Item 1. Business
Douglas & Lomason Company (the "Company" or the "Registrant") is a major supplier of original equipment parts to the North American automotive industry. Automotive products, which have accounted for approximately 93% of the Company's total sales during each of the last three years, include fully trimmed seating, seating components and mechanisms, and decorative and functional body trim parts. These products are manufactured primarily for the three major U.S. automotive manufacturers and other original equipment suppliers.
The Company also manufactures material handling systems and custom truck bodies and trailers. These products have accounted for approximately 7% of the Company's total sales during each of the last three years.
The Registrant classifies its business into two segments: automotive products and industrial and commercial products. Exclusive of automotive products, no segment accounts for 10 percent or more of consolidated revenues or profits. A summary of certain segment information appears in note (6) of notes to consolidated financial statements on page 24 of the 1993 Annual Report to Shareholders and is incorporated herein by reference.
AUTOMOTIVE PRODUCTS
Seating
Seating systems and components account for the principal portion of the Company's automotive business. The Company is one of the three major independent manufacturers and assemblers of seating systems and components for the North American automotive industry. Seat assemblies produced by the Company satisfy the seat requirements of a full range of vehicles. The Company currently supplies complete seats to customer assembly plants on a "just-in-time" (JIT) "sequenced parts delivery" (SPD) basis for passenger cars, light and medium duty trucks, and vans.
The Company's seat frame business has grown significantly over the 47 years it has been supplying seating systems and components to the North American automotive industry. The Company believes it is currently one of the largest independent manufacturers of seat frames in North America. The seat frames manufactured by the Company are incorporated by it into complete seats and sold to vehicle assembly plants and are also sold separately to other seat assemblers. The Company believes that it is recognized as one of the most vertically integrated independent seat manufacturers in North America. The Company is capable of producing seat frames, manual seat mechanisms, foam, covers, suspension systems, and plastic seat trim at its manufacturing facilities.
The Company believes that opportunities for growth may emerge in foreign transplant operations in North America and from the expanding trend toward seat assembly outsourcing in Europe. The Company has established technical and business relationships with two Japanese partners to facilitate the exchange of technical information and to establish business relationships with foreign automakers. In 1988, the Company formed a
50/50 joint venture company with Namba Press Works Co., Ltd. of Japan. This company, named Bloomington-Normal Seating Company, is located in Normal, Illinois and manufactures seating systems for Diamond-Star Motors, a subsidiary of Mitsubishi Motors Corporation. The Company also has a license agreement with Imasen Electric of Japan for the manufacture of manual seat adjuster mechanisms.
Body Trim Components
The Company has been supplying decorative body trim components to the automotive industry since 1902. These products include body side, wheel opening and structural B-pillar moldings, head and tail lamp bezels, bumpers, including those back filled with Azdel, and window and door sealing systems. The Company has the capability of processing large quantities of metal, plastic and composite material parts through injection molding, pressing, rolling, laminating and extruding systems and finishing parts through anodizing and painting.
The Company produces a variety of injection molded and extruded plastic moldings including bi-laminate body side and deck lid moldings. These moldings can be finished in a variety of ways such as with a high gloss, in body colors including metallics, or with encapsulated colorful graphics.
Product Engineering
The Company pursues new products and processes through a 120 person product engineering staff. This staff is customer-focused in that all new projects must be based on a customer's requirements. This facilitates the development of products in shorter lead time and matches products more closely to consumer requirements.
Sales and Customers
Sales coverage by the Company of the North American automotive industry is maintained by an experienced direct sales staff consisting of 18 account managers, divided into separate and distinct customer-focused groups. The sales group is supported by fully developed program management teams incorporating simultaneous engineering techniques.
The percent of sales to total automotive sales of seating systems and body trim components to the three major automotive manufacturers during the past three years is as follows:
Sales percentages include sales to other seat assemblers for ultimate sale to the above customers.
INDUSTRIAL AND COMMERCIAL PRODUCTS
This segment of the Company's business accounted for approximately 7% of total Company sales in each of the three years ended December 31, 1993.
Industrial and commercial products include:
Material Handling Equipment. The Company designs and manufactures material handling equipment such as conveyors, bagging and packaging machines, pulleys and rollers. The Company also produces related equipment such as elevators, bag flatteners, automatic palletizers and bag placers. These products are sold to the agriculture, mining and transportation industries.
Custom Truck Bodies and Trailers. The Company serves the food and beverage industry through the design and manufacture of delivery truck bodies and trailers for soft drinks, beer, bottled water, bakery products, milk and ice cream, meats, frozen foods and other products. These units include side-loading aluminum bodies and trailers, and steel, aluminum or reinforced fiberglass refrigerated truck bodies and trailers.
Competition
The Company is one of the three major independent seat suppliers to the North American automotive industry. The Company's primary independent competitors are Johnson Controls Inc.'s Automotive Products Group and Lear Seating Inc. The Company also competes with captive seating suppliers, namely: Inland Fisher-Guide Division of General Motors Corporation and the Plastic Trim Products Division of Ford Motor Company.
The Company's body trim business competes with a significant number of major competitors. There are 10 to 12 with a full range of material, process and product capabilities similar to the Company's and several competitors with specialized niche products.
GENERAL
Raw materials purchased by the Registrant consisting of carbon steel, aluminum, stainless steel, plastics, and fabric are generally available from numerous independent sources. Management believes that the trend in its material costs is upward.
While the Registrant owns several patents and patent rights, patent protection is not materially significant to its business.
To the best of the Registrant's knowledge, its permits are in compliance with all federal, state and local environmental protection provisions.
The number of persons employed by the Registrant at December 31, 1993 was 5,697.
The Registrant does not consider its business seasonal except to the extent that automotive changeovers to new models affect business conditions.
Item 2.
Item 2. Properties
The corporate offices of the Company and the product engineering staff are located in Farmington Hills, Michigan in two buildings containing approximately 81,000 square feet. Information as to the Company's 20 principal facilities in operation as of December 31, 1993 is set forth below:
The Company believes that substantially all of its property and equipment is in good condition and adequate for its present requirements.
Item 3.
Item 3. Legal Proceedings
There are no material legal proceedings pending against the Registrant or its subsidiaries.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Executive Officers of the Registrant
The names and ages of all executive officers of the Registrant are as follows:
Officers of the Registrant are elected each year at the Annual Meeting of the Board of Directors to serve for the ensuing year or until their successors are elected and qualified.
All of the executive officers of the Registrant named above have held various executive positions with the Registrant for more than five years except: Mr. Nicholson who has been President and Chief Executive Officer of PVS Chemicals, Inc. and a Director of the Company for more than five years; Mr. Hampton who has been a partner with the law firm of Dickinson, Wright, Moon, Van Dusen and Freeman for more than five years; Mr. Hill who joined the Company in October 1992 after serving in various positions with General Motors Corporation for more than five years, the most recent of which was Director for the Quality Network of the Delco Chassis Division; and Mr. Pniewski who joined the Company in January 1994 after serving in various positions with Ford Motor Company for more than twenty years, the most recent of which was Vehicle Seat Systems Engineering Manager in the Plastics and Trim Products Division.
There is no family relationship between any of the foregoing persons.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters
The information set forth under the caption "Shareholder Information" on page 29 the 1993 Annual Report of the Registrant is incorporated by reference herein. As of December 31, 1993 there were 806 holders of record of the Registrant's Common Stock.
Item 6.
Item 6. Selected Financial Data
The information set forth under the caption "Selected Financial and Other Data" on page 17 the 1993 Annual Report of the Registrant is incorporated by reference herein.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 16 and 17 of the 1993 Annual Report of the Registrant is incorporated by reference herein.
Item 8.
Item 8. Financial Statements and Supplementary Data
The information set forth on pages 18 through 27 of the 1993 Annual Report of the Registrant is incorporated by reference herein.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not Applicable
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
The information set forth under the caption "Information About Directors and Nominees for Directors" on pages 3 and 4 of the definitive Proxy Statement of the Registrant dated March 31, 1994 filed with the Securities and Exchange Commission pursuant to Regulation 14A is incorporated by reference herein for information as to directors of the Registrant.
Reference is made to Part I of this Report for information as to executive officers of the Registrant.
Item 11.
Item 11. Executive Compensation
The information set forth under the caption "Executive Compensation" on pages 6, 7 and 8 of the definitive Proxy Statement of the Registrant dated March 31, 1994 filed with the Securities and Exchange Commission pursuant to Regulation 14A is incorporated by reference herein.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Security Ownership" on pages 1 and 2 of the definitive Proxy Statement of the Registrant dated March 31, 1994 filed with the Securities and Exchange Commission pursuant to Regulation 14A is incorporated by reference herein.
Item 13.
Item 13. Certain Relationships and Related Transactions
The information set forth in footnotes (2) and (3) under the caption "Executive Compensation" and in the last paragraph under the caption "Retirement Plan" on pages 6 and 7 of the definitive Proxy Statement of the Registrant dated March 31, 1994 filed with the Securities and Exchange Commission pursuant to Regulation 14A is incorporated by reference herein.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements
The following consolidated financial statements of Douglas & Lomason Company and subsidiaries included in the Douglas & Lomason Company 1993 Annual Report to its Shareholders for the year ended December 31, 1993 are incorporated herein by reference:
Consolidated Balance Sheets at December 31, 1993 and 1992.
Consolidated Statements of Earnings for each of the years in the three year period ended December 31, 1993.
Consolidated Statements of Shareholders' Equity for each of the years in the three year period ended December 31, 1993.
Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 1993.
Notes to Consolidated Financial Statements.
The consolidated financial information for the years ended December 31, 1993, 1992, and 1991 set forth under "Index to Consolidated Financial Statements and Schedules."
EXHIBITS
(The Exhibit marked with one asterisk below was filed as an Exhibit to the Form 10-K Report of the Registrant for the fiscal year ended December 31, 1983; the Exhibit marked with two asterisks below was filed as an Exhibit to the Form 10-Q Report of the Registrant for the quarter ended June 30, 1988; the Exhibit marked with three asterisks below was filed as an Exhibit to the Form 10-K Report of the Registrant for the fiscal year ended December 31, 1989; the Exhibits marked with four asterisks below were filed as Exhibits to the Form 10-K Report of the Registrant for the fiscal year ended December 31, 1991; and the Exhibit marked with five asterisks below was filed as an Exhibit to the Form 10-K Report of the Registrant for the fiscal year ended December 31, 1992, and are incorporated herein by reference, the Exhibit numbers in brackets being those in such Form 10-K or 10-Q Reports).
(3)(a) Restated Articles of Incorporation of Registrant.
(3)(b) By-Laws of the Registrant.
(4)(a)** Term Loan Agreement dated as of May 20, 1988 between Registrant and the Banks named in Section 2.1 thereof [1].
(4)(a)(1)**** Amendments to Term Loan Agreement dated as of May 20, 1988. [(4)(a)(1)]
(4)(b)**** Term Loan Agreement dated as of December 19, 1991 between Registrant and NBD Bank, N.A. and Manufacturers Bank, N.A., as amended. [(4)(b)]
(10)(a)* 1982 Incentive Stock Option Plan of the Registrant [10](1)
(10)(b)*** 1990 Stock Option Plan of the Registrant [(10)(b)](1)
(10)(c)**** Joint Venture Agreement dated as of July 25, 1986 between Registrant and Namba Press Works Co., Ltd. [(10)(c)]
(13) Portions of 1993 Annual Report of Registrant.
(22)***** Subsidiaries of the Registrant. [(22)]
(24) Consent of KPMG Peat Marwick.
(b) Reports on Form 8-K.
The Registrant has not filed any reports on Form 8-K during the last quarter of the period covered by this report.
(1) This document is a management contract or compensatory plan.
SIGNATURES
Pursuant to the requirements of the Section 13 or 15 (d) 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 on the 29th day of March, 1994.
DOUGLAS & LOMASON COMPANY
By: /s/H. A. Lomason II ------------------------------- H. A. Lomason II Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)
By: /s/James J. Hoey ------------------------------- James J. Hoey Senior Vice President and Chief Financial Officer (Principal Financial Officer)
By: /s/Melynn M. Zylka ------------------------------- Melynn M. Zylka Treasurer (Principal Accounting Officer)
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 29, 1994.
Signature Title --------- -----
/s/James E. George Director ---------------------- James E. George
/s/H. A. Lomason II Director ---------------------- H. A. Lomason II
/s/Dale A. Johnson Director ---------------------- Dale A. Johnson
/s/Charles R. Moon Director ---------------------- Charles R. Moon
/s/James B. Nicholson Director ---------------------- James B. Nicholson
Director ---------------------- Richard N. Vandekieft
/s/Gary T. Walther Director ---------------------- Gary T. Walther
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The consolidated balance sheets of the Company and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, together with the related notes and the report of KPMG Peat Marwick, independent Certified Public Accountants, all contained in the Company's 1993 Annual Report to Shareholders, are incorporated herein by reference.
The following additional financial data should be read in conjunction with the financial statements in the 1993 Annual Report to Shareholders. All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. Financial statements and related schedules of the Registrant have been omitted because the Registrant is primarily an operating company and the subsidiaries included in the consolidated financial statements are totally held.
Independent Auditors' Report
The Board of Directors and Shareholders Douglas & Lomason Company:
Under date of January 31, 1994, we reported on the consolidated balance sheets of Douglas & Lomason Company and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the years in the three- year period ended December 31, 1993, as contained in the 1993 Annual Report to Shareholders. These financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
As discussed in notes 1 and 8 to the consolidated financial statements, the Company changed its method of accounting for income taxes and postretirement benefits other than pensions in 1993.
/s/ KPMG Peat Marwick
Detroit, Michigan January 31, 1994
Schedule V
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES Property, Plant, and Equipment Years ended December 31, 1991, 1992, and 1993 (Expressed in thousands of dollars)
Schedule VI
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES Accumulated Depreciation of Property, Plant, and Equipment Years ended December 31, 1991, 1992, and 1993 (Expressed in thousands of dollars)
Schedule VIII
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES Valuation and Qualifying Accounts Years ended December 31, 1992, 1991, and 1990 (Expressed in thousands of dollars)
Schedule IX
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES Short-Term Borrowings Years ended December 31, 1992, 1991, and 1990 (Expressed in thousands of dollars, except for percentages)
Schedule X
DOUGLAS & LOMASON COMPANY AND SUBSIDIARIES Supplementary Income Statement Information Years ended December 31, 1993, 1992, and 1991 (Expressed in thousands of dollars)
Other disclosures under Rule 12-11 are omitted because the individual amounts do not exceed 1 percent of total consolidated net sales.