SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended June 30, 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 checkmark 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 AUGUST 15, 1995
Common stock, $2 par value 4,243,720 shares
DOUGLAS & LOMASON COMPANY
Consolidated Condensed Balance Sheets
June 30 December 31
1995 1994
------------ ------------
ASSETS
Current assets:
Notes and accounts receivable $ 95,113,047 $ 99,927,502
Inventories
Raw materials 11,204,803 10,823,892
Work in process and finished goods 15,221,180 8,967,433
------------ ------------
26,425,983 19,791,325
Cash and other current assets 10,340,941 10,185,455
------------ ------------
131,879,971 129,904,282
Property, plant and equipment, net 75,072,645 66,787,613
Other non-current assets 19,904,407 14,871,532
Intangibles 36,133,414 ---
------------ ------------
Total assets $262,990,437 $211,563,427
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 5,370,843 $ 5,938,130
Accounts payable and accrued expenses 65,378,868 71,787,370
Taxes on income 1,892,703 1,865,401
------------ ------------
Total current liabilities 72,642,414 79,590,901
Postretirement benefits other than
pensions 8,026,165 7,533,669
Other liabilities 17,543,780 6,822,429
Long-term debt, less current maturities 77,984,000 31,887,500
Shareholders' equity
Preferred stock
No par value, authorized 500,000
shares, issued - none
Common stock 8,487,440 8,457,440
Par value $2 per share authorized
5,000,000 shares; issued and
outstanding 4,243,720 shares in
1995 and 4,228,720 in 1994
Other capital 28,096,631 27,997,976
Retained earnings 54,124,872 52,048,512
Foreign currency translation adjustment (3,914,865) (2,775,000)
------------ ------------
Total shareholders' equity 86,794,078 85,728,928
------------ ------------
Total liabilities and
shareholders' equity $262,990,437 $211,563,427
============ ============
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DOUGLAS & LOMASON COMPANY
Consolidated Condensed Statements of Income
Three Months Ended Six Months Ended
June 30 June 30
---------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
Net sales $130,601,835 $123,253,404 $285,660,060 $246,719,362
Cost of sales 125,130,449 113,582,619 268,890,184 225,892,785
------------ ------------ ------------ ------------
Gross profit 5,471,386 9,670,785 16,769,876 20,826,577
Selling, general and
administrative expense 5,959,375 5,434,963 12,022,087 10,876,910
------------ ------------ ------------ ------------
Operating income (loss) (487,989) 4,235,822 4,747,789 9,949,667
Other income (expenses):
Interest expense, net (1,053,889) (591,478) (1,749,677) (1,207,887)
Interest income
and other 46,225 256,725 261,919 459,324
------------ ------------ ------------ ------------
(1,007,664) (334,753) (1,487,758) (748,563)
Earnings (loss) before
provision for
income taxes (1,495,653) 3,901,069 3,260,031 9,201,104
Income tax expense
(benefit) (1,040,000) 1,390,000 335,000 3,375,000
------------ ------------ ------------ ------------
Net earnings (loss) $ (455,653) $ 2,511,069 $ 2,925,031 $ 5,826,104
============ ============ ============ ============
Net earnings (loss)
per share $ (.11) $ .60 $ .69 $ 1.38
============ ============ ============ ============
Weighted average number
of shares 4,243,580 4,227,970 4,239,365 4,227,858
============ ============ ============ ============
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DOUGLAS & LOMASON COMPANY
Consolidated Condensed Statements of Cash Flows
Six Months Ended
June 30
---------------------------------
1995 1994
------------ ------------
Cash flows from operating activities:
Net earnings $ 2,925,031 $ 5,826,104
Depreciation and amortization 6,437,053 6,274,800
Postretirement benefits other than
pensions 492,496 ---
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 8,939,624 (6,471,796)
(Increase) decrease in inventories 2,847,317 (6,646,375)
(Increase) decrease in prepaid expenses
and other assets (7,188,151) 1,294,844
Increase (decrease) in accounts payable,
and accrued expenses (8,176,033) 10,270,544
Increase (decrease) in other liabilities (6,788) 1,077,299
------------ ------------
Net cash provided by operating activities 6,270,549 11,625,420
Cash flows from investing activities:
Proceeds from the sale of property,
plant and equipment 83,811 187,240
Acquisition of property, plant and
equipment (9,356,113) (7,182,707)
Cost of acquisition, net of cash (43,487,920) ---
------------ ------------
Net cash used by investing activities (52,760,222) (6,995,467)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt 47,000,000 4,500,000
Repayment of long-term debt --- (3,154,787)
Repayment of short-term debt (3,221,455) (7,000,000)
Proceeds from exercised stock
options, net 128,655 6,125
Dividends paid (848,671) (845,594)
------------ ------------
Net cash provided (used) by financing
activities 43,058,529 (6,494,256)
------------ ------------
Effect of translation on cash (718,962) ---
Net decrease in cash (4,150,106) (1,864,303)
Cash at beginning of year 6,532,415 2,745,818
------------ ------------
Cash at end of quarter $ 2,382,309 $ 881,515
============ ============
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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 June 30, 1995 and 1994, and the results of operations
for the six months then ended, and changes in financial position for
the six months then ended, subject to year end audit adjustments.
2. On June 8, 1995, Douglas & Lomason Company (the "Company") acquired the
stock of Bestop, Inc. ("Bestop"). Bestop is the leading designer and
manufacturer in North America of soft tops and accessories for small
sport utility vehicles. Bestop sells its product domestically and
internationally to original equipment manufacturer (OEM) companies and in
the aftermarket. The purchase agreement required a purchase price of
approximately $43,952,000. The acquisition will be accounted for in
accordance with the purchase method of accounting.
Had the acquisition of Bestop, Inc. occurred as of January 1, 1994,
revenues, net income and earnings per share would have been as follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
(in 000's except for per share data)
1995 1994 1995 1994
---- ---- ---- ----
Revenues $143,108 $137,303 $314,025 $271,894
Net Income $ (928) $ 2,680 $ 2,310 $ 5,575
Earnings Per Share $ (.22) $ .63 $ .54 $ 1.32
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Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Liquidity and Capital Resources
Funds provided from long term debt of $47.0 million and from operations of
$6.3 million were the principal source of cash in the first six months of
1995. The investment in Bestop, Inc. of $44.0 million, capital expenditures
of $9.4 million and debt repayment of $3.2 million resulted in a negative
cash flow of $3.3 million during the period.
In June 1995, the Company entered into an amended and restated unsecured
revolving credit agreement with two banks in the amount of $60.0 million
which matures in June 1998. Borrowings outstanding under this facility
totaled $38.0 million at June 30, 1995. In June 1995, the Company executed a
new term loan for $25.0 million with two banks with quarterly principal
payments commencing July 1, 1999, and a maturity date of June 8, 2003, at a
interest rate of 7.8%.
Results of Operations
Net Sales
Net sales for the quarter ended June 30, 1995, were $130.6 million, up 6%
from 1994 second quarter sales of $123.3 million. The increase in 1995
second quarter sales over 1994 second quarter sales is directly attributable
to the production of the fully trimmed seats for the Ford Contour and Mercury
Mystique models. Sales for the 1995 second quarter reflect a 25% decline in
the Company's decorative moldings business compared to 1994 second quarter
and 35% decrease in seating related sales (exclusive of sales related to the
Company's Contour and Mystique programs). For the six months ended June 30,
1995, the Company had sales of $285.7 million or 16% increase over the $246.7
million in 1994 first six months. Again, this increase is directly
attributable to the Ford Contour and Mercury Mystique models.
Cost of Sales
Cost of sales as a percentage of net sales for the second quarter increased
3.6% in 1995 compared to the same period of 1994. This unfavorable
relationship resulted from the significantly lower sales than previously
planned in our 1995 budget. In addition, raw material increases and
continued pressure from customers for price reductions contributed to this
increase. For the six months ended June 30, 1995, cost of sales as a
percentage of net sales increased 2.5% compared to the same period of 1994.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the second quarter of 1995
increased $524,000 or 9.6% in 1995 compared to the second quarter of 1994.
Additional staffing, medical insurance and travel expenses are the principal
components of this increase.
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Interest Expense
Interest expense in the second quarter of 1995 of $1.1 million increased
approximately $462,000 or 78% from the same period of 1994, principally as a
result of the $55.0 million higher debt level in 1995 compared to 1994. As
mentioned earlier, approximately $44.0 million was borrowed for the
acquisition of Bestop, Inc. in June of 1995.
Net Earnings (Loss)
The net loss of $456,000 or $.11 per share decreased over the net earnings of
$2.5 million or $.60 per share in the second quarter of 1994. The
unfavorable sales level during the second quarter and inability to absorb
overhead resulted in the unfavorable cost of sales and net loss for the
period.
Financial Condition
The balance sheet remains strong at the end of the second quarter of 1995.
The current ratio was 1.82 to 1 and the debt to total capitalization was
.47 to 1 at June 30, 1995.
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PART II - OTHER INFORMATION
Item 2. Changes in Securities
The Registrant entered into an Amended and Restated Credit Agreement
("Agreement") dated as of June 8, 1995, with two banks providing for a new
revolving credit facility in the aggregate principal amount of $60,000,000
and an additional term loan facility in the aggregate principal amount of
$25,000,000.
The Agreement contains provisions providing that the Company will
maintain a ratio of consolidated current assets to consolidated current
liabilities of not less than 1.5 to 1.0; permit consolidated working capital
to be less than $32,000,000; maintain consolidated tangible net worth of not
less than the sum of (i) $50,000,000 plus (ii) 50% of cumulative net income
since January 1, 1996, plus (iii) 75% of the net cash proceeds of any
issuance of capital stock of the Registrant after June 8, 1995; permit the
ratio of consolidated funded debt to consolidated capitalization to be
greater than 65%; permit the ratio of (i) consolidated earnings from
operations before deduction of interest and income taxes to (ii) interest
expense paid or accrued for any period of four consecutive fiscal quarters to
be less than 2.0:1.0; and during the continuance of any default or event of
default or if as a result thereof a default or event of default would exist,
declare or pay any dividends (except dividends payable in capital stock of
the Registrant) or make any other distribution upon its shares of capital
stock, or acquire or retire any of its capital stock.
Item 4. Submission of Matters to a Vote of Security Holders
The following information is furnished with respect to the Annual
Meeting of security holders of the Registrant held during April 1995:
(a) A meeting was held on April 28, 1995, and was an Annual
Meeting.
(b) Not applicable
(c) At such meeting the nominees for election as directors, Dale A.
Johnson, Harry A. Lomason II and Gary T. Walther, were elected
for the term of office to expire at the 1998 Annual Meeting of
Shareholders. The votes cast with respect to each nominee for
director are as follows:
Votes to
Withhold
Authority
to Vote
Votes for for the
Nominee Nominee Nominee
------- --------- --------
Dale A. Johnson 3,979,634 23,346
Harry A. Lomason II 3,979,790 23,190
Gary T. Walther 3,979,934 23,046
Further at such meeting the shareholders approved the
Directors' Stock Plan. 3,537,352 affirmative votes, 52,930
negative votes and 412,642 abstain votes were cast with
respect to such plan.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(1) Directors' Stock Plan
(2) Amended and Restated Credit Agreement dated as of June 8,
1995, between Registrant and banks named in Section 2.1
thereof - filed as Exhibit 2 to Form 8-K Report dated
June 8, 1995, and incorporated herein by reference.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K during the quarter
for which this Report is filed. The report was dated June 8,
1995, and reported the acquisition by the Registrant of Bestop,
Inc.
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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: August 15, 1995 /s/ James J. Hoey
-------------------------
James J. Hoey
Senior Vice President &
Chief Financial Officer
(Duly Authorized Officer
and Principal Financial
Officer)
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