1
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 March 31, 2000
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 (I.R.S. Employer
incorporation or organization) Identification No.)
4508 IDS CENTER 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
(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 April 30, 2000 was 14,125,378 shares. The number of
shares outstanding of the Registrant's Class B common stock, par value $.01 per
share, at April 30, 2000 was 3,320,303 shares.
2
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 March 31, 2000 and 1999 (unaudited)
Condensed Consolidated Balance Sheets at March 31, 2000
(unaudited) and December 31, 1999
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 (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
SIGNATURE
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ITEM 1 - FINANCIAL INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Three Months Ended March 31,
-----------------------------------
2000 1999
-------------- ---------------
Revenues $ 682,769 $ 264,701
Cost of sales 573,654 218,219
-------------- ---------------
Gross profit 109,115 46,482
Selling, general and administrative expenses 43,918 16,897
Amortization expense 7,041 3,685
-------------- ---------------
Operating income 58,156 25,900
Interest expense, net 27,921 6,895
-------------- ---------------
Income before provision for income taxes,
equity in losses of affiliate and minority
interests 30,235 19,005
Provision for income taxes 12,366 7,711
Equity in losses of affiliate and minority
interests 798 1,342
Minority interest - dividends on trust preferred
securities, net 611 611
-------------- ---------------
Income before extraordinary item and
accounting change 16,460 9,341
Extraordinary item - loss on early
extinguishment of debt, net -- (2,702)
Cumulative effect of change in accounting, net -- (3,147)
-------------- ---------------
Net income $ 16,460 $ 3,492
============== ===============
Basic earnings per common share:
Income before extraordinary item and
accounting change $ 0.94 $ 0.73
Extraordinary item -- (0.21)
Cumulative effect of change in accounting -- (0.25)
-------------- ---------------
Net income $ 0.94 $ 0.27
============== ===============
Basic shares outstanding 17,430 12,877
============== ===============
Diluted earnings per common share:
Income before extraordinary item and
accounting change $ 0.90 $ 0.70
Extraordinary item -- (0.19)
Cumulative effect of change in accounting -- (0.22)
-------------- ---------------
Net income $ 0.90 $ 0.29
============== ===============
Diluted shares outstanding 18,956 14,253
============== ===============
The accompanying notes are an integral part of these condensed consolidated
statements.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
March 31, December 31,
Assets 2000 1999
- ------------------------------------------------------------------ ----------------- ----------------
(unaudited)
Current assets:
Cash and cash equivalents $ 31,442 $ 23,697
Accounts receivable, net 512,563 478,542
Inventories 136,788 136,562
Other current assets 171,006 154,704
----------------- ----------------
Total current assets 851,799 793,505
----------------- ----------------
Property, plant and equipment, net 509,304 500,894
Goodwill, net 1,068,383 1,067,937
Deferred income taxes and other assets, net 77,869 82,531
----------------- ----------------
$ 2,507,355 $ 2,444,867
================= ================
Liabilities and Stockholders' Investment
- ------------------------------------------------------------------
Current liabilities:
Short-term notes payable $ 15,282 $ 20,207
Current maturities of long-term debt 41,611 32,505
Accounts payable 297,284 281,413
Accrued liabilities 308,942 296,431
----------------- ----------------
Total current liabilities 663,119 630,556
----------------- ----------------
Long-term debt, net of current maturities 801,949 776,750
Subordinated notes 397,730 401,560
Other noncurrent liabilities 149,885 149,755
Mandatorily redeemable convertible trust preferred securities 55,250 55,250
----------------- ----------------
Stockholders' investment:
Common stock - Class A 141 141
Common stock - Class B 33 33
Treasury stock (1,723) --
Additional paid-in capital 339,159 339,041
Retained earnings 124,732 108,272
Accumulated other comprehensive loss -
cumulative translation adjustment (22,920) (16,491)
----------------- ----------------
Total stockholders' investment 439,422 430,996
----------------- ----------------
$ 2,507,355 $ 2,444,867
================= ================
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS - UNAUDITED)
Three Months Ended March 31,
------------------------------------
2000 1999
---------------- ---------------
OPERATING ACTIVITIES:
Net income $ 16,460 $ 3,492
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 21,788 10,507
Deferred income taxes (2,835) (3,057)
Equity in losses of affiliates and minority interest 798 1,342
Extraordinary loss on extinguishment of debt -- 2,702
Cumulative effect of change in accounting, net -- 3,147
Changes in other operating items (15,601) (17,746)
---------------- ---------------
Net cash provided by operating activities 20,610 387
---------------- ---------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (8,766) (540,133)
Capital expenditures, net (27,771) (5,994)
Other -- 2,227
---------------- ---------------
Net cash used in investing activities (36,537) (543,900)
---------------- ---------------
FINANCING ACTIVITIES:
Short-term borrowings, net 4,181 904,680
Long-term debt borrowings (repayments), net 24,003 (321,761)
Debt issuance costs -- (19,537)
Common stock repurchases (1,723) --
Proceeds from issuance of common stock and
exercise of stock options 118 770
---------------- ---------------
Net cash provided by financing activities 26,579 564,152
---------------- ---------------
EFFECT OF EXCHANGE RATE ON CASH (2,907) (1,916)
---------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,745 18,723
CASH AND CASH EQUIVALENTS:
Beginning of period 23,697 20,544
---------------- ---------------
End of period $ 31,442 $ 39,267
================ ===============
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ 18,786 $ 7,637
Cash paid for income taxes $ 3,210 $ 3,731
The accompanying notes are an integral part of these condensed consolidated
statements.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
We have prepared the condensed consolidated financial statements of Dura
Automotive Systems, Inc. ("Dura"), 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 our opinion, necessary
for a fair presentation of the results of operations and statements of financial
position for the interim periods presented. 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. We believe that the disclosures are
adequate to make the information presented not misleading when read in
conjunction with the financial statements and the notes thereto included in our
Annual Report on Form 10-K, as filed with the Securities and Exchange Commission
for the period ended December 31, 1999.
Revenues and operating results for the three months ended March 31, 2000
are not necessarily indicative of the results to be expected for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
Mar. 31, 2000 Dec. 31, 1999
----------------- -----------------
Raw materials $ 89,417 $ 85,609
Work-in-process 20,469 21,162
Finished goods 26,902 29,791
----------------- -----------------
$ 136,788 $ 136,562
================= =================
3. EARNINGS PER SHARE
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 and warrants using the treasury stock method, (ii) the conversion
of the Preferred Securities and (iii) the effects of shares issued under the
deferred income leadership stock purchase plan, as follows (in thousands, except
per share amounts):
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Three Months Ended March 31,
--------------------------------------
2000 1999
---------------- ------------------
Net income $ 16,460 $ 3,492
Interest expense on mandatorily redeemable
convertible preferred securities, net of tax 611 611
---------------- -----------------
Net income applicable to common
stockholders -- diluted $ 17,071 $ 4,103
================ =================
Weighted average number of Class A
common shares outstanding 14,110 9,552
Weighted average number of Class B
common shares outstanding 3,320 3,325
---------------- -----------------
17,430 12,877
Dilutive effect of outstanding stock options
after application of the treasury stock method 84 87
Dilutive effect of warrants 153
Dilutive effect of mandatorily redeemable
convertible preferred securities, assuming
conversion 1,289 1,289
---------------- -----------------
Diluted shares outstanding 18,956 14,253
================ =================
Basic earnings per share $ 0.94 $ 0.27
================ =================
Diluted earnings per share $ 0.90 $ 0.29
================ =================
4. 1999 FACILITY CONSOLIDATION CHARGE
In the fourth quarter of 1999, Dura began to implement a comprehensive plan
(the "Plan") to consolidate certain facilities designed to lower its cost
structure and improve the long-term competitive position of Dura. As a result of
the Plan, Dura recognized charges to operations of $16.2 million. Included in
this charge are the costs associated with consolidating and eliminating certain
facilities and associated lease obligations of $1.4 million; severance related
to employee terminations of $13.2 million; and asset impairments of $1.6
million. Costs incurred and charged to the reserves as of March 31, 2000
amounted to $0.1 million related to lease and other closure costs, $2.8 million
in severance and $1.6 million related to asset impairment. There have been no
significant changes to the original Plan. The Plan originally called for the
termination of approximately 5 salaried plant management and 313 hourly plant
manufacturing employees, of which 3 salaried and 16 hourly employees had been
terminated as of March 31, 2000.
5. FACILITY REORGANIZATION RELATED TO ACQUISITIONS
Dura has implemented reorganization plans designed to integrate the
operations of recent acquisitions. As a result of these reorganization plans,
Dura has recorded purchase liabilities of approximately $48.7 million for costs
associated with the shutdown and consolidation of certain acquired facilities
and $35.0 million for severance and other related costs. Additional purchase
liabilities recorded during 2000 in connection with the finalization of
estimates from the Adwest
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and Excel acquisitions included approximately $7.7 million for costs associated
with the shutdown and consolidation of certain acquired facilities and $1.0
million for severance and other related costs. These adjustments were recorded
as an adjustment to goodwill. Costs incurred and charged to the reserves
amounted to $4.1 million related to acquired facilities and $3.0 million in
severance and other related costs during the quarter ended March 31, 2000.
6. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
March 31, December 31,
2000 1999
----------------- -----------------
Credit Agreement:
Tranche A and B term loans $ 550,000 $ 550,521
Revolving credit facility 270,507 208,751
9% Senior subordinated notes 397,730 401,560
Other 38,335 70,190
----------------- -----------------
1,256,572 1,231,022
Less-current maturities (56,893) (52,712)
----------------- -----------------
Total long-term debt $ 1,199,679 $ 1,178,310
================= =================
In connection with the acquisitions of Adwest and Excel, Dura 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. As of March 31, 2000, rates on
borrowings under the Credit Agreement ranged from 5.2% to 8.6%. 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. The Credit Agreement contains various
restrictive covenants which limit indebtedness, investments, rental obligations
and cash dividends. The Credit Agreement also requires Dura to maintain certain
financial ratios including minimum liquidity and interest coverage. Dura was in
compliance with the covenants as of March 31, 2000. Borrowings under the Credit
Agreement are collateralized by substantially all assets of Dura.
The Credit Agreement provides Dura 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 March 31, 2000, $242.4 million of borrowings were
denominated in US dollars, $5.5 million of borrowings were denominated in
Canadian dollars, $3.6 million of borrowings were denominated in Australian
dollars, and $19.0 million in British pound sterling.
In April 1999, Dura completed the offering of $300.0 million and Euro 100.0
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 $394.7 million
were used to repay the $200.0 million interim term loan, approximately $78.1
million to retire other indebtedness and approximately $118.9 million was used
for general corporate purposes. These notes are collateralized by guarantees of
certain of Dura's subsidiaries.
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7. COMPREHENSIVE INCOME
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 Dura, comprehensive income represents net income adjusted
for foreign currency translation adjustments. Comprehensive income for the
periods is as follows (in thousands):
Three Months Ended March 31,
---------------------------------------
2000 1999
----------------- -----------------
Net income $ 16,460 $ 3,492
Other comprehensive income:
Foreign currency translation adjustment (6,429) (12,624)
----------------- -----------------
Comprehensive income $ 10,031 $ (9,132)
================= =================
8. 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
Dura's business. Each Guarantor, as defined, is a direct or indirect wholly
owned subsidiary of Dura 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 to investors.
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8. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ -------------- --------------
Assets
- -----------------------------------
Current assets:
Cash and cash equivalents $ 3,854 $ 1,775 $ 25,813 $ -- $ 31,442
Accounts receivable, net 235,566 45,568 231,429 -- 512,563
Inventories 52,463 16,550 67,775 -- 136,788
Other current assets 81,930 15,389 73,687 -- 171,006
Due from affiliates 64,069 117,524 2,384 (183,977) --
------------ ------------ ------------ ------------ ------------
Total current assets 437,882 196,806 401,088 (183,977) 851,799
------------ ------------ ------------ ------------ ------------
Property, plant and equipment,
net 183,957 61,875 263,472 -- 509,304
Investment in subsidiaries 480,618 28,116 45,552 (554,286) --
Notes receivable from
affiliates 489,127 13,942 36,493 (539,562) --
Goodwill, net 459,601 86,565 522,217 -- 1,068,383
Other assets, net 18,969 15,905 42,995 -- 77,869
------------ ------------ ------------ ------------ ------------
$2,070,154 $ 403,209 $1,311,817 $(1,277,825) $ 2,507,355
============== ============ ============ ============ ============
Liabilities and Stockholders'
Investment
- -----------------------------------
Current liabilities:
Accounts payable $ 130,620 $ 21,107 $ 145,557 -- $ 297,284
Accrued liabilities 126,999 22,389 159,554 -- 308,942
Current maturities of long-
term debt 25,817 145 30,931 -- 56,893
Due to affiliates 112,581 27,937 43,459 (183,977) --
------------ ------------ ------------ ------------ ------------
Total current liabilities 396,017 71,578 379,501 (183,977) 663,119
------------ ------------ ------------ ------------ ------------
Long-term debt, net of
current maturities 706,382 -- 95,567 -- 801,949
Subordinated notes 397,730 -- -- -- 397,730
Other noncurrent liabilities 41,966 32,407 75,512 -- 149,885
Notes payable to affiliates 10,467 42,762 486,333 (539,562) --
------------ ------------ ------------ ------------ ------------
Total liabilities 1,552,562 146,747 1,036,913 (723,539) 2,012,683
------------ ------------ ------------ ------------ ------------
Mandatorily redeemable
convertible trust preferred
securities 55,250 -- -- -- 55,250
Stockholders' investment: 462,342 256,462 297,824 (554,286) 462,342
Accumulated other compre-
hensive loss - cumulative
translation adjustment -- -- (22,920) -- (22,920)
------------ ------------ ------------ ------------ ------------
$2,070,154 $ 403,209 $ 1,311,817 $ (1,277,825) $ 2,507,355
============ ============ ============ ============ ============
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8. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------ ----------- ----------- -------------- --------------
Revenues $ 341,433 $ 87,552 $ 268,614 $ (14,830) $682,769
Cost of sales 292,688 70,231 225,565 (14,830) 573,654
------------ ----------- ----------- -------------- --------------
Gross profit 48,745 17,321 43,049 -- 109,115
Selling, general and
administrative expenses 18,226 4,308 21,384 -- 43,918
Amortization expense 3,387 540 3,114 -- 7,041
------------ ----------- ----------- -------------- --------------
Operating income 27,132 12,473 18,551 -- 58,156
Interest expense, net 15,200 672 12,049 -- 27,921
------------ ----------- ----------- -------------- --------------
Income before provision for
income taxes, equity in
(earnings) of affiliates
and minority interest 11,932 11,801 6,502 -- 30,235
------------ ----------- ----------- -------------- --------------
Provision for income taxes 5,026 4,043 3,297 -- 12,366
Minority interests and equity in
(earnings) of affiliates, net (10,165) -- (1,962) 12,925 798
Minority interest-dividends on
trust preferred securities, net 611 -- -- -- 611
------------ ----------- ----------- -------------- --------------
Net income (loss) $ 16,460 $ 7,758 $ 5,167 $ (12,925) $ 16,460
============ =========== =========== ============== ==============
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8. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 2000
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------ ----------- ----------- -------------- --------------
OPERATING ACTIVITIES:
Net income (loss) $ 16,460 $ 7,758 $ 5,167 $ (12,925) $ 16,460
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 10,102 1,865 9,821 21,788
Deferred income taxes -- -- (2,835) -- (2,835)
Equity in losses of affiliates
and minority interest (10,165) -- (1,962) 12,925 798
Changes in other operating
items (5,744) (10,125) 268 -- (15,601)
------------ ----------- ----------- -------------- --------------
Net cash provided by (used
in) operating activities 10,653 (502) 10,459 -- 20,610
------------ ----------- ----------- -------------- --------------
INVESTING ACTIVITIES:
Acquisitions, net of cash
acquired -- (9,190) 424 -- (8,766)
Capital expenditures, net (10,264) (2,657) (14,850) -- (27,771)
------------ ----------- ----------- -------------- --------------
Net cash used in investing
activities (10,264) (11,847) (14,426) -- (36,537)
------------ ----------- ----------- -------------- --------------
FINANCING ACTIVITIES:
Short-term borrowings, net 7,743 (187) (3,375) 4,181
Long-term borrowings, net 44,645 (79) (20,563) -- 24,003
Debt financing (to)/from
affiliates (48,585) 14,676 33,909 -- --
Common stock repurchases (1,723) -- -- -- (1,723)
Proceeds from issuance of
common stock and exercise
of stock options 118 -- -- -- 118
------------ ----------- ----------- -------------- --------------
Net cash provided by
financing activities 2,198 14,410 9,971 -- 26,579
------------ ----------- ----------- -------------- --------------
EFFECT OF EXCHANGE
RATE ON CASH -- -- (2,907) -- (2,907)
------------ ----------- ----------- -------------- --------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 2,587 2,061 3,097 -- 7,745
CASH AND CASH
EQUIVALENTS:
Beginning of period 1,267 (286) 22,716 -- 23,697
------------ ----------- ----------- -------------- --------------
End of period $ 3,854 $ 1,775 $ 25,813 -- $ 31,442
============ =========== =========== ============== ==============
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8. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ------------ ----------- -------------- --------------
Assets
- -----------------------------------
Current assets:
Cash and cash equivalents $ 277 $ 704 $ 22,716 $ -- $ 23,697
Accounts receivable, net 161,403 94,542 222,597 -- 478,542
Inventories 36,062 32,513 67,987 -- 136,562
Other current assets 66,920 23,171 64,613 -- 154,704
Due from affiliates 167,536 136,813 10,666 (315,015) --
------------- ------------ ----------- -------------- --------------
Total current assets 432,198 287,743 388,579 (315,015) 793,505
------------- ------------ ----------- -------------- --------------
Property, plant and equipment,
net 125,328 117,960 257,606 -- 500,894
Investment in subsidiaries 558,950 29,042 43,459 (631,451) --
Notes receivable from
affiliates 450,669 3,466 36,557 (490,692) --
Goodwill, net 355,605 186,117 526,215 -- 1,067,937
Other assets, net 38,651 13,756 30,124 -- 82,531
------------- ------------ ----------- -------------- --------------
$1,961,401 $ 638,084 $1,282,540 $(1,437,158) $ 2,444,867
============= ============ =========== ============== ==============
Liabilities and Stockholders'
Investment
- -----------------------------------
Current liabilities:
Accounts payable $ 102,983 $ 37,324 $ 141,106 -- $ 281,413
Accrued liabilities 93,727 51,379 151,325 -- 296,431
Current maturities of long-
term debt 16,247 2,159 34,306 -- 52,712
Due to affiliates 155,773 111,204 48,038 (315,015) --
------------- ------------ ----------- -------------- --------------
Total current liabilities 368,730 202,066 374,775 (315,015) 630,556
------------- ------------ ----------- -------------- --------------
Long-term debt, net of
current maturities 661,737 79 114,934 -- 776,750
Subordinated notes 401,560 -- -- -- 401,560
Other noncurrent liabilities 26,637 55,467 67,651 -- 149,755
Notes payable to affiliates -- 36,565 454,127 (490,692) --
------------- ------------ ----------- -------------- --------------
Total liabilities 1,458,664 294,177 1,011,487 (805,707) 1,958,621
------------- ------------ ----------- -------------- --------------
Mandatorily redeemable
convertible trust preferred
securities 55,250 -- -- -- 55,250
Stockholders' investment: 447,487 343,907 287,544 (631,451) 447,487
Accumulated other compre-
hensive loss - cumulative
translation adjustment -- -- (16,491) -- (16,491)
------------- ------------ ----------- -------------- --------------
$ 1,961,401 $ 638,084 $ 1,282,540 $(1,437,158) $2,444,867
============= ============ =========== ============== ==============
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8. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ------------ ----------- -------------- --------------
Revenues $ 108,955 $ 69,448 $ 90,848 $ (4,550) $ 264,701
Cost of sales 88,609 57,634 76,526 (4,550) 218,219
------------- ------------ ----------- -------------- --------------
Gross profit 20,346 11,814 14,322 -- 46,482
Selling, general and
administrative expenses 8,034 1,929 6,934 -- 16,897
Amortization expense 1,125 1,111 1,449 -- 3,685
------------- ------------ ----------- -------------- --------------
Operating income 11,187 8,774 5,939 -- 25,900
Interest expense, net 2,540 711 3,644 -- 6,895
------------- ------------ ----------- -------------- --------------
Income before provision for
income taxes, equity in
earnings (losses) of
subsidiaries and minority
interest 8,647 8,063 2,295 -- 19,005
------------- ------------ ----------- -------------- --------------
Provision for income taxes 3,079 2,872 1,760 -- 7,711
Equity in earnings (losses)
of subsidiaries 3,693 -- 1,633 (6,668) (1,342)
Minority interest-dividend on
trust preferred securities, net 611 -- -- -- 611
------------- ------------ ----------- -------------- --------------
Income (loss) before
extraordinary item 8,650 5,191 2,168 (6,668) 9,341
Extraordinary item - loss on
early extinguishment of
debt, net 5,158 -- 691 -- 5,849
------------- ------------ ----------- -------------- --------------
Net income (loss) $ 3,492 $ 5,191 $ 1,477 $ (6,668) $ 3,492
============= ============ =========== ============== ==============
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8. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 1999
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ------------ ----------- -------------- --------------
OPERATING ACTIVITIES:
Net income (loss) $ 3,492 $ 5,191 $ 1,477 $ (6,668) $ 3,492
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 3,364 2,669 4,474 -- 10,507
Deferred income taxes (2,187) (82) (788) -- (3,057)
Equity in losses of affiliates (3,693) -- (1,633) 6,668 1,342
Extraordinary loss on
extinguishment of debt 2,011 -- 691 -- 2,702
Cumulative effect of change in
accounting, net 3,147 -- -- -- 3,147
Changes in other operating
items 49,456 (10,864) (56,338) -- (17,746)
------------- ------------ ----------- -------------- --------------
Net cash provided by (used for)
operating activities 55,590 (3,086) (52,117) -- 387
------------- ------------ ----------- -------------- --------------
INVESTING ACTIVITIES:
Acquisitions, net (442,501) -- (97,632) -- (540,133)
Capital expenditures, net (1,215) (2,202) (2,577) -- (5,994)
Other -- 2,227 -- -- 2,227
------------- ------------ ----------- -------------- --------------
Net cash used for investing
activities (443,716) 25 (100,209) -- (543,900)
------------- ------------ ----------- -------------- --------------
FINANCING ACTIVITIES:
Short-term borrowings, net 772,550 21,522 110,608 -- 904,680
Long-term borrowings
(repayments), net (233,577) (17,772) (70,412) -- (321,761)
Debt issuance costs (19,537) -- -- -- (19,537)
Debt financing (to)/from affiliates (126,223) (145) 126,368 -- --
Proceeds from issuance of common
stock and exercise of stock
options 770 -- -- -- 770
------------- ------------ ----------- -------------- --------------
Net cash provided by
financing activities 393,983 3,605 166,564 -- 564,152
------------- ------------ ----------- -------------- --------------
EFFECT OF EXCHANGE
RATE ON CASH -- -- (1,916) -- (1,916)
------------- ------------ ----------- -------------- --------------
NET CHANGE IN CASH
AND CASH EQUIVALENTS 5,857 544 12,322 -- 18,723
CASH AND CASH
EQUIVALENTS:
Beginning of period 1,247 (557) 19,854 -- 20,544
------------- ------------ ----------- -------------- --------------
End of period $ 7,104 $ (13) $ 32,176 $ -- $ 39,267
============ ============ =========== ============== ==============
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 TO THE THREE MONTHS ENDED
MARCH 31, 1999
Revenues -- Revenues of $682.8 million for the three months ended March 31, 2000
increased substantially over $264.7 million for the three months ended March 31,
1999. The increase in revenues is primarily the result of the full quarter
impact of the operations of Excel, Adwest and the Meritor seat track business
acquired during 1999.
Cost of Sales -- Cost of sales for the three months ended March 31, 2000
increased by $355.5 million to $573.7 million from $218.2 million for the three
months ended March 31, 1999. Cost of sales as a percentage of revenues for the
three months ended March 31, 2000 was 84.0% compared to 82.4% for the three
months ended March 31, 1999. 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 $43.9
million for the three months ended March 31, 2000 compared to $16.9 million for
the three months ended March 31, 1999. 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 March 31, 2000 and 1999.
Interest Expense -- Interest expense for the three months ended March 31, 2000
was $27.9 million compared to $6.9 million for the three months ended March 31,
1999. The increase was due principally to borrowings incurred related to the
acquisitions discussed above.
Income Taxes -- The effective income tax rate was 40.9% for the three months
ended March 31, 2000 and 40.6% for the three months ended March 31, 1999. 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.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the acquisitions of Adwest and Excel, Dura 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. As of March 31, 2000, rates on
borrowings under the Credit Agreement ranged from 5.2% to 8.6%. 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. The Credit Agreement contains various
restrictive covenants that limit indebtedness, investments, rental obligations
and cash dividends. The Credit Agreement also requires Dura to maintain certain
financial ratios including minimum liquidity and interest
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coverage. Dura was in compliance with the covenants as of March 31, 2000.
Borrowings under the Credit Agreement are collateralized by substantially all
assets of Dura.
The Credit Agreement provides Dura 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 March 31, 2000, $242.4 million of borrowings were
denominated in US dollars, $5.5 million of borrowings were denominated in
Canadian dollars, $3.6 million of borrowings were denominated in Australian
dollars and $19.0 million in British pound sterling.
In April 1999, the Company completed the offering of $300.0 million and Euro
100.0 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 $394.7
million were used to repay the $200.0 million interim term loan, approximately
$78.1 million to retire the indebtedness and approximately $118.9 million was
used for general corporate purposes. These notes are collateralized by
guarantees of certain of the Company's subsidiaries.
During the first quarter of 2000, Dura provided cash from operations of $20.6
million, compared to a $0.4 million in 1999. Cash generated from operations
before changes in working capital items was $36.2 million for 2000 compared to
$18.1 million for 1999. Decreases in working capital used cash of $15.6 million
in 2000 compared to $17.7 million in 1999. The decrease in working capital is
primarily the result of the timing of cash receipts and cash payments.
Net cash used in investing activities was $36.5 million for the first quarter of
2000 as compared to $543.9 million in 1999. Net capital expenditures totaled
$27.8 million for the first quarter of 2000 primarily for equipment and
dedicated tooling purchases related to new or replacement programs. This
compares with net capital expenditures of $6.0 million in 1999 and $540.1
million spent primarily on the acquisition of Excel and Adwest.
Net cash provided by financing activities totaled $26.6 million for the first
quarter of 2000 compared with $564.2 million in 1999. Approximately $28.2
million of cash was provided through net borrowings.
At March 31, 2000, Dura had unused borrowing capacity of approximately $113.8
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 2000 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.
During 1999, Dura established the Deferred Income Leadership Stock Purchase Plan
(the "Deferred Income Stock Plan"), which allows certain employees to defer
receipt of all or a portion of their annual cash bonus. Dura makes a matching
contribution of one-third of the employee's deferral. In accordance with the
terms of the plan, the employee's deferral and Dura's matching contribution have
been placed in a "Rabbi" trust, which invests solely in Dura's Common Stock.
This trust arrangement offers the employee a degree of assurance for ultimate
payment of benefits without causing constructive receipt for income tax
purposes. The assets of
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the trust remain subject to the creditors of Dura and are not the property of
the employees; therefore, they are included as a separate component of
stockholders' investment under the caption Treasury Stock. During the first
quarter of 2000, Dura made Common Stock repurchases of $1.7 million related to
the Deferred Income Stock Plan.
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. Certain mobile products are seasonal in that
sales in the fourth quarter are normally at reduced levels.
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
Dura 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. Dura does not enter into derivatives or other
financial instruments for trading or speculative purposes.
Dura 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.
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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.
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
Dura, are intended to identify forward-looking statements. Such forward-looking
statements are based on the beliefs of Dura's management as well as on
assumptions made by and information currently available to Dura 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 Dura, such as
risks relating to: (i) the degree to which Dura is leveraged; (ii) Dura'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) Dura'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 Dura or persons acting on behalf of Dura 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.
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PART II. OTHER INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
Other than as reported in Dura's 1999 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:
None
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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: May 12, 2000 By /s/ William Ohrt
----------------
William Ohrt
Vice President, Chief Financial Officer
(principal accounting and financial
officer)
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