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 September 30, 1999
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 0-21139
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
| Delaware |
|
38-3185711 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer
Identification No.) |
4508 IDS Center
Minneapolis, Minnesota |
|
55402 |
| (Address of principal executive offices) |
|
(Zip Code) |
(612) 342-2311
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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 / /
The
number of shares outstanding of the Registrant's Class A common stock, par value $.01 per share, at October 15, 1999 was 14,092,441 shares. The number of shares outstanding of the
Registrant's Class B common stock, par value $.01 per share, at October 15, 1999 was 3,320,303 shares.
Dura Automotive Systems, Inc.
Form 10-Q
Table of Contents
| PART I Financial Information |
|
|
Item 1. |
|
Financial Statements: |
|
|
|
|
Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 1999 and 1998 (unaudited) |
|
|
|
|
Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 1999 and 1998 (unaudited) |
|
|
|
|
Condensed Consolidated Balance Sheets at September 30, 1999 (unaudited) and December 31, 1998 |
|
|
|
|
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 1998 (unaudited) |
|
|
|
|
Notes to Condensed Consolidated Financial Statements (unaudited) |
|
|
Item 2. |
|
Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
|
Item 3. |
|
Quantitative and Qualitative Disclosures About Market Risk |
PART II Other Information |
|
|
Item 1. |
|
Legal Proceedings |
|
|
Item 6. |
|
Exhibits and Reports on Form 8-K |
SIGNATURE |
|
|
|
|
|
ITEM 1—FINANCIAL INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share amounts—unaudited)
|
|
Three Months Ended Sept. 30,
|
|
|
1999
|
|
1998
|
| Revenues |
|
$ |
580,886 |
|
$ |
185,204 |
| Cost of sales |
|
|
491,479 |
|
|
153,345 |
| |
|
|
|
|
| Gross profit |
|
|
89,407 |
|
|
31,859 |
| Selling, general and administrative expenses |
|
|
37,344 |
|
|
13,103 |
| Amortization expense |
|
|
8,218 |
|
|
3,128 |
| |
|
|
|
|
| Operating income |
|
|
43,845 |
|
|
15,628 |
| Interest expense, net |
|
|
22,863 |
|
|
5,377 |
| |
|
|
|
|
| Income before provision for income taxes, equity in losses of affiliate and minority interests |
|
|
20,982 |
|
|
10,251 |
| Provision for income taxes |
|
|
8,664 |
|
|
4,403 |
| Minority interest and equity in losses of affiliates, net |
|
|
415 |
|
|
— |
| Minority interest—dividends on trust preferred securities, net |
|
|
612 |
|
|
599 |
| |
|
|
|
|
| Net income |
|
$ |
11,291 |
|
$ |
5,249 |
| |
|
|
|
|
Basic earnings per common share |
|
$ |
0.65 |
|
$ |
0.43 |
| |
|
|
|
|
Diluted earnings per common share |
|
$ |
0.63 |
|
$ |
0.43 |
| |
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated statements.
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands, except per share amounts—unaudited)
|
|
Nine Months Ended Sept. 30,
|
|
|
|
1999
|
|
1998
|
|
| Revenues |
|
$ |
1,530,754 |
|
$ |
498,383 |
|
| Cost of sales |
|
|
1,292,366 |
|
|
413,230 |
|
| |
|
|
|
|
|
| Gross profit |
|
|
238,388 |
|
|
85,153 |
|
| Selling, general and administrative expenses |
|
|
92,320 |
|
|
33,986 |
|
| Amortization expense |
|
|
20,542 |
|
|
6,724 |
|
| |
|
|
|
|
|
| Operating income |
|
|
125,526 |
|
|
44,443 |
|
| Interest expense, net |
|
|
52,188 |
|
|
14,185 |
|
| |
|
|
|
|
|
| Income before provision for income taxes, equity in losses of affiliate and minority interests |
|
|
73,338 |
|
|
30,258 |
|
| Provision for income taxes |
|
|
29,595 |
|
|
12,591 |
|
| Minority interest and equity in losses of affiliates, net |
|
|
2,908 |
|
|
— |
|
| Minority interest—dividends on trust preferred securities, net |
|
|
1,834 |
|
|
1,297 |
|
| |
|
|
|
|
|
| Income before extraordinary item and accounting change |
|
|
39,001 |
|
|
16,370 |
|
| Extraordinary item—loss on early extinguishment of debt, net |
|
|
5,402 |
|
|
643 |
|
| Cumulative effect of change in accounting, net |
|
|
3,147 |
|
|
— |
|
| |
|
|
|
|
|
| Net income |
|
$ |
30,452 |
|
$ |
15,727 |
|
| |
|
|
|
|
|
Basic earnings per common share: |
|
|
|
|
|
|
|
| Income before extr. item and accounting change |
|
$ |
2.46 |
|
$ |
1.61 |
|
| Extraordinary item |
|
|
(0.34 |
) |
|
(0.06 |
) |
| Cumulative effect of change in accounting |
|
|
(0.20 |
) |
|
— |
|
| |
|
|
|
|
|
| Net income |
|
$ |
1.92 |
|
$ |
1.55 |
|
| |
|
|
|
|
|
Diluted earnings per common share: |
|
|
|
|
|
|
|
| Income before extr. item and accounting change |
|
$ |
2.35 |
|
$ |
1.58 |
|
| Extraordinary item |
|
|
(0.31 |
) |
|
(0.05 |
) |
| Cumulative effect of change in accounting |
|
|
(0.18 |
) |
|
— |
|
| |
|
|
|
|
|
| Net income |
|
$ |
1.86 |
|
$ |
1.53 |
|
| |
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated statements.
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
|
|
Sept. 30, 1999
|
|
December 31, 1998
|
|
|
|
(unaudited)
|
|
|
|
| Assets |
|
| Current assets: |
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
17,729 |
|
$ |
20,544 |
|
| Accounts receivable, net |
|
|
458,097 |
|
|
158,465 |
|
| Inventories |
|
|
137,886 |
|
|
50,498 |
|
| Other current assets |
|
|
118,506 |
|
|
45,924 |
|
| |
|
|
|
|
|
| Total current assets |
|
|
732,218 |
|
|
275,431 |
|
| |
|
|
|
|
|
| Property, plant and equipment, net |
|
|
487,360 |
|
|
188,732 |
|
| Goodwill, net |
|
|
1,022,439 |
|
|
435,960 |
|
| Other assets, net |
|
|
85,528 |
|
|
29,260 |
|
| |
|
|
|
|
|
| |
|
$ |
2,327,545 |
|
$ |
929,383 |
|
| |
|
|
|
|
|
Liabilities and Stockholders' Investment |
|
| Current liabilities: |
|
|
|
|
|
|
|
| Current maturities of long-term debt |
|
$ |
11,395 |
|
$ |
15,489 |
|
| Accounts payable |
|
|
250,582 |
|
|
99,512 |
|
| Accrued liabilities |
|
|
288,912 |
|
|
96,664 |
|
| |
|
|
|
|
|
| Total current liabilities |
|
|
550,889 |
|
|
211,665 |
|
| |
|
|
|
|
|
| Long-term debt, net of current maturities |
|
|
670,521 |
|
|
316,417 |
|
| Subordinated notes |
|
|
404,470 |
|
|
— |
|
| Other noncurrent liabilities |
|
|
228,528 |
|
|
108,014 |
|
Mandatorily redeemable convertible trust preferred securities |
|
|
55,250 |
|
|
55,250 |
|
| |
|
|
|
|
|
| Stockholders' investment: |
|
|
|
|
|
|
|
| Common stock—Class A |
|
|
140 |
|
|
90 |
|
| Common stock—Class B |
|
|
33 |
|
|
33 |
|
| Additional paid-in capital |
|
|
338,859 |
|
|
171,377 |
|
| Retained earnings |
|
|
97,504 |
|
|
67,052 |
|
Accumulated other comprehensive loss—cumulative translation
adjustment |
|
|
(18,649 |
) |
|
(515 |
) |
| |
|
|
|
|
|
| Total stockholders' investment |
|
|
417,887 |
|
|
238,037 |
|
| |
|
|
|
|
|
| |
|
$ |
2,327,545 |
|
$ |
929,383 |
|
| |
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated balance sheets.
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands—unaudited)
|
|
Nine Months Ended Sept. 30,
|
|
|
|
1999
|
|
1998
|
|
| OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
| Net income |
|
$ |
30,452 |
|
$ |
15,727 |
|
| Adjustments to reconcile net income to net cash provided by (used in) operating activities— |
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
55,915 |
|
|
19,357 |
|
| Equity in losses of affiliates and minority interest |
|
|
2,908 |
|
|
— |
|
| Extraordinary loss on extinguishment of debt |
|
|
5,402 |
|
|
643 |
|
| Cumulative effect of change in accounting, net |
|
|
3,147 |
|
|
— |
|
| Changes in other operating items |
|
|
(16,927 |
) |
|
(46,261 |
) |
| |
|
|
|
|
|
| Net cash provided by (used in) operating activities |
|
|
80,897 |
|
|
(10,534 |
) |
| |
|
|
|
|
|
| INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
| Acquisitions, net of cash acquired |
|
|
(563,113 |
) |
|
(190,779 |
) |
| Capital expenditures, net |
|
|
(57,947 |
) |
|
(16,426 |
) |
| Other, net |
|
|
(16,441 |
) |
|
(167 |
) |
| |
|
|
|
|
|
| Net cash used in investing activities |
|
|
(637,501 |
) |
|
(207,372 |
) |
| |
|
|
|
|
|
| FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
| Proceeds from borrowings, net |
|
|
191,431 |
|
|
65,027 |
|
| Proceeds from subordinated note offering, net |
|
|
394,653 |
|
|
— |
|
| Debt issue costs |
|
|
(19,537 |
) |
|
— |
|
| Proceeds from issuance of common stock and exercise of stock options |
|
|
3,745 |
|
|
107,441 |
|
| Proceeds from issuance of preferred securities |
|
|
— |
|
|
52,525 |
|
| Other, net |
|
|
— |
|
|
444 |
|
| |
|
|
|
|
|
| Net cash provided by financing activities |
|
|
570,292 |
|
|
225,437 |
|
| |
|
|
|
|
|
| EFFECT OF EXCHANGE RATES ON CASH |
|
|
(16,503 |
) |
|
1,335 |
|
| |
|
|
|
|
|
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
(2,815 |
) |
|
8,866 |
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
| Beginning of period |
|
|
20,544 |
|
|
4,148 |
|
| |
|
|
|
|
|
| End of period |
|
$ |
17,729 |
|
$ |
13,014 |
|
| |
|
|
|
|
|
The
accompanying notes are an integral part of these condensed consolidated statements.
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- 1.
- The
accompanying condensed consolidated financial statements have been prepared by Dura Automotive Systems, Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects
all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. Although the Company believes that the
disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial
statements and the notes thereto included in the Company's 1998 Annual Report to Stockholders.
Revenues
and operating results for the three and nine months ended September 30, 1999 are not necessarily indicative of the results to be expected for the full year.
- 2.
- Inventories
consisted of the following (in thousands):
|
|
Sept. 30, 1999
|
|
Dec. 31, 1998
|
| Raw materials |
|
$ |
72,058 |
|
$ |
23,067 |
| Work-in-process |
|
|
30,397 |
|
|
11,155 |
| Finished goods |
|
|
35,431 |
|
|
16,276 |
| |
|
|
|
|
| |
|
$ |
137,886 |
|
$ |
50,498 |
| |
|
|
|
|
- 3.
- Basic
earnings per share were computed by dividing net income by the weighted average number of Class A and Class B common shares outstanding during the quarter.
Diluted earnings per share include (i) the effects of outstanding stock options using the treasury stock method (ii) the effects of outstanding warrants, and (iii) the conversion
of the Preferred Securities from their date of issuance on March 20, 1998 as follows (in thousands, except per share amounts):
|
|
Three Months Ended Sept. 30,
|
|
Nine Months Ended Sept. 30,
|
|
|
1999
|
|
1998
|
|
1999
|
|
1998
|
| Net income |
|
$ |
11,291 |
|
$ |
5,249 |
|
$ |
30,452 |
|
$ |
15,727 |
| Interest expense on mandatorily redeemable convertible preferred securities, net of tax |
|
|
612 |
|
|
599 |
|
|
1,834 |
|
|
1,297 |
| |
|
|
|
|
|
|
|
|
| Net income applicable to common stockholders—diluted |
|
$ |
11,903 |
|
$ |
5,848 |
|
$ |
32,286 |
|
$ |
17,024 |
| |
|
|
|
|
|
|
|
|
| Weighted average number of Class A common shares outstanding |
|
|
14,085 |
|
|
9,000 |
|
|
12,553 |
|
|
6,011 |
| Weighted average number of Class B common shares outstanding |
|
|
3,322 |
|
|
3,342 |
|
|
3,324 |
|
|
4,149 |
| |
|
|
|
|
|
|
|
|
| |
|
|
17,407 |
|
|
12,342 |
|
|
15,877 |
|
|
10,160 |
| Dilutive effect of outstanding stock options after application of the treasury stock method |
|
|
123 |
|
|
76 |
|
|
115 |
|
|
86 |
| Dilutive effect of outstanding warrants |
|
|
152 |
|
|
— |
|
|
102 |
|
|
— |
| Dilutive effect of mandatorily redeemable convertible preferred securities, assuming conversion |
|
|
1,289 |
|
|
1,289 |
|
|
1,289 |
|
|
912 |
| |
|
|
|
|
|
|
|
|
| Diluted shares outstanding |
|
|
18,971 |
|
|
13,707 |
|
|
17,382 |
|
|
11,158 |
| |
|
|
|
|
|
|
|
|
| Basic earnings per share |
|
$ |
0.65 |
|
$ |
0.43 |
|
$ |
1.92 |
|
$ |
1.55 |
| |
|
|
|
|
|
|
|
|
| Diluted earnings per share |
|
$ |
0.63 |
|
$ |
0.43 |
|
$ |
1.86 |
|
$ |
1.53 |
| |
|
|
|
|
|
|
|
|
- 4.
- On
March 15, 1999, Dura acquired through a cash tender offer approximately 95% of the outstanding ordinary shares of Adwest Automotive plc ("Adwest"). The Company
subsequently purchased the remaining 5%. Adwest has annual revenues of approximately $400 million and is a supplier of driver control products primarily for European OEMs. The Company paid
approximately $320 million to acquire all of the outstanding shares of Adwest, including the assumption of approximately $106.1 million in indebtedness.
On
March 23, 1999, the Company completed its merger with Excel Industries, Inc. ("Excel"). Excel has annual revenues of approximately $1.1 billion of which 75% is derived from the
automotive/light truck market and the remainder from the recreational vehicle, mass transit and heavy truck markets. Approximately 78% of Excel's revenues are generated in North America with the
remainder in Europe. The Company issued an aggregate of approximately 5.1 million shares of its Class A Common Stock and paid $155.5 million in cash to Excel's former shareholders. The Company also
assumed approximately $100.0 million of indebtedness.
On
June 28, 1999, Dura acquired Metallifacture Limited ("Metallifacture") from Bullough plc for an aggregate purchase price of approximately $22.0 million. Metallifacture, located in
Nottingham, England, is a manufacturer of jacks and tire carriers for the European automotive industry. It has revenues of approximately $25 million and its major customers include Ford, General
Motors, Rover, Nissan and Volkswagen. The pro forma effects of this transaction are not material to the Company's results of operations for the nine months ended September 30, 1999.
The
cash consideration related to the acquisitions of Adwest, Excel and Metallifacture was financed with borrowings under a new credit facility which is further described in Note 5.
The
Company's acquisitions have been accounted for using the purchase method of accounting and, accordingly, the assets acquired and liabilities assumed have been recorded at fair value as of the
dates of acquisition, with the excess purchase price recorded as goodwill. With respect to the acquisitions of Excel and Adwest, the assets and liabilities have been recorded based upon preliminary
estimates of fair value. At September 30, 1999, liabilities for approximately $79.5 million for costs associated with the shutdown and consolidation of certain acquired facilities and $58.5
million in severance costs are recorded on the condensed consolidated balance sheet. Additional reserves of $43.2 million related to acquired facilities and $43.2 million in severance costs were
recorded during the nine months ended September 30, 1999. Costs incurred and charged, together with reallocations and exchange effects on such reserves amounted to $12.6 million related to acquired
facilities and $17.0 million in severance costs for the nine months ended September 30, 1999. The Company is further evaluating the fair value of certain assets acquired and liabilities assumed
in connection with certain rationalization plans. As a result, the final evaluation will likely result in adjustments to the preliminary allocations as plans are finalized which may result in changes
to goodwill.
The
accompanying unaudited pro forma condensed results of operations for the nine months ended September 30, 1999 give effect to the acquisitions of Adwest and Excel, the offering of the Senior
Subordinated Notes and the tender of the Trident Notes, which are further described in Note 5, as if such transactions had occurred at the beginning of the period, and exclude the effects of the
extraordinary loss and the cumulative effect of change in accounting. The accompanying unaudited pro forma condensed results of operations for the nine months ended September 30, 1998 give
effect to the transactions described above, the acquisitions of Universal, Trident and Hinge, the offering of Class A common stock, which is further described in Note 8, and the offering of the
Convertible Trust Preferred Securities, which is further described in Note 7, as if such transactions had occurred at the beginning of the period and exclude the effects of the extraordinary loss. The
1998 results of operations of Trident for the period prior to its acquisition date, which are included in the unaudited pro forma financial information, reflect pretax charges of approximately $3.6
million relating to the recognition of obligations to certain Trident customers. The following unaudited pro forma information does not purport to represent what the Company's results of operations
would actually have been if such transactions in fact had occurred at such date or to project the Company' results of future operations (in thousands, except per share data):
|
|
Pro Forma for the Nine Months Ended Sept. 30,
|
|
|
1999
|
|
1998
|
| Revenues |
|
$ |
1,918,805 |
|
$ |
1,880,484 |
| Operating income |
|
|
148,911 |
|
|
116,363 |
| Net income |
|
|
43,200 |
|
|
25,264 |
| Basic earnings per share |
|
$ |
2.48 |
|
$ |
1.45 |
| Diluted earnings per share |
|
$ |
2.38 |
|
$ |
1.45 |
- 5.
- Long-term
debt consisted of the following (in thousands):
|
|
Sept. 30, 1999
|
|
December 31, 1998
|
|
| Credit Agreement: |
|
|
|
|
|
|
|
| Tranche A and B term loans |
|
$ |
553,892 |
|
$ |
— |
|
| Revolving credit facility |
|
|
53,174 |
|
|
— |
|
| Trident 10% senior subordinated notes, due 2005 |
|
|
— |
|
|
81,150 |
|
| Former Credit Facility |
|
|
— |
|
|
243,510 |
|
| Other |
|
|
74,850 |
|
|
7,246 |
|
| |
|
|
|
|
|
| |
|
|
681,916 |
|
|
331,906 |
|
| Less-current maturities |
|
|
(11,395 |
) |
|
(15,489 |
) |
| |
|
|
|
|
|
| Total long-term debt |
|
$ |
670,521 |
|
$ |
316,417 |
|
| |
|
|
|
|
|
In
connection with the acquisitions of Adwest and Excel, the Company entered into an amended and restated $1.15 billion credit agreement ("Credit Agreement"). The Credit Agreement provides for
revolving credit facilities of $400.0 million, a $275.0 million tranche A term loan, a $275.0 million tranche B term loan and a $200.0 million interim term loan facility. Borrowings under the interim
loan were due and payable in September 2000, and, as further discussed below, were repaid in April 1999. Borrowings under the tranche A term loan are due and payable in March 2005
and borrowings under the tranche B term loan are due and payable in March 2006. The revolving credit facility is available until March 2005. As of September 30, 1999, rates on
borrowings under the Credit Agreement ranged from 4.6% to 7.6%. The Credit Agreement contains various restrictive covenants that limit indebtedness, investments, rental obligations and cash dividends.
The Credit Agreement also requires the Company to maintain certain financial ratios including minimum liquidity and interest coverage. The Company was in compliance with the covenants as of
September 30, 1999. Borrowings under the Credit Agreement are collateralized by the assets of the Company.
The
Credit Agreement provides the Company with the ability to denominate a portion of its revolving credit borrowings in foreign currencies up to an amount equal to $100.0 million. As of
September 30, 1999 revolving credit borrowings were as follows: $40.1 million in US dollars; $5.5 million in Canadian dollars; $3.9 million in Australian dollars; and $3.7 million in British
pound sterling.
On
June 24, 1999, Dura retired the $75.0 million of Trident's outstanding 10% Senior Subordinated Notes ("the Trident Notes") due 2005. The total consideration paid was approximately $84.0
million of principal and premium and was funded through borrowings under the credit agreement.
In
connection with the termination of the Company's former credit facility, the Company wrote-off deferred financing costs of approximately $2.7 million, net of income taxes, during the first quarter
of 1999. In addition, the Company wrote-off costs of approximately $2.7 million, net of income taxes, related to the tender of the Trident Notes during the second quarter of 1999. These charges are
reflected as extraordinary items in the accompanying statements of operations for the nine months ended September 30, 1999.
- 6.
- On
April 23, 1999, the Company completed the offering of $300 million and Euro 100 million of senior subordinated notes ("Subordinated Notes"). The Subordinated Notes mature
in May 2009 and bear interest at 9% per year, which is payable semi-annually. Net proceeds from this offering of approximately $395.0 million were used to repay the $200.0 million interim term
loan, approximately $78.1 million to retire other indebtedness and approximately $116.9 million will be used for general corporate purposes. These notes are collateralized by guarantees of certain of
the Company's subsidiaries (see Note 11).
- 7.
- Comprehensive
income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the
Company, comprehensive income represents net income adjusted for foreign currency translation adjustments. The Company had comprehensive income of approximately $11.1 million and $8.0 million for the
three months ended September 30, 1999 and 1998, respectively. The Company had comprehensive income of approximately $12.3 million and $15.4 million for the nine months ended
September 30, 1999 and 1998, respectively.
- 8.
- On
October 28, 1999, the Company agreed to acquire the seat adjusting business of Meritor Automotive, Inc. ("Meritor") for total cash consideration of $130 million.
Meritor's seat track business manufactures seat track adjusting mechanisms for the North American automotive industry. Meritor, with operations in Bracebridge, Ontario and Gordonsville, Tennessee, had
revenues of approximately $130 million and is a Tier II supplier to Lear Corporation and other automotive interior suppliers. The transaction, which is subject to regulatory approval, is expected to
close during the fourth quarter of 1999.
- 9.
- Effective January 1, 1999, the Company adopted the provisions of the Financial Accounting Standards Board Statement of Position ("SOP") No. 98-5, "Reporting on
the Costs of Start-Up Activities." SOP 98-5 requires costs associated with certain start-up activities be expensed as incurred versus capitalizing and expensing them over a period of time. Previously,
the Company capitalized certain design and engineering costs which related to future programs and amortized these costs over the life of the program once production began. Pursuant to the provisions
of SOP 98-5, the Company wrote off the unamortized balance of such capitalized costs, net of income tax benefits, of approximately $3.1 million. The write-off is reflected as a cumulative effect of
change in accounting in the accompanying condensed consolidated statement of operations for the nine months ended September 30, 1999.
SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," becomes effective for years beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting
standards
requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair
value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge criteria are met. Special accounting for qualifying hedges allow a
derivative's gains or losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. The Company has not yet quantified the impact of adopting SFAS No. 133.
- 10.
- Supplemental
cash flow information (in thousands):
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
1999
|
|
1998
|
|
1999
|
|
1998
|
| Cash paid for— |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest |
|
$ |
16,573 |
|
$ |
6,407 |
|
$ |
37,426 |
|
$ |
15,859 |
| Income taxes |
|
|
4,243 |
|
|
2,398 |
|
|
13,291 |
|
|
9,804 |
- 11.
- On March 20, 1998, Dura Automotive Systems Capital Trust (the "Issuer"), a wholly owned statutory business trust of the Company, completed the offering of
$55.3 million of its 71/2% Convertible Trust Preferred Securities ("Preferred Securities"). No separate financial statements of the Issuer have been included herein. The Company does
not consider that such financial statements would be material to holders of Preferred Securities because (i) all of the voting securities of the Issuer will be owned, directly or indirectly, by the
Company, a reporting company under the Exchange Act, (ii) the Issuer has no independent operations and exists for the sole purpose of issuing securities representing undivided beneficial interests in
the assets of the Issuer and investing the proceeds thereof in 71/2% Convertible Subordinated Debentures due March 31, 2028 issued by the Company and (iii) the obligations of the
Issuer under the Preferred Securities are fully and unconditionally guaranteed by the Company.
- 12.
- Condensed
consolidating guarantor and non-guarantor financial information:
The
following condensed consolidating financial information presents balance sheets, statements of operations and cash flow information related to the Company's business. Each Guarantor, as defined,
is a direct or indirect wholly owned subsidiary of the Company and has fully and unconditionally guaranteed the 9% senior subordinated notes issued by Dura Operating Corp., on a joint and several
basis. Separate financial statements and other disclosures concerning the Guarantors have not been presented because management believes that such information is not material.
Dura Automotive Systems, Inc.
Condensed Consolidating Statements of Operations for the Nine Months Ended Sept. 30, 1998
(Amounts in thousands)
|
|
Dura Operating Corp.
|
|
Guarantor Companies
|
|
Non-Guarantor Companies
|
|
Eliminations
|
|
Consolidated
|
| Revenues |
|
$ |
248,852 |
|
$ |
115,267 |
|
$ |
138,561 |
|
$ |
(4,297 |
) |
$ |
498,383 |
| Cost of sales |
|
|
209,530 |
|
|
93,855 |
|
|
114,142 |
|
|
(4,297 |
) |
|
413,230 |
| |
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
39,322 |
|
|
21,412 |
|
|
24,419 |
|
|
— |
|
|
85,153 |
| Selling, general and Administrative expenses |
|
|
15,904 |
|
|
7,191 |
|
|
10,891 |
|
|
— |
|
|
33,986 |
| Amortization expense |
|
|
2,685 |
|
|
1,739 |
|
|
2,300 |
|
|
— |
|
|
6,724 |
| |
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
|
20,733 |
|
|
12,482 |
|
|
11,228 |
|
|
— |
|
|
44,443 |
| Interest expense, net |
|
|
8,296 |
|
|
1,701 |
|
|
4,188 |
|
|
— |
|
|
14,185 |
| |
|
|
|
|
|
|
|
|
|
|
| Income before provision for Income taxes, equity in (earnings) losses of affiliates and minority interests |
|
|
12,437 |
|
|
10,781 |
|
|
7,040 |
|
|
— |
|
|
30,258 |
| Provision for income taxes |
|
|
4,664 |
|
|
4,216 |
|
|
3,711 |
|
|
— |
|
|
12,591 |
| Equity in (earnings) losses of affiliates |
|
|
(9,894 |
) |
|
— |
|
|
(2,916 |
) |
|
12,810 |
|
|
— |
| Minority interest-dividends on trust preferred securities, net |
|
|
1,297 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,297 |
| |
|
|
|
|
|
|
|
|
|
|
| Income (loss) before extraordinary item |
|
|
16,370 |
|
|
6,565 |
|
|
6,245 |
|
|
(12,810 |
) |
|
16,370 |
| Extraordinary item—loss on early extinguishment of debt, net |
|
|
643 |
|
|
— |
|
|
— |
|
|
— |
|
|
643 |
| |
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
15,727 |
|
$ |
6,565 |
|
$ |
6,245 |
|
$ |
(12,810 |
) |
$ |
15,727 |
| |
|
|
|
|
|
|
|
|
|
|
Dura Automotive Systems, Inc.
Condensed Consolidating Statements of Cash Flows for the Nine Months Ended Sept. 30, 1998
(Amounts in thousands)
|
|
Dura Operating Corp.
|
|
Guarantor Companies
|
|
Non-Guarantor Companies
|
|
Eliminations
|
|
Consolidated
|
|
| OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
15,727 |
|
$ |
6,565 |
|
$ |
6,245 |
|
$ |
(12,810 |
) |
$ |
15,727 |
|
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
8,748 |
|
|
4,056 |
|
|
6,553 |
|
|
— |
|
|
19,357 |
|
| Equity in losses of affiliates and minority interest |
|
|
(12,810 |
) |
|
— |
|
|
— |
|
|
12,810 |
|
|
— |
|
| Extraordinary loss on early extinguishment of debt |
|
|
643 |
|
|
— |
|
|
— |
|
|
— |
|
|
643 |
|
| Changes in other operating items |
|
|
(2,404 |
) |
|
(28,818 |
) |
|
(15,039 |
) |
|
— |
|
|
(46,261 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by (used in) operating activities |
|
|
9,904 |
|
|
(18,197 |
) |
|
(2,241 |
) |
|
— |
|
|
(10,534 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Acquisitions, net of cash acquired |
|
|
— |
|
|
(54,853 |
) |
|
(135,926 |
) |
|
— |
|
|
(190,779 |
) |
| Capital expenditures, net |
|
|
(6,849 |
) |
|
(2,383 |
) |
|
(7,194 |
) |
|
— |
|
|
(16,426 |
) |
| Other, net |
|
|
— |
|
|
— |
|
|
(167 |
) |
|
— |
|
|
(167 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
|
(6,849 |
) |
|
(57,236 |
) |
|
(143,287 |
) |
|
— |
|
|
(207,372 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from borrowings, net |
|
|
2,633 |
|
|
11,513 |
|
|
50,881 |
|
|
— |
|
|
65,027 |
|
| Debt financing (to)/from Affiliates |
|
|
(166,452 |
) |
|
67,032 |
|
|
99,420 |
|
|
— |
|
|
— |
|
| Proceeds from issuance of common stock and exercise of stock options |
|
|
107,441 |
|
|
— |
|
|
— |
|
|
— |
|
|
107,441 |
|
| Proceeds from issuance of preferred securities |
|
|
52,525 |
|
|
— |
|
|
— |
|
|
— |
|
|
52,525 |
|
| Other, net |
|
|
444 |
|
|
— |
|
|
— |
|
|
— |
|
|
444 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by (used for) financing activities |
|
|
(3,409 |
) |
|
78,545 |
|
|
150,301 |
|
|
— |
|
|
225,437 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| EFFECT OF EXCHANGE RATES ON CASH |
|
|
— |
|
|
(28 |
) |
|
1,363 |
|
|
— |
|
|
1,335 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
(354 |
) |
|
3,084 |
|
|
6,136 |
|
|
— |
|
|
8,866 |
|
| CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of period |
|
|
1,292 |
|
|
134 |
|
|
2,722 |
|
|
— |
|
|
4,148 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| End of period |
|
$ |
938 |
|
$ |
3,218 |
|
$ |
8,858 |
|
$ |
— |
|
$ |
13,014 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Dura Automotive Systems, Inc.
Condensed Consolidating Balance Sheets as of September 30, 1999
(Amounts in thousands)
|
|
Dura Operating Corp.
|
|
Guarantor Companies
|
|
Non-Guarantor Companies
|
|
Eliminations
|
|
Consolidated
|
|
| Assets |
|
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
4,908 |
|
$ |
450 |
|
$ |
12,371 |
|
$ |
— |
|
$ |
17,729 |
|
| Accounts receivable, net |
|
|
139,989 |
|
|
117,856 |
|
|
200,252 |
|
|
— |
|
|
458,097 |
|
| Inventories |
|
|
34,513 |
|
|
36,665 |
|
|
66,708 |
|
|
— |
|
|
137,886 |
|
| Other current assets |
|
|
36,830 |
|
|
25,902 |
|
|
55,774 |
|
|
— |
|
|
118,506 |
|
| Due from affiliates |
|
|
75,830 |
|
|
141,877 |
|
|
(186 |
) |
|
(217,521 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
292,070 |
|
|
322,750 |
|
|
334,919 |
|
|
(217,521 |
) |
|
732,218 |
|
| Property, plant and equipment, net |
|
|
107,948 |
|
|
112,705 |
|
|
266,707 |
|
|
— |
|
|
487,360 |
|
| Investment in subsidiaries |
|
|
544,954 |
|
|
29,619 |
|
|
168,746 |
|
|
(743,319 |
) |
|
— |
|
| Notes receivable from affiliates |
|
|
387,132 |
|
|
— |
|
|
44,617 |
|
|
(431,749 |
) |
|
— |
|
| Goodwill, net |
|
|
335,579 |
|
|
191,616 |
|
|
495,244 |
|
|
— |
|
|
1,022,439 |
|
| Other assets, net |
|
|
46,951 |
|
|
4,096 |
|
|
34,481 |
|
|
— |
|
|
85,528 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
1,714,634 |
|
$ |
660,786 |
|
$ |
1,344,714 |
|
$ |
(1,392,589 |
) |
$ |
2,327,545 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Investment |
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current maturities of long-term debt |
|
$ |
143 |
|
$ |
1,101 |
|
$ |
10,151 |
|
$ |
— |
|
$ |
11,395 |
|
| Accounts payable |
|
|
82,199 |
|
|
51,600 |
|
|
116,783 |
|
|
— |
|
|
250,582 |
|
| Due to affiliates |
|
|
43,285 |
|
|
140,084 |
|
|
34,152 |
|
|
(217,521 |
) |
|
— |
|
| Accrued liabilities |
|
|
101,237 |
|
|
52,189 |
|
|
135,486 |
|
|
— |
|
|
288,912 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
226,864 |
|
|
244,974 |
|
|
296,572 |
|
|
(217,521 |
) |
|
550,889 |
|
| Long-term debt, net of current maturities |
|
|
521,223 |
|
|
3,172 |
|
|
146,126 |
|
|
— |
|
|
670,521 |
|
| Subordinated notes |
|
|
404,470 |
|
|
— |
|
|
— |
|
|
— |
|
|
404,470 |
|
| Other noncurrent liabilities |
|
|
70,291 |
|
|
68,690 |
|
|
89,547 |
|
|
— |
|
|
228,528 |
|
| Notes payable to affiliates |
|
|
— |
|
|
22,757 |
|
|
409,022 |
|
|
(431,779 |
) |
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
1,222,848 |
|
|
339,593 |
|
|
941,267 |
|
|
(649,300 |
) |
|
1,854,408 |
|
| Mandatorily redeemable convertible trust preferred securities |
|
|
55,250 |
|
|
— |
|
|
— |
|
|
— |
|
|
55,250 |
|
| Stockholders' investment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock—Class A |
|
|
140 |
|
|
278,549 |
|
|
401,669 |
|
|
(680,218 |
) |
|
140 |
|
| Common stock—Class B |
|
|
33 |
|
|
— |
|
|
— |
|
|
— |
|
|
33 |
|
| Additional paid-in capital |
|
|
338,859 |
|
|
— |
|
|
— |
|
|
— |
|
|
338,859 |
|
| Retained earnings |
|
|
97,504 |
|
|
42,649 |
|
|
20,310 |
|
|
(62,959 |
) |
|
97,504 |
|
| Accumulated other comprehensive loss—cumulative translation adjustment |
|
|
— |
|
|
(5 |
) |
|
(18,532 |
) |
|
(112 |
) |
|
(18,649 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Total stockholders' investment |
|
|
436,536 |
|
|
321,193 |
|
|
403,447 |
|
|
(743,289 |
) |
|
417,887 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
1,714,634 |
|
$ |
660,786 |
|
$ |
1,344,714 |
|
$ |
(1,392,589 |
) |
$ |
2,327,545 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Dura Automotive Systems, Inc.
Condensed Consolidating Statements of Operations for the Nine Months Ended Sept. 30, 1999
(Amounts in thousands)
|
|
Dura Operating Corp.
|
|
Guarantor Companies
|
|
Non-Guarantor Companies
|
|
Eliminations
|
|
Consolidated
|
| Revenues |
|
$ |
555,031 |
|
$ |
433,914 |
|
$ |
556,855 |
|
$ |
(15,046 |
) |
$ |
1,530,754 |
| Cost of sales |
|
|
468,985 |
|
|
367,969 |
|
|
470,458 |
|
|
(15,046 |
) |
|
1,292,366 |
| |
|
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
86,046 |
|
|
65,945 |
|
|
86,397 |
|
|
— |
|
|
238,388 |
| Selling, general and administrative expenses |
|
|
44,313 |
|
|
10,701 |
|
|
37,306 |
|
|
— |
|
|
92,320 |
| Amortization expense |
|
|
8,762 |
|
|
3,950 |
|
|
7,830 |
|
|
— |
|
|
20,542 |
| |
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
|
32,971 |
|
|
51,294 |
|
|
41,261 |
|
|
— |
|
|
125,526 |
| Interest expense, net |
|
|
30,126 |
|
|
2,353 |
|
|
19,709 |
|
|
— |
|
|
52,188 |
| |
|
|
|
|
|
|
|
|
|
|
| Income before provision for income taxes, equity in (earnings) losses of affiliates and minority interests |
|
|
2,845 |
|
|
48,941 |
|
|
21,552 |
|
|
— |
|
|
73,338 |
| Provision for income taxes |
|
|
1,020 |
|
|
18,108 |
|
|
10,467 |
|
|
— |
|
|
29,595 |
| Equity in (earnings) losses of affiliates and minority interest |
|
|
(35,619 |
) |
|
— |
|
|
(2,445 |
) |
|
40,972 |
|
|
2,908 |
| Minority interest-dividends on trust preferred securities, net |
|
|
1,834 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,834 |
| |
|
|
|
|
|
|
|
|
|
|
| Income before extraordinary item and accounting change |
|
|
35,610 |
|
|
30,833 |
|
|
13,530 |
|
|
(40,972 |
) |
|
39,001 |
| Extraordinary item—loss on early extinguishment of debt, net |
|
|
2,011 |
|
|
— |
|
|
3,391 |
|
|
— |
|
|
5,402 |
| Cumulative effect of change in accounting, net |
|
|
3,147 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,147 |
| |
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
30,452 |
|
$ |
30,833 |
|
$ |
10,139 |
|
$ |
(40,972 |
) |
$ |
30,452 |
| |
|
|
|
|
|
|
|
|
|
|
Dura Automotive Systems, Inc.
Condensed Consolidating Statements of Cash Flows for the Nine Months Ended Sept. 30, 1999
(Amounts in thousands)
|
|
Dura Operating Corp.
|
|
Guarantor Companies
|
|
Non-Guarantor Companies
|
|
Eliminations
|
|
Consolidated
|
|
| OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
30,452 |
|
$ |
30,833 |
|
$ |
10,139 |
|
$ |
(40,972 |
) |
$ |
30,452 |
|
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
18,747 |
|
|
13,235 |
|
|
23,933 |
|
|
— |
|
|
55,915 |
|
| Equity in losses of affiliates and minority interest |
|
|
(39,138 |
) |
|
— |
|
|
1,074 |
|
|
40,972 |
|
|
2,908 |
|
| Extraordinary loss on extinguishment of debt |
|
|
2,011 |
|
|
— |
|
|
3,391 |
|
|
— |
|
|
5,402 |
|
| Cumulative effect of change in accounting, net |
|
|
3,147 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,147 |
|
| Changes in other operating items |
|
|
60,526 |
|
|
(38,008 |
) |
|
(39,445 |
) |
|
— |
|
|
(16,927 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by (used in) operating activities |
|
|
75,745 |
|
|
6,060 |
|
|
(908 |
) |
|
— |
|
|
80,897 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Acquisitions, net of cash acquired |
|
|
(442,501 |
) |
|
— |
|
|
(120,612 |
) |
|
— |
|
|
(563,113 |
) |
| Capital expenditures, net |
|
|
(7,486 |
) |
|
(15,942 |
) |
|
(34,519 |
) |
|
— |
|
|
(57,947 |
) |
| Other, net |
|
|
— |
|
|
— |
|
|
(16,441 |
) |
|
— |
|
|
(16,441 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities |
|
|
(449,987 |
) |
|
(15,942 |
) |
|
(171,572 |
) |
|
— |
|
|
(637,501 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Proceeds from borrowings, net |
|
|
358,551 |
|
|
(8,675 |
) |
|
(158,445 |
) |
|
— |
|
|
191,431 |
|
| Proceeds from subordinated note offering, net |
|
|
394,653 |
|
|
— |
|
|
— |
|
|
— |
|
|
394,653 |
|
| Debt issue costs |
|
|
(19,537 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(19,537 |
) |
| Proceeds from issuance of common stock and exercise of stock options |
|
|
3,745 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,745 |
|
| Debt financing (to)/from affiliates |
|
|
(359,509 |
) |
|
19,569 |
|
|
339,940 |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by financing activities |
|
|
377,903 |
|
|
10,894 |
|
|
181,495 |
|
|
— |
|
|
570,292 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| EFFECT OF EXCHANGE RATES ON CASH |
|
|
— |
|
|
(5 |
) |
|
(16,498 |
) |
|
— |
|
|
(16,503 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
3,661 |
|
|
1,007 |
|
|
(7,483 |
) |
|
— |
|
|
(2,815 |
) |
| CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Beginning of period |
|
|
1,247 |
|
|
(557 |
) |
|
19,854 |
|
|
— |
|
|
20,544 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| End of period |
|
$ |
4,908 |
|
$ |
450 |
|
$ |
12,371 |
|
$ |
— |
|
$ |
17,729 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Comparison of the three months ended September 30, 1999 to the three months ended September 30, 1998
Revenues—Revenues of $580.9 million for the three months ended September 30, 1999 increased substantially over the $185.2 million reported
for the three months ended September 30, 1998. The increase in revenues is primarily the result of the acquisitions of Excel and Adwest in March 1999. Sales also benefited from strong
North American vehicle production during the quarter.
Cost of Sales—Cost of sales for the three months ended September 30, 1999 increased by $338.2 million to $491.5 million from $153.3
million for the three months ended September 30, 1998. Cost of sales as a percentage of revenues for the three months ended September 30, 1999 was 84.6% compared to 82.8% for the three
months ended September 30, 1998. The corresponding decrease in gross margins is primarily the result of historically lower margins being achieved at the acquired operations.
S, G & A Expenses—Selling, general and administrative expenses were $37.3 million for the three months ended September 30,
1999 compared to $13.1 million for the three months ended September 30, 1998. The increase was due primarily to incremental costs from the acquisitions discussed above. As a percentage of
revenues, selling, general and administrative expenses were 6.4% for the three months ended September 30, 1999 compared to 7.1% for the three months ended September 30, 1998.
Interest Expense—Interest expense for the three months ended September 30, 1999 was $22.9 million compared to $5.4 million for the
three months ended September 30, 1998. The increase was due principally to borrowings incurred related to the acquisitions discussed above.
Income Taxes—The effective income tax rate was 41.3% for the three months ended September 30, 1999 and 43.0% for the three months
ended September 30, 1998. The effective rates differed from the statutory rates as a result of higher foreign tax rates and the effects of state taxes and non-deductible goodwill amortization.
The decrease in rate from prior year is due to the varying tax rates among the tax jurisdictions for which the Company operates.
Comparison of the nine months ended September 30, 1999 to the nine months ended September 30, 1998
Revenues—Revenues of $1,530.8 million for the nine months ended September 30, 1999 increased substantially over the $498.4 million reported
for the nine months ended September 30, 1998. The increase in revenues is primarily the result of the acquisitions of Trident in April 1998 and Excel and Adwest in March 1999.
Sales for the nine months also benefited from increased North American vehicle production.
Cost of Sales—Cost of sales for the nine months ended September 30, 1999 increased by $879.2 million to $1,292.4 million from $413.2
million for the nine months ended September 30, 1998. Cost of sales as a
percentage of revenues for the nine months ended September 30, 1999 was 84.4% compared to 82.9% for the nine months ended September 30, 1998. The corresponding decrease in gross margins
is primarily the result of lower margins at the acquired operations offset by efficiency improvements at certain Dura operations.
S, G & A Expenses—Selling, general and administrative expenses were $92.3 million for the nine months ended September 30, 1999
compared to $34.0 million for the nine months ended September 30, 1998. The increase was due primarily to incremental costs from the acquisitions discussed above. As a percentage of revenues,
selling, general and administrative expenses were 6.0% for the nine months ended September 30, 1999 compared to 6.8% for the nine months ended September 30, 1998.
Interest Expense—Interest expense for the nine months ended September 30, 1999 was $52.2 million compared to $14.2 million for the
nine months ended September 30, 1998. The increase was due principally to borrowings incurred related to the acquisitions discussed above.
Income Taxes—The effective income tax rate was 40.4% for the nine months ended September 30, 1999 and 41.6% for the nine months ended
September 30, 1998. The effective rates differed from the statutory rates as a result of higher foreign tax rates and the effects of state taxes and non-deductible goodwill amortization. The
decrease in rate from prior year is due to the varying tax rates among the tax jurisdictions for which the Company operates.
Liquidity and Capital Resources
During
the first nine months of 1999, Dura provided cash from operations of $80.9 million, compared to a $10.5 million use of cash in 1998. Cash generated from operations before changes in working
capital items was $97.8 million for 1999 compared to $35.7 million for 1998. Increases in working capital used cash of $16.9 million in 1999 compared to $46.3 million in 1998. The increase in working
capital is primarily the result of the timing of cash receipts from the Company's major customers that were received subsequent to the 1998 period.
Net
cash used in investing activities was $637.5 million for the nine months of 1999 as compared to $207.4 million in 1998. Net capital expenditures totaled $57.9 million for the nine months of 1999
primarily for equipment and dedicated tooling purchases related to new or replacement programs with an additional $563.1 million used for the acquisitions of Adwest and Excel. This compares with net
capital expenditures of $16.4 million in 1998 and $190.8 million used for the acquisitions of Universal, Trident and Hinge.
Net
cash provided by financing activities totaled $570.3 million for the nine months of 1999 compared with $225.4 million in 1998. Included in this source of funds is $394.7 million of cash that was
provided through the subordinated note offering discussed above.
In
connection with the acquisitions of Adwest and Excel, the Company entered into an amended and restated $1.15 billion credit agreement ("Credit Agreement"). The Credit Agreement provides for
revolving credit facilities of $400.0 million, a $275.0 million tranche A term loan, a $275.0 million tranche B term loan and a $200.0 million interim term loan facility. Borrowings under the interim
loan were due and payable in September 2000 and, as further discussed below, were repaid in April 1999. Borrowings under the tranche A term loan are due and payable in March 2005
and borrowings under the tranche B term loan are due and payable in March 2006. The revolving credit facility is available until March 2005. As of September 30, 1999, rates on
borrowings under the Credit Agreement ranged
from 4.6% to 7.6%. The Credit Agreement contains various restrictive covenants that limit indebtedness, investments, rental obligations and cash dividends. The Credit Agreement also requires the
Company to maintain certain financial ratios including minimum liquidity and interest coverage. The Company was in compliance with the covenants as of September 30, 1999. Borrowings under the
Credit Agreement are collateralized by the assets of the Company.
The
Credit Agreement provides the Company with the ability to denominate a portion of its revolving credit borrowings in foreign currencies up to an amount equal to $100.0 million. As of
September 30, 1999 revolving credit borrowings were as follows: $40.1 million in US dollars; $5.5 million in Canadian dollars; $3.9 million in Australian dollars; and $3.7 million in British
pound sterling.
At
September 30, 1999, Dura had unused borrowing capacity of approximately $273 million under its most restrictive debt covenant. Dura believes the borrowing availability under its credit
agreement, together with funds generated by operations, should provide liquidity and capital resources to pursue its business strategy for the foreseeable future, with respect to working capital,
capital expenditures, and other operating needs. Dura estimates its 1999 capital expenditures will approximate $100 million. Under present conditions, management does not believe access to funds will
restrict its ability to pursue its acquisition strategy.
On
April 23, 1999, the Company completed the offering of $300 million and Euro 100 million of senior subordinated notes ("Subordinated Notes"). The Subordinated Notes mature in May 2009
and bear interest at 9% per year, which is payable semi-annually. Net proceeds from this offering of
approximately $395.0 million were used to repay the $200.0 million interim term loan, approximately $78.1 million to retire other indebtedness and approximately $116.9 million will be used for general
corporate purposes. These notes are collateralized by guarantees of certain of the Company's subsidiaries.
On
June 24, 1999, Dura retired the $75.0 million of Trident's outstanding 10% Senior Subordinated Notes ("the Trident Notes") due 2005. The total consideration paid was approximately $84.0
million of principal and premium and was funded through borrowings under the credit agreement.
In
connection with the termination of the Company's former credit facility, the Company wrote-off deferred financing costs of approximately $2.7 million, net of income taxes during the first quarter
of 1999. In addition, the Company wrote-off costs of approximately $2.7 million, net of income taxes related to the tender of the Trident Notes during the second quarter of 1999. These charges are
reflected as an extraordinary item in the accompanying statement of operations for the nine months ended September 30, 1999.
On
March 15, 1999, Dura acquired through a cash tender offer approximately 95% of the outstanding ordinary shares of Adwest Automotive plc ("Adwest"). The Company subsequently purchased the
remaining 5%. Adwest has annual revenues of approximately $400 million and is a supplier of driver control products primarily for European OEMs. The Company paid approximately $320 million to
acquire all of the outstanding shares of Adwest, including the assumption of approximately $106.1 million in indebtedness in connection with the acquisition of Adwest.
On
March 23, 1999, the Company completed its merger with Excel Industries, Inc. ("Excel"). Excel has annual revenues of approximately $1.1 billion of which 75% is derived from the
automotive/light truck market and the remainder from the recreational vehicle, mass transit and heavy truck markets. Approximately 78% of Excel's revenues is generated in North America with the
remainder in Europe. The Company issued an aggregate of approximately 5.1 million shares of its Class A Common Stock
and paid $155.5 million in cash to Excel's former shareholders. The Company also assumed approximately $100.0 million of indebtedness in connection with the merger with Excel.
On
June 28, 1999, Dura acquired Metallifacture Limited ("Metallifacture") from Bullough plc for an aggregate purchase price of approximately $22.0 million which was financed with borrowings
under Dura's credit facility. Metallifacture, located in Nottingham, England, is a manufacturer of jacks and tire carriers for the European automotive industry. It has revenues of approximately $25
million and its major customers include Ford, General Motors, Rover, Nissan and Volkswagen.
On
October 28, 1999, the Company agreed to acquire the seat adjusting business of Meritor Automotive, Inc. ("Meritor") for total cash consideration of $130 million. Meritor's seat track
business manufactures seat track adjusting mechanisms for the North American automotive industry. Meritor, with operations in Bracebridge, Ontario and Gordonsville, Tennessee, had revenues of
approximately $130 million and is a Tier II supplier to Lear Corporation and other automotive interior suppliers. The transaction, which is subject to regulatory approval, is expected to close during
the fourth quarter of 1999.
Quarterly Results of Operations and Seasonality
Dura
typically experiences decreased revenues and operating income during the third calendar quarter of each year due to production shutdowns at OEMs for model changeovers and vacations.
Effects of Inflation
Inflation
potentially affects Dura in two principal ways. First, a portion of Dura's debt is tied to prevailing short-term interest rates which may change as a result of inflation rates, translating
into changes in interest expense. Second, general inflation can impact material purchases, labor and other costs. In many cases, Dura has limited ability to pass through inflation-related cost
increases due to the
competitive nature of the markets that Dura serves. In the past few years, however, inflation has not been a significant factor for Dura.
Market Risk
The
Company is exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates
and prices, such as foreign currency exchange and interest rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes.
The
Company manages its interest rate risk by balancing the amount of fixed and variable debt. For fixed rate debt, interest rate changes affect the fair market value but do not impact earnings or
cash flows. Conversely for variable rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held
constant.
Foreign Currency Transactions
A
significant portion of Dura's revenues were derived from manufacturing operations in Europe, Latin America and Canada. The results of operations and financial position of Dura's operations in these
countries are principally measured in their respective currency and translated into U.S. dollars. The effects of foreign currency fluctuations in such countries are somewhat mitigated by the fact that
expenses are generally incurred in the same currencies in which revenues are generated. The reported income of these subsidiaries will be higher or lower depending on a weakening or strengthening of
the U.S. dollar against the respective foreign currency.
A
significant portion of Dura's assets are based in its foreign operations and are translated into U.S. dollars at foreign currency exchange rates in effect as of the end of each period, with the
effect of such translation reflected as a separate component of stockholders' investment. Accordingly, Dura's consolidated stockholders' investment will fluctuate depending upon the weakening or
strengthening of the U.S. dollar against the respective foreign currency.
Dura's
strategy for management of currency risk relies primarily upon conducting its operations in such countries' respective currency and may, from time to time, engage in hedging programs intended
to reduce Dura exposure to currency fluctuations.
Year 2000
Dura
is currently working to resolve the potential impact of the year 2000 on the processing of time-sensitive information by Dura's computerized information systems. Any of Dura's programs that have
time-sensitive software may recognize the year "00" as 1900 rather than the year 2000. This could result in miscalculations, classification errors or system failures.
While
Dura's various operations are at different stages of Year 2000 readiness, Dura has nearly completed its global compliance review. Based on the information available to date, Dura does not
anticipate any significant readiness problems with respect to its systems.
Most
of Dura's facilities have completed the inventory and assessment of their internal information technology ("IT") and non-IT systems (including business, operating and factory floor systems) and
are working on remediation, as appropriate, for these systems. The remediation may include repair, replacement or upgrading of specific systems and components, with priorities based on a business risk
assessment. Remediation activities for Dura's internal systems was completed as of September 30, 1999 and contingency plans, as needed, will be completed before the end of the year.
The
most reasonably likely worst case scenario that Dura currently anticipates with respect to Year 2000 is the failure of some of its suppliers, including utilities suppliers, to be ready. This could
cause a temporary interruption of materials or services that Dura needs to make its products, which could result in delayed shipments to customers and lost sales and profits for Dura. As the critical
supplier assessments are completed, Dura will develop specific contingency plans, as necessary, to address the
risks which are identified. This will likely include resourcing materials or building inventory banks. Dura has aggressively addressed this issue with all major suppliers and believes contingency
plans are in place.
Dura
has spent approximately $4.0 million on Year 2000 activities to date and anticipates that it will incur additional future costs not to exceed $2.0 million in total in addressing Year 2000 issues.
The
outcome of Dura's Year 2000 program is subject to a number of risks and uncertainties, some of which (such as the availability of qualified computer personnel and the Year 2000 responses of third
parties) are beyond its control. Therefore, there can be no assurances that Dura will not incur material remediation costs beyond the above anticipated future costs, or that Dura's business, financial
condition, or results of operations will not be significantly impacted if Year 2000 problems with its systems, or with the products or systems of other parties with whom it does business, are not
resolved in a timely manner.
Recently Issued Accounting Pronouncements
SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," becomes effective for years beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts be recorded in the balance sheet as either an asset or liability measured at
its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge criteria are met. Special accounting for qualifying hedges
allow a derivative's gains or losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. Dura has not yet quantified the impacts of adopting SFAS No. 133.
Forward-Looking Statements
All
statements, other than statements of historical fact, included in this Form 10-Q, including without limitation the statements under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. When used in this Form 10-Q, the words "anticipate," "believe," "estimate," "expect," "intends," and similar expressions, as they relate to the Company, are intended to identify
forward-looking statements. Such forward-looking statements are based on the beliefs of the Company's management as well as on assumptions made by and information currently available to the Company at
the time such statements were made. Various economic and competitive factors could cause actual results to differ materially from those discussed in such forward-looking statements, including factors
which are outside the control of the Company, such as risks relating to: (i) the degree to which the Company is leveraged; (ii) the Company's reliance on major customers and selected
models; (iii) the cyclicality and seasonality of the automotive market; (iv) the failure to realize the benefits of recent acquisitions and joint ventures; (v) obtaining new
business on new and redesigned models; (vi) the Company's ability to continue to implement its acquisition strategy; and (vii) the highly competitive nature of the automotive supply
industry. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary
statements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See
"Market Risk" and "Foreign Currency Transactions" sections of Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.
PART II. OTHER INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
Other
than as reported in the Company's 1998 Annual Report on Form 10-K under the caption "Legal Proceedings," the Company is not currently a party to any material pending legal proceedings, other
than routine matters incidental to the business of the Company.
Item 2. Change in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
- (a)
- Exhibits:
- (b)
- Reports
on Form 8-K:
During
the quarter for which this report is filed, the Company filed the following Form 8-K Current Reports with the Securities and Exchange Commission:
None
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.
| |
|
DURA AUTOMOTIVE SYSTEMS, INC. |
Date: November 12, 1999 |
|
By |
/s/ STEPHEN E. K. GRAHAM
Stephen E. K. Graham
Vice President, Chief Financial Officer (principal accounting and financial officer) |
Table of Contents
ITEM 1—FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
Item 2. Change in Securities:
Item 3. Defaults Upon Senior Securities:
Item 4. Submission of Matters to a Vote of Security Holders:
Item 5. Other Information:
Item 6. Exhibits and Reports on Form 8-K:
SIGNATURE
