FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 0-23238
DEFLECTA-SHIELD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 42-1411117
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1800 North 9th Street, 50125
Indianola, Iowa (Zip Code)
(Address of principal
executive offices)
(515) 961-6100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
As of August 13, 1996, 4,800,000 shares of the registrant's Common
Stock were outstanding.
<PAGE>
DEFLECTA-SHIELD CORPORATION
INDEX
Page
PART I. Financial Information . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at December 31, 1995
and June 30, 1996 . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income for the Three
Months ended June 30, 1995 and 1996 . . . . . . . . . . . 4
Condensed Consolidated Statements of Income for the Six
Months ended June 30, 1995 and 1996 . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows for
the Six Months ended June 30, 1995 and 1996 . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 8
PART II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of Security Holders . . 14
Item 5. Other Information . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 15
2
<PAGE>
<TABLE>
DEFLECTA-SHIELD CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(in thousands)
<CAPTION>
December 31, June 30,
1995 1996
<S> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . $533 $410
Accounts receivable, less allowance for
doubtful accounts of $623 and
$690, respectively . . . . . . . . . . . 9,708 10,380
Inventories . . . . . . . . . . . . . . . 10,580 9,801
Deferred income taxes . . . . . . . . . . 1,635 1,635
Prepaid expenses . . . . . . . . . . . . 912 316
------ ------
Total current assets . . . . . . . . . 23,368 22,542
Property and equipment, net . . . . . . . . 9,344 9,214
Intangible assets . . . . . . . . . . . . . 12,601 12,342
Other assets . . . . . . . . . . . . . . . 97 101
------ ------
$45,410 $44,199
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt . . . . . . . . . . . . . . . . . . $1,523 $ 1,121
Accounts payable . . . . . . . . . . . . 4,233 5,142
Accrued expenses . . . . . . . . . . . . 2,423 2,342
------ ------
Total current liabilities . . . . . . 8,179 8,605
Deferred taxes . . . . . . . . . . . . . . 275 275
Long-term debt, less current maturities . . 12,345 9,029
Stockholders' equity (Note 2):
Common stock . . . . . . . . . . . . . . 48 48
Additional paid-in capital . . . . . . . 18,556 18,556
Retained earnings . . . . . . . . . . . . 6,007 7,686
------ ------
$45,410 $44,199
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
<TABLE>
DEFLECTA-SHIELD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three Months Ended June 30,
1995 1996
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . $19,346 $18,255
Cost of sales . . . . . . . . . . . . . 13,210 11,917
------ ------
Gross profit . . . . . . . . . . . . . 6,136 6,338
Operating expenses:
Selling . . . . . . . . . . . . . . . 2,892 2,648
General and administrative . . . . . 1,606 1,819
Amortization of other assets . . . . 113 113
----- -----
Income from operations . . . . . . . . 1,525 1,758
Interest expense . . . . . . . . . . . 368 241
----- -----
Income before income taxes . . . . . . 1,157 1,517
Income tax expense . . . . . . . . . . 451 560
----- -----
Net income . . . . . . . . . . . . . . $706 $957
===== =====
Net income per share . . . . . . . . . $.15 $.20
Weighted average common shares 4,800 4,800
outstanding . . . . . . . . . . . . . .
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
<TABLE>
DEFLECTA-SHIELD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<CAPTION>
Six Months Ended June 30,
1995 1996
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . $36,697 $36,278
Cost of sales . . . . . . . . . . . . . 23,566 24,150
------ ------
Gross profit . . . . . . . . . . . . . 13,131 12,128
Operating expenses:
Selling . . . . . . . . . . . . . . . 5,511 5,295
General and administrative . . . . . 3,271 3,359
Amortization of other assets . . . . 226 259
----- -----
Income from operations . . . . . . . . 4,123 3,215
Interest expense . . . . . . . . . . . 652 549
----- -----
Income before income taxes . . . . . . 3,471 2,666
Income tax expense . . . . . . . . . . 1,354 987
----- -----
Net income . . . . . . . . . . . . . . $2,117 $1,679
===== =====
Net income per share . . . . . . . . . $.44 $.35
Weighted average common shares 4,800 4,800
outstanding . . . . . . . . . . . . . .
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
<TABLE>
DEFLECTA-SHIELD CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<CAPTION>
Six Months Ended June 30,
1995 1996
<S> <C> <C>
Cash flow from operating activities:
Net income . . . . . . . . . . . . . . $ 2,117 $1,679
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation . . . . . . . . . . . 649 939
Amortization of other assets . . . 226 259
Add (deduct) changes in assets and
liabilities:
Accounts receivable . . . . . . (873) (672)
Inventories . . . . . . . . . . (3,784) 779
Prepaid expenses . . . . . . . (594) 596
Accounts payable . . . . . . . (254) 909
Accrued expenses . . . . . . . (386) (81)
------- -------
Net cash provided by operating activities (2,899) 4,408
------- -------
Cash flows from investing activities:
Acquisition adjustments . . . . . . . . (2) -
Acquisition of other assets . . . . . . (330) (4)
Purchases of property and equipment . . (2,934) (809)
------- -------
Cash used by investing activities . . . (3,266) (813)
Cash flows from financing activities:
Net proceeds (repayment) on revolving
line of credit . . . . . . . . . . . . 6,038 (3,316)
Repayment of debt . . . . . . . . . . . (246) (402)
------- -------
Net cash provided (used) by financing
activities . . . . . . . . . . . . . . . 5,792 (3,718)
------- -------
Net decrease in cash . . . . . . . . . . (373) (123)
Cash at beginning of period . . . . . . . 747 533
------- -------
Cash at end of period . . . . . . . . . . $ 374 $ 410
======= =======
Cash paid during the period for interest $ 644 $ 590
Cash paid during the period for income
taxes . . . . . . . . . . . . . . . . . . $ 2,215 $ 645
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
DEFLECTA-SHIELD CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION OF UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements of
Deflecta-Shield Corporation and its subsidiaries (collectively, the
"Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the
opinion of management, all adjustments (which were of a normal
recurring nature) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended
June 30, 1996 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1996. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
NOTE 2 - CHANGES IN STOCKHOLDERS' EQUITY (in thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings
<S> <C> <C> <C>
Balance at December 31, 1995 $ 48 $18,556 $6,007
Net income for the six months
ended June 30, 1996 -- -- 1,679
----- ------ -----
Balance at June 30, 1996 $ 48 $18,556 $7,686
===== ====== =====
</TABLE>
7
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial
condition and results of operations should be read in conjunction
with the condensed consolidated financial statements included
elsewhere herein and in conjunction with the Management's Discussion
and Analysis of Financial Condition and Results of Operations
contained in the Company's Annual Report on Form 10-K for the Fiscal
Year ended December 31, 1995.
Results of Operations
The following tables set forth, for the periods indicated,
certain operating data as a percentage of net sales and the
percentage change in the dollar amounts of such items compared to the
prior period.
<TABLE>
<CAPTION>
Percentage of Net Percentage Increase
Sales (Decrease)
Three Months Ended June Three Months Ended
30, June 30,
1996
over
1995 1996 1995
<S> <C> <C> <C>
Net sales . . . . . . . . . . 100.0% 100.0% (5.6%)
Cost of sales . . . . . . . . 68.3 65.3 (9.8)
----- -----
Gross profit . . . . . . . . 31.7 34.7 3.3
Selling expenses . . . . . . 14.9 14.5 (8.4)
General and administrative
expenses . . . . . . . . . . 8.3 10.0 13.3
Amortization of other assets .6 .6 -
----- -----
Income from operations . . . 7.9 9.6 15.3
Interest expense . . . . . . 1.9 1.3 (34.5)
----- -----
Income before income taxes . 6.0% 8.3% 31.1
===== =====
</TABLE>
<TABLE>
<CAPTION>
Percentage of Net Percentage
Sales Increase (Decrease)
Six Months Ended Six Months Ended
June 30, June 30,
1996
over
1995 1996 1995
<S> <C> <C> <C>
Net sales . . . . . . . . . . 100.0% 100.0% (1.1%)
Cost of sales . . . . . . . . 64.2 66.6 2.5
----- -----
Gross profit . . . . . . . . 35.8 33.4 (7.6)
Selling expenses . . . . . . 15.0 14.6 (3.9)
General and administrative
expenses . . . . . . . . . . 8.9 9.2 2.7
Amortization of other assets .6 .7 14.6
----- -----
Income from operations . . . 11.3 8.9 (22.0)
Interest expense . . . . . . 1.8 1.6 (15.8)
----- -----
Income before income taxes . 9.5% 7.3% (23.2)
===== =====
</TABLE>
8
<PAGE>
Three Months ended June 30, 1996 Compared to Three Months Ended June
30, 1995
Net Sales. Net sales were $18,255,000 for the three months
ended June 30, 1996, compared to $19,346,000 for the three months
ended June 30, 1995, a decrease of $1,091,000, or 5.6%. Net sales of
light truck products decreased by $313,000 and net sales of heavy
truck products decreased by $778,000. Net sales of Fibernetics
products increased by $156,000 and net sales of Delta III products
increased by $143,000 in the three months ended June 30, 1996, as
compared to the three months ended June 30, 1995. The remainder of
the change in net sales of light truck products, a net decrease of
$612,000, was primarily attributable to fiberglass running board
products and bug deflectors. Sales of heavy truck products in the
three months ended June 30, 1996, were affected by lower sales of new
heavy trucks, which adversely affected demand for the Company's heavy
truck products.
Gross Profit. Gross profit was $6,338,000 for the three months
ended June 30, 1996, compared to $6,136,000 for the three months
ended June 30, 1995, an increase of $202,000, or 3.3%. The increase
in gross profit was primarily attributable to an increase in the
average sale price of some light truck products and an increase in
manufacturing efficiency, offset by gross profit lost to reduced net
sales. As a percentage of net sales, gross profit increased to 34.7%
for the three months ended June 30, 1996, compared to 31.7% for the
three months ended June 30, 1995, an increase of 3.0% of net sales.
This increase in gross profit percentage was primarily attributable
to sales of light truck products, offset in part by a decrease in
gross profit on sales of heavy truck products.
Selling Expenses. Selling expenses were $2,648,000 for the
three months ended June 30, 1996, compared to $2,892,000 for the
three months ended June 30, 1995, a decrease of $244,000, or 8.4%.
As a percentage of net sales, selling expense decreased to 14.5% for
the three months ended June 30, 1996, from 14.9% for the three months
ended June 30, 1995. This decrease of 0.4% of net sales was
primarily attributable to a decrease in variable selling expenses of
1.8% of net sales for the quarter ended June 30, 1996, compared to
the quarter ended June 30, 1995. The remaining change in selling
expenses, an increase of 1.4% of net sales was primarily attributable
to an increase in advertising expense of 1.2% of net sales and an
increase in bad debts of 0.5% of net sales.
General and Administrative Expenses. General and
administrative expenses were $1,819,000 for the three months ended
June 30, 1996, compared to $1,606,000 for the three months ended June
30, 1995, an increase of $213,000, or 13.3%. This increase was
primarily attributable to an increase in product development expense
of $210,000 for the three months ended June 30, 1996, compared to the
three months ended June 30, 1995. As a percentage of net sales,
general and administrative expense increased to 10.0% for the three
months ended June 30, 1996, from 8.3% for the three months ended June
30, 1995.
Interest Expense. Interest expense was $241,000 for the three
months ended June 30, 1996, compared to $368,000 for the three months
ended June 30, 1995, a decrease of $127,000, or 34.5%. Interest
bearing debt averaged approximately $11,288,000 for the quarter ended
June 30, 1996, compared to approximately $16,010,000 for the quarter
ended June 30, 1995.
9
<PAGE>
Six Months ended June 30, 1996 Compared to Six Months Ended June 30,
1995
Net Sales. Net sales were $36,278,000 for the six months ended
June 30, 1996, compared to $36,697,000 for the six months ended June
30, 1995, a decrease of $419,000, or 1.1%. Net sales of light truck
products increased by $670,000 and net sales of heavy truck products
decreased by $1,089,000. The increase in net sales of light truck
products was attributable to sales increases of $696,000 in Delta III
products, $444,000 in Fibernetics products, and $289,000 in
Trailmaster products, offset by a net decrease of $759,000 in other
light truck product categories, primarily fiberglass running board
products. Sales of heavy truck products in 1996 were affected by
lower sales of new heavy trucks which adversely affected demand for
the Company's heavy truck products.
Gross Profit. Gross profit was $12,128,000 for the six months
ended June 30, 1996, compared to $13,131,000 for the six months ended
June 30, 1995, a decrease of $1,003,000, or 7.6%. The reduction in
gross profit was primarily attributable to cost increases in raw
materials, the incurrence of additional overhead to accommodate
planned business consolidations, and the decrease in heavy truck
product sales, offset by an increase in the average sale price of
some light truck products and an increase in manufacturing
efficiency. As a percentage of net sales, gross profit decreased to
33.4% for the six months ended June 30, 1996, compared to 35.8% for
the six months ended June 30, 1995, a decrease of 2.4% of net sales.
This decrease in gross profit percentage was primarily attributable
to sales of light truck products. Gross profit on heavy truck
products, as a percentage of such sales, also decreased in the six
months ended June 30, 1996 compared to the six months ended June 30,
1995.
Selling Expenses. Selling expenses were $5,295,000 for the six
months ended June 30, 1996, compared to $5,511,000 for the six months
ended June 30, 1995, a decrease of $216,000, or 3.9%. As a
percentage of net sales, selling expense decreased to 14.6% for the
six months ended June 30, 1996, from 15.0% for the six months ended
June 30, 1995. This decrease of 0.4% of net sales was primarily
attributable to a decrease in sales personnel (compensation and
associated costs, including travel, decreased as a percentage of net
sales by 0.5% for the six months ended June 30, 1996, compared to the
six months ended June 30, 1995) and a decrease in variable selling
expenses of 1.3% of net sales for the six months ended June 30, 1996,
compared to the six months ended June 30, 1995. The remaining change
in selling expenses, an increase of 1.4% of net sales was primarily
attributable to an increase in advertising expense of 0.9% of net
sales and an increase in bad debts of 0.3% of net sales.
General and Administrative Expenses. General and
administrative expenses were $3,359,000 for the six months ended June
30, 1996, compared to $3,271,000 for the six months ended June 30,
1995, an increase of $88,000, or 2.7%. As a percentage of net sales,
general and administrative expenses increased to 9.2% for the six
months ended June 30, 1996, from 8.9% for the six months ended June
30, 1995. This increase of 0.3% of net sales was primarily
attributable to an increase of 0.8% of net sales for product
development expense. The remaining change in general and
administrative expenses, a decrease of 0.5% of net sales, was
primarily attributable to a decrease of 0.8% of net sales for general
and administrative wages and associated costs, including travel.
Interest Expense. Interest expense was $549,000 for the six
months ended June 30, 1996, compared to $652,000 for the six months
ended June 30, 1995, a decrease of $103,000, or 15.8%. Interest
bearing debt averaged approximately $12,183,000 for the six months
ended June 30, 1996, compared to approximately $14,522,000 for the
six months ended June 30, 1995.
10
<PAGE>
Seasonality and Quarterly Data
Although the Company deviated from the pattern in 1995, it has
historically generated the majority of its net sales and income from
operations in the second and third quarters of each year. The
Company expects results to move toward the historical pattern in 1996
and future years. This seasonal pattern combined with effects of new
product introductions and the timing of customer orders can cause the
Company's results of operations to vary from quarter to quarter.
Liquidity and Capital Resources
The Company's primary sources of working capital are cash flow
from operations and borrowings by the Company under its credit
facility. As of June 30, 1996, the Company had cash balances of
approximately $410,000 and working capital of approximately
$13,937,000.
Net cash provided (used) by operating activities was
approximately $4,408,000 and ($2,899,000) for the six months ended
June 30, 1996, and June 30, 1995, respectively.
The Company's capital expenditures totaled approximately
$809,000 and $2,934,000 for the six months ended June 30, 1996, and
June 30, 1995, respectively.
In August 1994, the Company initiated the construction of a new
distribution facility in Indianola, Iowa. Total capital expenditures
of the Company associated with the Indianola, Iowa facility,
including computer hardware and software, were $3.7 million, with
approximately $1.6 million expended in 1994 and approximately $2.1
million expended in 1995. Phase I of the facility was operational in
early January, 1995. Phase II of the facility, an expansion of
approximately 60,000 square feet was completed and occupied in July
1995. The costs incurred in the fourth quarter of 1994 and in the
first six months of 1995 in connection with this project, primarily
consisting of costs and expenses associated with acquiring and
training the initial workforce for the Indianola facility, were
expensed as these costs were incurred. The Company is currently
studying the appropriate means of consolidating portions of its
manufacturing and distribution facilities. The locations into which
various activities would be consolidated have not been determined.
The Company anticipates that costs and expenses associated with any
relocation and consolidation of the Company's distribution and
manufacturing functions would be substantially offset by cost savings
generated through such relocation and consolidation. The timing
relationship between the incurrence of such charges and the
generation of such savings may cause the Company's results of
operations to vary from quarter to quarter.
On July 21, 1994, the Company entered in to a $24 million
Revolving Credit and Acquisition Facility (the "Credit Agreement")
with Heller Financial, Inc. (the "Lender"), pursuant to which the
Lender is providing Deflecta-Shield with a $6.0 million revolving
credit facility (the "Revolver") and an $18.0 million acquisition
facility (the "Acquisition Facility"). Approximately $2 million of
the Revolver was used to finance the purchase of the assets of
Trailmaster Products, Inc., with the balance of the purchase price
paid with cash generated from operations of Deflecta-Shield's
subsidiaries. Approximately $5.8 million of the Acquisition Facility
was used to finance the purchase of Delta III, Inc., with the balance
of the purchase price paid with a note made by the acquired
subsidiary for approximately $1.5 million. Deflecta-Shield's
obligations under the Credit Agreement are guaranteed by its direct
and indirect wholly owned subsidiaries. Some of these guarantees are
secured by the assets of certain subsidiaries.
11
<PAGE>
Availability under the Acquisition Facility is subject to the sole and
absolute discretion of the Lender. It is anticipated that future
acquisitions by Deflecta-Shield and its subsidiaries will be funded
primarily through the Acquisition Facility. No such acquisitions are
currently contemplated.
The Credit Agreement provides for the revolving credit and
acquisition loans up to the amount of the respective commitments
until July 21, 1999. Under the terms of the Credit Agreement,
Deflecta-Shield paid a closing fee of $60,000, and is obligated to
pay a fee of .5% per annum of the unused Revolver and .2% per annum
of the unused portion of the Acquisition Facility during the term of
the Credit Agreement. The Revolver is limited by levels of inventory
and receivables which, together with other assets, secure the
borrowings under the Credit Agreement. Interest on all loans under
the Credit Agreement is payable at varying rates, ranging from the
Lender's base rate (the "Base Rate") plus .5% for loans under the
Revolver, to a maximum of the Base Rate plus 2% for the final $6
million drawn under the Acquisition Facility.
The Credit Agreement contains certain covenants covering
Deflecta-Shield and its subsidiaries on a consolidated basis,
including, without limitation, covenants relating to the maximum
amount of indebtedness which the entities may incur and limitations
on capital expenditures and payment of dividends by Deflecta-Shield.
As of June 30, 1996, the outstanding principal balance,
together with accrued interest, under the credit facility was
approximately $9,090,000. During 1995, the Lender agreed to make
$3,000,000 of the Acquisition Facility available on a revolving
basis. At June 30, 1996, the aggregate amount available under the
revolving credit facility and the revolving portion of the
acquisition facility was approximately $4,427,000. The Company
believes that cash flow from operations and available borrowings
under the credit facility are adequate to meet the Company's
liquidity needs for the next 12 months.
In the ordinary course of business, the Company is subject to
examination by the Internal Revenue Service (the "IRS"). In October
1994, the IRS initiated an examination of the 1990 Federal income tax
return of DFM Corp. The examination was subsequently expanded to
include the 1991 and 1992 Federal income tax returns. As of June
1996, the examination has been substantially completed, and the
Company anticipates settlement of all matters in connection with this
examination for a total assessment of between $245,000 and $300,000
in additional Federal income tax for the periods examined. The
Company believes that it has made adequate provisions for the
additional assessment of taxes.
Forward Looking Information
Information included in this Report on Form 10-Q relating to
sales and earnings expectations constitutes forward-looking
statements that involve a number of risks and uncertainties. From
time to time, information provided by the Company or statements made
by its employees may contain other forward-looking statements.
Factors that could cause actual results to differ materially from the
forward-looking statements include but are not limited to: general
economic conditions, including their impact on the sale of new light
trucks; sales of heavy trucks, which are cyclical; competitive
factors, including pricing pressures; changes in product and sales
mix; the timely development and introduction of competitive new
products by the Company and market acceptance of those products;
inventory risks due to changes in market demand or the Company's
business strategies; difficulties which may be encountered in the
consolidation of the Company's manufacturing and distribution
facilities; changes in effective tax rates; and the fact that a
substantial portion of the Company's sales are generated from
12
<PAGE>
orders received during the quarter, making prediction of quarterly
revenues and earnings difficult. The words "believe," "expect,"
"anticipate," "project," and similar expressions identify forward looking
statements. Readers are cautioned not to place undue reliance on
these forward looking statements, which speak only as of the date
made. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The predecessor of Deflecta-Shield's subsidiary Trailmaster
Products, Inc. ("Trailmaster") has been named as a defendant in Sexton v.
Ford Motor Company, et al., a negligence/products liability/wrongful
death/breach of warranty lawsuit pending in the Court of Common Pleas
of Sumter County, South Carolina. The complaint was originally filed
on May 22, 1996. The suit arises out of an automobile accident which
occurred on September 21, 1993. The complaint states that the
plaintiff's decedent's truck was equipped with a lift kit
manufactured by such predecessor. The Asset Purchase Agreement
pursuant to which the Company acquired Trailmaster provides that the
predecessor must indemnify the Company for certain claims arising out
of occurrences prior to the closing date of the acquisition. The
defense of the claim has been tendered to the predecessor's insurer
and the Company believes that the predecessor and its insurer will
bear any liability resulting from this claim.
Deflecta-Shield's Trailmaster subsidiary has been named as a
defendant in Haag v. Trailmaster Products, Inc., a negligence/products
liability lawsuit pending in the District Court of Bexar County,
Texas. The complaint was originally filed on July 19, 1996. The
suit arises out of an automobile accident which occurred on July 16,
1994. The complaint states that the plaintiff's truck was equipped
with a lift kit manufactured by the predecessor of such subsidiary.
The defense of the claim has been tendered to the predecessor's
insurer and the Company believes that the predecessor and its insurer
will bear any liability resulting from this claim.
Item 4. Submission of Matters to a Vote of Security Holders
On May 23, 1996, the Company held its annual meeting of
stockholders. At the meeting, William V. Glastris, Jr., Ronald D.
Katz, Mark C. Mamolen, Douglas Mergenthaler, Charles S. Meyer,
Russell E. Stubbings, and Leon E. Vinyard were elected to serve as
directors of the Company for the 1996 fiscal year, the
Deflecta-Shield Corporation 1996 Stock Program was approved, and the
appointment of Price Waterhouse as auditors for the Company was
approved.
The following table provides the number of votes cast for,
against or withheld, as well as the number of abstentions and broker
non-votes as to each matter submitted to a vote of stockholders at
the meeting.
Matter For Withheld
Election of Directors:
William V. Glastris, Jr. 4,105,504 11,450
Ronald D. Katz 4,105,504 11,450
Mark C. Mamolen 4,105,504 11,450
Douglas Mergenthaler 4,105,804 11,150
Charles S. Meyer 4,105,504 11,450
Russell E. Stubbings 4,105,804 11,150
Leon E. Vinyard 4,105,504 11,450
14
<PAGE>
Matter For Against Abstentions Broker Non-Votes
Approval of 1996
Stock Program 3,847,876 233,533 9,755 25,790
Matter For Against Abstentions Broker Non-Votes
Approval of
Auditors 4,107,904 3,300 5,750 0
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27.--Financial Data Schedule
(b) Reports on Form 8-K
None during the fiscal quarter ended June 30, 1996.
15
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
Date: August 13, 1996
DEFLECTA-SHIELD CORPORATION
By: /s/ LOWELL A. SWARTHOUT
-------------------------
Lowell A. Swarthout,
Vice President and Chief
Financial Officer
(Duly authorized officer
and Principal Financial
and Accounting Officer)
16
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