simpson Industries,
Inc. 1984 Stock Option Plan, incorporation by reference in the registration
statement (No. 33-62806) on Form S-8 pertaining to the 1993 Executive
Long-Term Incentive Plan, to incorporation by reference in the registration
statement (No. 33-62802) 1993 Non-Employee Director Stock Option Plan, and to
incorporation by reference to the registration statement (No. 333-52843) on
Form S-3 pertaining to the offering of shares in connection with the
acquisition of Stahl International, Inc., of our report dated January 27,
1999, relating to the consolidated balance sheets of Simpson Industries,
Inc., and subsidiaries as of December 31, 1998, and 1997, and the related
consolidated statements of operations, shareholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
December 31, 1998, which report appears in the December 31, 1998, annual
report on Form 10-K of Simpson Industries, Inc.
/S/ KPMG LLP
Detroit, Michigan.
March 19, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S AUDITED FINANCIAL
STATEMENTS AS OF AND FOR THE PERIOD ENDING DECEMBER 31,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-START> JAN-01-1998
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 6,145
<SECURITIES> 0
<RECEIVABLES> 72,785
<ALLOWANCES> 0
<INVENTORY> 22,866
<CURRENT-ASSETS> 114,539
<PP&E> 328,609
<DEPRECIATION> 158,724
<TOTAL-ASSETS> 340,554
<CURRENT-LIABILITIES> 82,343
<BONDS> 0
<COMMON> 18,177
0
0
<OTHER-SE> 106,391
<TOTAL-LIABILITY-AND-EQUITY> 340,554
<SALES> 496,419
<TOTAL-REVENUES> 496,715
<CGS> 446,914
<TOTAL-COSTS> 462,273
<OTHER-EXPENSES> 2,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,588
<INCOME-PRETAX> 22,354
<INCOME-TAX> 7,599
<INCOME-CONTINUING> 14,755
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,755
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.80
</TABLE>
