UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
Commission file number 33-11958
MOTOR WHEEL CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 38-1741793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization)Identification No.)
2501 WOODLAKE CIRCLE, OKEMOS, MICHIGAN 48864-5955
(Address of principal executive offices)
(517) 337-5700
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
COMMON SHARES NO PAR VALUE -- 1,100 SHARES OUTSTANDING AS OF MAY 13, 1996
Page 1 of 10 pages
INDEX
MOTOR WHEEL CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- March 31, 1996
and December 31, 1995
Condensed consolidated income statements -- Three months
ended March 31, 1996 and 1995
Condensed consolidated statements of cash flows -- Three
months ended March 31, 1996 and 1995
Notes to condensed consolidated financial statements --
March 31, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MOTOR WHEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
March 31, December 31,
1996 1995
ASSETS
Current assets:
Cash and equivalents 319 1,344
Accounts receivable, net of
allowance of $250 in 1996
and in 1995 32,018 32,294
Inventories - Note B 34,082 31,943
Prepaid expenses and other
current assets 4,115 5,459
Total current assets 70,534 71,040
Property, plant and equipment 217,148 215,362
Less accumulated depreciation,
amortization and valuation allowance 140,241 136,385
76,907 78,977
Investments in equity affiliates 6,499 7,374
Other assets 13,034 12,087
Total assets 166,974 169,478
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable 28,519 30,123
Accrued liabilities 22,399 26,087
Short-term borrowings 12,021 5,000
Total current liabilities 62,939 61,210
Long-term debt 125,000 125,000
Other long-term liabilities 60,947 60,953
Shareholders' equity (deficit):
Common stock, no par value,
authorized 2,500 shares,
outstanding 1,100 shares 1 1
Additional paid-in capital 29,844 29,844
Retained-earnings deficit (111,757) (107,530)
Total shareholders' equity (deficit) (81,912) (77,685)
Total liabilities and
shareholders' equity (deficit) 166,974 169,478
See notes to condensed consolidated financial statements.
MOTOR WHEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
(Dollars in thousands except per share amounts)
Three Months Ended
March 31,
1996 1995
Net sales 79,590 105,605
Costs of goods sold 73,497 91,776
Gross profit 6,093 13,829
Selling, administrative and general 4,136 4,626
Research and development 1,240 1,891
Interest expense 4,302 4,513
Other (income) expense 631 (354)
Income (loss) before taxes (4,216) 3,153
Provision for income taxes 11 29
Net income (loss) (4,227) 3,124
Preferred stock dividend accrued plus
accretion - 471
Net income (loss) available to
common shareholder (4,227) 2,653
Income (loss) per common share:
Net income (loss) per common share (3,843) 2,412
See notes to condensed consolidated financial statements.
MOTOR WHEEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Three Months Ended
March 31,
1996 1995
Cash Flows From Operating Activities
Net income (loss) (4,227) 3,124
Adjustments to reconcile net income
(loss) to net cash used for
operating activities:
Depreciation and amortization 4,542 4,901
Postretirement benefits other
than pensions 710 600
Debt issuance amortization 208 208
Equity in net (income) loss of
affiliates 875 (431)
Changes in operating assets and
liabilities (7,681) (12,667)
Net cash used for operating
activities (5,573) (4,265)
Cash Flows From Investing Activities
Additions to property, plant
and equipment (2,480) (4,094)
Disposals of property, plant
and equipment 7 3
Net cash used for
investing activities (2,473) (4,091)
Cash Flows From Financing Activities
Proceeds from revolving credit loans
with financial institutions 7,021 7,780
Net cash provided by financing
activities 7,021 7,780
Decrease in cash (1,025) (576)
Cash at beginning of year 1,344 966
Cash at end of period 319 390
See notes to condensed consolidated financial statements.
MOTOR WHEEL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1996
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required for complete
financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included.
Adjustments consisted of only normal recurring accruals. Operating
results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
NOTE B -- INVENTORIES
Inventories are comprised of:
March 31, December 31,
1996 1995
(Dollars in thousands)
Raw materials and supplies 13,441 15,315
Work in process 6,939 6,536
Finished product 18,455 14,863
38,835 36,714
Less excess of FIFO cost over LIFO (2,088) (1,971)
Less valuation allowance (2,665) (2,800)
------ ------
34,082 31,943
NOTE C -- INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share amounts are based on the weighted
average number of common shares outstanding and give effect to
increasing preferred stock dividend requirements in 1995. The weighted
average number of common shares outstanding was 1,100 for the periods
presented.
NOTE D -- CONTINGENCIES
The Company, in the normal course of business, is involved in various
legal actions. Management, after taking into consideration legal
counsels' evaluations, is of the opinion that the outcome thereof will
not have a material impact on the financial position, operating results
or cash flows of the Company.
NOTE D -- CONTINGENCIES (Continued)
In addition, the Company is party to various environmental clean-up and
product liability matters. At the time of the acquisition of the
Company from Goodyear in December 1986 (the "Acquisition"), Goodyear
agreed to be responsible for, and to indemnify the Company with respect
to, all liabilities, claims and obligations for environmental
pollutants, or other substances generated prior to December 30, 1986,
for the plants then owned by the Company, and April 1, 1987, for the
plants previously owned by Goodyear. Also at the time of the
Acquisition, Goodyear agreed to indemnify the Company for all costs and
liabilities arising from any product warranty, product liability, other
claims or obligations for products manufactured by the Company prior to
December 30, 1986 and for products manufactured by Goodyear at the
Akron, Ohio plant prior to April 1, 1987. After taking into
consideration both the Goodyear indemnification and actions taken by
the Company since the Acquisition to limit the Company's exposure in
these matters, management is of the opinion that the outcome thereof
will not have a material impact on the financial position, operating
results or cash flows of the Company.
NOTE E -- OTHER EVENTS
On March 28, 1996, MWC Holdings, Inc. ("Holdings"), the holder of all
of the Company's outstanding common shares, signed a definitive
Agreement and Plan of Merger (the "Merger Agreement") which provides
for the merger of Holdings with and into Hayes Wheels International,
Inc. ("HWI"). At the effective time of the merger, the separate
corporate existence of Holdings shall thereupon cease and HWI shall
continue as the surviving corporation. Pursuant to the merger, the
Company will become a wholly-owned subsidiary of HWI. The Board of
Directors of both Holdings and HWI approved the Merger Agreement and
the transactions contemplated thereby at their respective meetings held
on March 28, 1996. In connection with the merger and the related
financings, it is anticipated that all of the outstanding 11-1/2%
Senior Notes due 2000 of the Company will be redeemed in accordance
with their terms.
Consummation of the merger is subject to various conditions, including:
(i) receipt of approval by the stockholders of Holdings and HWI of the
Merger Agreement and the merger; (ii) expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; (iii) filing and effectiveness of
a Proxy and Registration Statement; (iv) receipt of financing necessary
to consummate the transactions; and (v) satisfaction of certain other
conditions. The merger is expected to be consummated in mid-summer
1996.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
Total sales in the first quarter of 1996 were $79.6 million compared to
$105.6 million in the same period of 1995. Automotive sales were $50.9
million in the first quarter of 1996, a decrease of $17.0 million from
the same period of 1995. This decrease was due primarily to a
resourcing program by one of the Company's principal customers that has
been and continues to be implemented. This resourcing program only
impacts the Company's level of automotive wheel sales and was a
consideration in the Company's decision to close its Mendota, Illinois
manufacturing facility. Sales of automotive brake products also
decreased as selected production shutdowns by customers, to control
their inventory levels, impacted some of the Company's higher volume
brake components. Commercial highway sales were $28.7 million in the
first quarter of 1996, a decrease of $9.0 million from the same period
of 1995 and is attributable to a significant downturn in the
production of heavy-duty trucks and trailers compared to record
production levels in the first quarter of 1995.
The Company's gross profit for the quarter of 1996 was $6.1 million, or
7.7% of net sales, compared to $13.8 million, or 13.1% of net sales,
for the same period of 1995. The lower sales volume is the primary
reason for the decreased level of gross profit but the Company has also
experienced certain manufacturing inefficiencies and incurred other
transition costs as its previously disclosed plans to cease operations
at certain manufacturing facilities are being implemented. Closure of
the Mendota facility is in process as the Company is consolidating all
automotive wheel production in its Bowling Green, Kentucky facility
with an anticipated completion by the end of the third quarter of 1996.
In addition, the Company is implementing certain aspects of its plan to
close its automotive brake manufacturing facility in Ypsilanti,
Michigan and continues to evaluate options with respect to satisfying
its expected long-term production requirements. Military wheel
production equipment which was previously located at the Company's now
closed Lansing, Michigan facility is in the process of being installed
at the Akron, Ohio facility. Management expects that these closings
will result in improvements in financial performance primarily through
reductions in fixed manufacturing costs and lower variable costs.
Selling, administrative and general expense together with research and
development expense decreased to $5.4 million in the first quarter of
1996 compared to $6.5 million in the same period of 1995 as a result of
actions initiated by the Company during the fourth quarter of 1995,
which were affected during the first quarter of 1996, to bring this
expense category in line with the lower sales volume.
Interest expense was $4.3 million in the first quarter of 1996 compared
to $4.5 million in the same period of 1995. Other expense was $0.6
million in the first quarter of 1996 compared to other income of $0.4
million in the same period of 1995. The primary component of this
other category is the Company's share of the results of Alumitech, a
50% owned joint venture which produces aluminum wheels.
The Company had minimal income tax expense and therefore the resulting
net loss for the first quarter of 1996 was $4.2 million compared to net
income of $3.1 million in the same period of 1995.
CAPITAL RESOURCES AND LIQUIDITY
The Company has a revolving credit agreement through March 1998, which
provides borrowing capacity up to $50 million, subject to limitations
based on the value of the Company's inventory and receivables. At
March 31, 1996, the Company used $12.0 million for short-term
borrowings and $12.5 million for letters of credit with excess
availability of $17.1 million.
Net cash used for operating activities was $5.6 million in the first
quarter of 1996 as compared to $4.3 million in the same period of 1995.
The principal usage of cash during the first quarter of 1996 was for an
inventory build program in one of the company's plants in anticipation
of the termination of a labor agreement. Cash provided by net income
(loss), as adjusted for non-cash charges, was $2.1 million while cash
requirements to support operating assets and liabilities was $7.7
million. These amounts are both lower than the comparable amounts in
the same period of 1995 due to the lower sales volume.
Net cash used for investing activities was $2.5 million in the first
quarter of 1996 as compared to $4.1 million for the same period of 1995
as the Company has adjusted its plans for investment in property, plant
and equipment to be in line with the lower sales volume.
Net cash provided by financing activities was $7.0 million in the first
quarter of 1996 as compared to $7.8 million for the same period of
1995. The Company has utilized borrowings under the revolving credit
agreement to support its cash requirements for operating assets and
liabilities.
The Company's availability under the revolving credit agreement is
expected to be adequate to support its working capital requirements.
Management believes that cash generated by operations will be
sufficient to meet the Company's expected operating needs (including
cash requirements related to plant closures), planned capital
expenditures and interest payments.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
2(b) Agreement and Plan of Merger, dated as of March 28, 1996, between
MWC Holdings, Inc. and Hayes Wheels International, Inc. is
incorporated by reference to Exhibit 2 to the Hayes Wheels
International, Inc. Form 8-K, dated March 28, 1996.
There were no reports on Form 8-K filed during the quarter.
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.
Date: May 14, 1996 MOTOR WHEEL CORPORATION
By: /s/ Richard W. Tuley
Richard W. Tuley
President
By: /s/ Thomas R. Collins
Thomas R. Collins
Vice President and Treasurer
(principal financial officer)