SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarter ended March 31, 1995 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ______________ Commission file number 0-627 Douglas & Lomason Company (exact name of registrant as specified in its charter) Michigan 38-0495110 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 24600 Hallwood Court, Farmington Hills, Michigan 48335-1671 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (810) 478-7800 Former name, former address and former fiscal year, if changed since last year: Same 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 and (2) has been subject to such filing requirements for the past 90 days. YES __X__ NO _____ CLASS OUTSTANDING AT MAY 12, 1995 Common stock, $2 par value 4,242,970 DOUGLAS & LOMASON COMPANY Consolidated Condensed Balance Sheets March 31 December 31 1995 1994 ASSETS Current assets: Notes and accounts receivable $ 91,234,731 $ 99,927,502 Inventories Raw materials 10,288,837 10,823,892 Work in process and finished goods 9,978,178 8,967,433 20,267,015 19,791,325 Cash and other current assets 5,102,827 10,185,455 116,604,573 129,904,282 Property, plant and equipment, net 66,132,095 66,787,613 Other non-current assets 16,985,249 14,871,532 Total assets $199,721,917 $211,563,427 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 5,657,969 $ 5,938,130 Accounts payable and accrued expenses 56,765,401 71,787,370 Taxes on income 3,204,815 1,865,401 Total current liabilities 65,628,185 79,590,901 Postretirement benefits other than pensions 7,779,917 7,533,669 Other liabilities 6,542,359 6,822,429 Long-term debt, less current maturities 32,393,750 31,887,500 Shareholders' equity Preferred stock No par value, authorized 500,000 shares, issued - none Common stock 8,485,940 8,457,440 Par value $2 per share authorized 5,000,000 shares; issued and outstanding 4,242,970 shares in 1995 and 4,228,720 in 1994 Other capital 28,092,006 27,997,976 Retained earnings 55,004,897 52,048,512 Foreign currency translation adjustment (4,205,137) (2,775,000) Total shareholders' equity 87,377,706 85,728,928 Total liabilities and shareholders' equity $199,721,917 $211,563,427 2 DOUGLAS & LOMASON COMPANY Consolidated Condensed Statements of Income Three Months Ended March 31 ------------------------------ 1995 1994 Net sales $155,058,225 $123,465,958 Cost of sales 143,759,735 112,310,166 Gross profit 11,298,490 11,155,792 Selling, general and administrative expense 6,062,712 5,441,947 Operating income 5,235,778 5,713,845 Other income (expenses): Interest expense, net (695,788) (616,409) Interest income and other 215,694 202,599 (480,094) (413,810) Earnings before provision for income taxes 4,755,684 5,300,035 Income tax expenses 1,375,000 1,985,000 Net earnings $ 3,380,684 $ 3,315,035 Net earnings per share $ .80 $ .78 Weighted average number of shares 4,235,103 4,227,745 3 DOUGLAS & LOMASON COMPANY Consolidated Condensed Statements of Cash Flows Three Months Ended March 31 --------------------------- 1995 1994 Cash flows from operating activities: Net earnings $ 3,380,684 $ 3,315,035 Depreciation 3,011,223 3,076,632 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 4,782,590 (2,470,160) Increase in inventories (475,690) (3,317,587) Decrease (increase) in prepaid expenses and other assets (2,247,237) 636,946 Increase (decrease) in accounts payable, and accrued expenses (9,533,285) 5,971,127 Increase (decrease) in other liabilities (33,822) 2,388,186 Net cash provided (used) by operating activities (1,115,537) 9,600,179 Cash flows from investing activities: Proceeds from the sale of property, plant and equipment 61,452 73,499 Acquisition of property, plant and equipment (3,416,396) (4,110,254) Net cash used by investing activities (3,354,944) (4,036,755) Cash flows from financing activities: Repayment of long-term debt (1,773,911) (1,747,701) Proceeds from long-term borrowings, net 2,000,000 --- Repayment of short-term debt --- (1,000,000) Proceeds from exercised stock options, net 122,530 6,125 Dividends paid (424,299) (422,797) Net cash used by financing activities (75,680) (3,164,373) Effect of translation on cash (669,987) --- Net increase (decrease) in cash (5,216,148) 2,399,051 Cash at beginning of year 6,532,415 2,745,818 Cash at end of quarter $ 1,316,267 $ 5,144,869 4 DOUGLAS & LOMASON COMPANY Notes to Consolidated Condensed Financial Statements 1. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of March 31, 1995 and 1994, and the results of operations for the three months then ended, and cash flow for the three months then ended, subject to year end audit adjustments. 2. On Thursday, May 4, 1995, the Company announced that it had entered into a definitive merger agreement to acquire all of the outstanding shares of Bestop, Inc., a publicly traded manufacturer of soft tops for utility vehicles for approximately $44.0 million in cash. Bestop, Inc. reported $54.0 million in sales and $3.5 million in net income for the year ended December 31, 1994. The transaction will be completed by means of a Tender Offer for all of the outstanding shares of Bestop followed by a merger in which any shares not acquired in the Tender Offer will be acquired. 5 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Funds provided from operations and additional borrowings were the principal sources of cash in the first quarter of 1995. Capital expenditures of $3.4 million and long-term debt repayment of $1.8 million resulted in a negative cash flow of $5.2 million in the first quarter. At March 31, 1995, the Company had available $17.0 million from its lines of credit at two banks. Results of Operations Net Sales Net sales for the quarter ended March 31, 1995, were $155.1 million up 26% over the $123.5 million in the first quarter of 1994. The increase in first quarter sales over 1994 first quarter sales is attributable to production of the fully trimmed seats for the Ford Contour and Mercury Mystique models. Cost of Sales The cost of sales as a percentage of net sales increased 1.7% in the first quarter of 1995 compared to the same period of 1994. This decline in gross margin reflects the continued pressure from customers for price reductions and the higher raw material prices. Selling, General and Administrative Expenses Selling, general and administrative expenses in the first quarter of 1995 increased approximately $620,000 compared to the same period of 1994. Wage increases and additional staffing in the Sales Department are the principal components of this increase. Interest Expense Interest expense in the first quarter of 1995 of $696,000 increased approximately $80,000 or 13% from the same period of 1994, principally as a result of higher debt level in 1995. Net Earnings Net earnings of $3.4 million or $.80 per share increased modestly over the $3.3 million or $.78 per share for the first quarter of 1994. Financial Condition The balance sheet remained strong at the end of the first quarter of 1995. The current ratio was 1.78-to-1, and debt to total capitalization was 27.0 at March 31, 1995. 6 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K There were no reports on Form 8-K filed by the Registrant during the first quarter of 1995. SIGNATURES 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. DOUGLAS & LOMASON COMPANY (Registrant) Date: May 15, 1995 /s/ James J. Hoey ---------------------------- James J. Hoey Senior Vice President & Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) 7