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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year 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 333-75849
OXFORD AUTOMOTIVE, INC.
(Exact name of Registrant as specified in its charter)
MICHIGAN 38-3262809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 STEPHENSON HIGHWAY, TROY MICHIGAN 48083
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 577-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant has been required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The Registrant is a privately held corporation. As such, there is no practicable
method to determine the aggregate market value of the voting stock held by
non-affiliates of the Registrant.
At June 1, 2000, there were outstanding 309,750 shares of the Registrant's
common stock.
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PART I
ITEM 1. BUSINESS
GENERAL
For purposes of this Report, the "Company", "our", "we", and "us"
shall refer to Oxford Automotive, Inc. ("Oxford Automotive") and its
consolidated subsidiaries, unless the context otherwise requires.
We are a leading global Tier 1 or direct supplier of high-quality,
engineered metal components, assemblies and modules used by original
equipment automotive manufacturers, commonly referred to as "OEMs". Our
core products are complex, high value-added products, primarily assemblies
containing multiple stamped parts, forgings, various welded, hemmed or
fastened components and locking and release mechanisms. Our product focus
is directed toward three areas: closure panels, suspension systems, and
complex structural systems. These products, which include large structural
stampings (door module) and assemblies, including exposed "Class A"
surfaces, leaf springs and smaller complex welded assemblies, are used in
manufacturing a variety of sport utility vehicles ("SUVs"), light and
medium trucks, mini-vans, vans and passenger cars. These products are also
used in the recently introduced "hybrid vehicles", defined as a cross
between the popular SUV segment and traditional passenger car segment. We
are the sole source supplier of these products to our customers. On a pro
forma basis, assuming the acquisition of Gebr. Wackenhut GmbH
Karosserie-und Fahrzeugfabrik ("Wackenhut"), and the automotive
engineering, design and prototype service business ("the Technology
Division") of Farley, Inc. described below, had occurred on April 1, 1999,
we would have had net sales of $838.5 million and EBITDA (as defined
herein) of $81.8 million for the fiscal year ended March 31, 2000.
Our seven largest customers, based on pro forma net sales for the
fiscal year ended March 31, 2000, assuming the acquisition of Wackenhut and
the Technology Division had occurred April 1, 1999 are: General Motors
Corporation ("GM") (27%), Ford Motor Company ("Ford") (24%),
DaimlerChrysler AG ("DaimlerChrysler") (15%), Renault S.A. (8%), PSA
Peugeot Citroen ("PSA") (6%), The Saturn Corporation ("Saturn") (4%) and
Matra (3%). We have been providing products to our major customers in the
United States for more than 50 years and the European OEM's for more then
20 years and have earned outstanding commercial ratings for our
high-quality standards, including GM's Supplier of the Year and Mark of
Excellence Awards, Ford's Q1 Award, DaimlerChrysler Gold Penestar, CAMI's
President's Award, and have recently been named one of three strategic
stampers for Mercedes-Benz. We also sell our products to other Tier 1
suppliers. For the fiscal year ended March 31, 2000, approximately 68% of
our net sales, on a pro forma basis assuming the acquisitions during the
year occurred on April 1, 1999, were derived from sales of our products
manufactured for SUVs, mini-vans, vans and light trucks. In recent years,
SUVs, mini-vans, vans and light trucks have experienced stronger growth in
vehicle production as compared to the passenger car sector. This sector
includes those platforms and models which have strong consumer demand, such
as Ford's F-Series Pickup, Ranger, Explorer and Windstar, DaimlerChrysler's
Ram pickup and mini-van, Renault's Kangoo, Megane and Espace and Mercedes C
-Class and E-Class passenger cars. See Note 15 of the Oxford Automotive,
Inc. Notes to Consolidated Financial Statements for a description of the
Company's domestic and export sales.
OEMs are increasingly demanding full service design, engineering,
program management and production capabilities. Our recent acquisitions
continue to strengthen our position as a leading Tier 1 supplier of
assemblies, systems and modules to the OEMs. We have the critical mass and
capabilities in the areas of design and advance engineering, sales and
marketing, and product expertise that provide the basis for our strategy of
becoming a fully-integrated, global systems/module supplier. Through
acquisitions, the Company's revenues have risen at a compounded growth rate
of 76% from $85 million for fiscal year 1996 to $809 million for the
fiscal year ended March 31, 2000. These acquisitions have also allowed the
Company to support our customers on a worldwide basis, with current
facilities in the United States, Canada, Mexico, France, Germany, Italy and
a joint venture interest in Venezuela.
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We currently operate 28 manufacturing facilities, all of which are
QS9000 certified, with the exception of the recently completed Ramos
Arizpe, Mexico facility. The facilities offer the latest technologies in
metal stamping (machining and fine blanking), forging, welding and assembly
production equipment, including fully-automated hydraulic and wide-bed
press lines (up to 350 inches), robotic welding cells, robotic hemming,
autophoretic and cataphoretic corrosion resistant coating, injection
molding and a patented eye forming process. We also have the world-wide
exclusive rights (outside the CIS--formerly Soviet Union) to the "MAZ"
tapering process for our suspension applications. With the recent
acquisition of the Technology Division, we also obtained die casting
technology. In excess of $237.8 million has been invested since 1992 in
capital investments to support sales growth, expand production capabilities
and improve efficiency and flexibility. Our diverse line of over 575
presses that range up to 3,000 tons including both conventional and
transfer technology and state-of-the-art robotic weld assembly and hemming
equipment are capable of manufacturing a broad assortment of parts and
assemblies ranging from simple stampings to full-size, Class A door and
closure panels. We are one of a few independent suppliers that has the
ability to produce large, complex stampings, as well as the technical
expertise and automated assembly capabilities to provide high value-added
modules such as door apertures and assemblies, A-pillars, Class A surface
products and control arms, and multiple leaf and parabolic leaf springs.
We recently began producing the door, hood, and underbody assemblies
for a new GM Program (Pontiac Aztec, Buick Rendezvous). The door, hood and
underbody assemblies will be produced solely in Mexico for sale throughout
North America. Management believes these parts will generate approximately
$95.0 million of annual net sales beginning in the 2001 fiscal year. Other
recent significant business awards not yet in production, together with the
sales management believes will be generated by the awards, include:
Chrysler RS leaf springs ($24.0 million), GMT360 control arms ($55.5
million). GMT315 front and rear sub-frame ($28.0 million), Renault W84
closure panels ($50.0 million), PSA 106 door and fender inner panels ($10.0
million) General Motors SUV floor pans ($15.0 million) and Ford
Escort/Focus Structural and apron assembly ($10.0 million). Although we
believe these awards may generate the proposed sales, we cannot assure that
such sales will be sustainable as the automotive industry may experience
downturns and a decrease in customer demand for motor vehicles could
adversely affect our sales.
BUSINESS STRATEGY
Our principal objective is to be a leading, full-service, global Tier
1 supplier of design and engineering services and integrated systems
solutions based on metal forming and related manufacturing technologies. We
believe that we are well positioned to benefit from three significant
trends in the stamping and metal forming segments of the automotive
industry: outsourcing, consolidation and globalization. Outsourcing of
metal stamping has increased in response to competitive pressures on OEMs
to improve quality and reduce capital requirements, labor costs, overhead
and inventory. Whereas traditionally this was only prevalent in North
American OEM's, European OEM's are now actively pursuing this strategy.
Consolidation among automotive industry suppliers has occurred as OEMs have
more frequently awarded long-term sole source contracts to the most capable
global suppliers. In addition, OEMs are increasingly seeking full service
suppliers who can provide a complete package of design, engineering,
project management and manufacturing support for an integrated system (such
as a front-end system). Finally, OEM's are positioning themselves to reach
emerging markets in a cost effective manner by seeking to design and
produce "world cars" which can be designed in one vehicle center and
produced and sold in different geographic markets. We intend to capitalize
on these trends through internal development and strategic acquisitions.
The key elements of our strategy include the following:
Provide Full-Service Program Management. We are focused on developing
full-service program management capabilities. We work with OEMs throughout
the product development process from concept and prototype development
through the design and implementation of manufacturing processes. Program
management begins with the assembly of a cross functional team drawn from
every aspect of the business - program managers with experience in all
disciplines, as well as personnel from such areas as quality, finance,
purchasing and human resources. This roster also includes key
representatives from our technical headquarters, the manufacturing plant
and
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the client. We believe our ability, through our North American and European
technology centers, to manage programs and provide design, engineering,
prototyping, tooling, blanking, stamping, forging, assembly, and corrosion
resistant coating to our customers creates a unique capability present in
only a limited number of suppliers. We believe this capability will enable
us to manage large programs, assist us in reducing customer program launch
time, lower customer costs and increase our margins.
Supply Complex, High Value-Added Systems. As a result of our technical
design and engineering capabilities and our reputation for highly-efficient
manufacturing operations, we are able to secure supply relationships for
complex, high value-added products, primarily assemblies and modules that
contain multiple stamped parts and various welded, hemmed or fastened
components. For example, we produce closure panels - (doors, decklids,
hoods and trunk lids) for the Saturn LS, Saturn sport Coupe, Pontiac Aztek
and the Renault Megane, the radiator enclosure, floor pan and toe-to-dash
panel for the Ford Windstar, floor pan assembly for the Renault Espace, the
control arm on the PN-131 platform, the control arm assemblies for Ford's
F-Series pickups and DaimlerChrysler's T- 300, the radiator support
assembly for GM's W-car (Grand Prix, Century, Lumina, Monte Carlo, Regal
and Intrigue), complex A-pillar assemblies for the Ford Mustang and the
Ford Ranger pickup, and multiple leaf, parabolic (long taper) multiple
leaf, and single leaf long taper suspension systems for products ranging
from Ford's F-Series pickups to DaimlerChrysler's mini-vans. These complex
products typically generate higher dollar content per vehicle as well as
higher margins for the Company as compared to simple, individual stampings.
We plan to capitalize on our ability to develop and provide integrated
modules and assemblies to deliver to the OEMs an integrated product such as
a complete door or front-end system. In addition to doors, radiator
supports and Class A surface components, we believe we have unique
expertise with respect to control arms and leaf springs, which we will
further develop as a fully integrated suspension system.
Focus on High Growth Vehicle Categories. Our sales and marketing
efforts have been, and will continue to be, directed toward sectors of the
automotive market that have experienced strong consumer demand. In North
America the high growth segment is SUV's, mini-vans, vans and light trucks
and the emerging hybrid segment, while in Europe the high growth segment is
passenger cars. For the fiscal year ended March 31, 2000, on a pro forma
basis assuming the acquisition of the Technology Division had occurred on
April 1, 1999 approximately 84% of our sales in North America were derived
from the SUV segment and in Europe, on a pro forma basis assuming the
acquisition of Wackenhut had occurred on April 1, 1999, approximately 32%
of our sales were derived from the passenger car segment.
Provide Superior Engineering Solutions. We provide engineering
solutions to our customers through our extensive product and engineering
expertise. Weight reduction, modularization and integration of components
into systems, using state of the art design, prototyping and process
technologies, address the customer requirements for continuous improvement.
As a full service global supplier we have taken a leading position in
integrating simulation software into our design culture. This considerable
investment in time and resources supports one long-term goal: finding new
technologies for old line stamping operations and working to achieve cost
reduction and manufacturing efficiencies. Our commitment to this strategy
was demonstrated by our acquisition of the Technology Division. The
Technology Division is a full service provider of early phase product
design and process simulation, and is a leader in large die prototyping
and complex welded assemblies. The Technology Division also provides
supplemental design and engineering services to the automotive OEMs and
Tier 1 suppliers.
Establish a Global Presence. We are actively pursuing additional
strategic acquisitions and joint-venture opportunities in Europe and Mexico
and intend to pursue opportunities that will allow us to increase our
presence in South America, and establish a presence in Asia and other
markets in order to serve our customers on a global basis. Several OEMs
have announced certain models designed for the world automobile market. As
a result, the OEMs have encouraged their existing suppliers to establish
foreign production support for these programs. This globalization provides
access to new customers and technology, as well as economic cycle
diversification. We currently have operations in Mexico, France, Germany
and Italy and have established a presence in Venezuela.
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Pursue Strategic Acquisitions and Alliances. In response to the trend
in the OEM market toward "full service systems suppliers," we are focused
on making strategic acquisitions and entering into strategic alliances and
joint ventures that will enhance our ability to provide integrated systems
(such as a door or front end system) or otherwise leverage our existing
business by providing additional program management, engineering, product,
manufacturing and service capabilities. We also intend to pursue
acquisitions that will expand our customer base by providing an entree to
new customers, including the North American operations of Asian and
European based OEMs. We believe that the continuing supplier consolidation
in the stamping and metal forming segments may also provide attractive
opportunities to acquire high-quality companies at favorable prices,
including businesses which can be improved financially through overhead
elimination, organizational restructuring, plant reconfiguration, labor
contract negotiations and management changes. We will also pursue
acquisitions that enable us to achieve a global presence.
RECENT DEVELOPMENTS
On June 28, 1999 we acquired, through a wholly owned, indirect
subsidiary, 100% of the shares of Wackenhut. Wackenhut is a supplier of
complex pressings, welded assemblies, complete truck cabs, cataphoretic
coatings and finish paint applications, and operates three facilities in
Germany located in the Nagold area near Stuttgart. Wackenhut is an
unrestricted subsidiary under our debt agreements. Pursuant to the terms of
the acquisition, we agreed to pay DM 1 for the Wackenhut shares, provide DM
5 million in additional paid in capital, restructure approximately DM 63.4
million in bank debt, and purchase approximately DM 18.6 million in bank
and shareholder debt for DM 1. The acquisition agreement provided for the
restructuring of Wackenhut's credit facilities and provided additional
financing of approximately DM 16.6 million under a line of credit and up to
DM 45.0 million to fund capital expenditures to support plant expansion and
modernization. The purchase price plus direct cost of the acquisition has
been allocated to the assets acquired and liabilities assumed based on
their estimated fair market values at the date of acquisition.
On February 16, 2000 we acquired, through two wholly-owned, indirect
subsidiaries, the automotive engineering, design and prototype service
business ("Technology Division") of Farley, Inc. ("Farley"). The purchase
price for the Technology Division was $6.3 million including closing costs,
subject to a closing date working capital adjustment, if applicable. The
Technology Division is a full service provider of early phase product
design as well as a leader in large die prototyping of large complex welded
assemblies and class A panels, with special expertise in aluminum. In
addition, it also provides design and engineering services to the
automotive OEM's and Tier 1 suppliers.
On April 3, 2000 we acquired through a wholly-owned indirect
subsidiary, the Group Gessaroli business (the "Gessaroli Group") from
Officine Meccaniche Gessaroli S.p.A., Gess.Cardi Gessaroli Agostino &
c.s.as., and various individuals. The purchase price was ITL 24.0 billion
($11.8 million) plus up to ITL 3.6 billion ($1.8 million) for the payment
of income taxes and debt, subject to a closing date net asset adjustment,
if applicable. On April 3, 2000, ITL 21.6 billion ($10.7 million) of the
total purchase price was paid to sellers and ITL 2.4 billion ($1.2 million)
was held back, pending any applicable purchase price adjustment or
indemnification claim. The Gessaroli Group's integrated manufacturing
operations cover all functions of design, engineering, die and mold
construction, parts production and assembly for its metal formed components
including fine blanking and weld and assembly of components, modules and
injection molded products.
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INDUSTRY TRENDS
The OEM market to which we sell our products consists of the program
management, design, engineering, prototype and development, production and
sale of parts, components, assemblies and modules or systems (several
components assembled together) for use in the manufacture of new motor
vehicles. Our performance, growth and strategic plan are directly related
to certain trends within the OEM market. The North American OEM's have each
been substantially reducing the number of suppliers that may bid for awards
and outsourcing an increasing percentage of their production requirements.
This trend is now rapidly developing among the European OEM's as well. As
a result, the OEMs are focusing on the development of long-term, sole
source relationships with suppliers who can provide more complex parts, as
well as complete subassemblies and modules on a just-in-time basis while at
the same time meeting strict quality requirements. These requirements are
accelerating the trend toward consolidation of the OEM's supplier base, as
those suppliers who lack the capital and production expertise to meet the
OEM's needs, either cease to operate or are merged with larger suppliers.
OEMs benefit from outsourcing because outside suppliers generally have
significantly lower cost structures and, as described below, suppliers can
assist in shortening development periods for new products.
In addition to consolidation and outsourcing, suppliers are
participating earlier in the design and engineering process, providing
research, as well as product development, product testing/validation,
prototyping and tooling. OEMs generally expect Tier 1 suppliers to (i)
participate in the design and engineering of complex assemblies, (ii)
develop the required manufacturing process to deliver these assemblies on a
just-in-time basis, and (iii) assume responsibility for quality control.
This results in shorter development times for new products, as evidenced by
the "go-fast" program (concept to market in less than 24 months) initiated
by GM on the Pontiac Aztek, as well as higher quality and lower part costs.
While the focus by the OEMs remains quality and cost, we
believe that the focus for the future will be on global capabilities of
program management, design innovation and ability to provide value-added
products and systems. The OEMs have been very successful in making
high-quality and low cost a minimum requirement to remain in the industry,
as opposed to a competitive advantage for certain suppliers. These evolving
requirements can best be addressed by suppliers with sufficient resources
to meet such demands. For full-service suppliers such as the Company, this
environment provides an opportunity to grow by obtaining business
previously provided by other suppliers who can no longer meet the current
or future requirements and expectations of the OEMs and by acquisitions
that further enhance product manufacturing and service capabilities.
Although the requirements of the OEMs have already resulted in significant
consolidation of component suppliers in many product segments, we believe
that many opportunities exist for further consolidation within our stamping
and metal forming industry.
PRODUCTS
We generate the majority of our net sales from large, complex, high
value-added closures and structural modules, primarily assemblies that
generally consist of multiple parts, which we stamp, forge and assemble
with various welded or fastened components. We are the sole source supplier
of these complex modules and assemblies. Our product focus is directed
toward three areas: closure panels, suspension systems, and complex
structural systems. These products include unexposed components and
assemblies that are fundamental to the structural integrity of the vehicle
such as A-pillars, radiator supports, floor pans, toe-to-dash panels, leaf
springs, frame and suspension components and reinforcements. In addition to
unexposed modules and assemblies, we have the capability and expertise to
produce Class A surfaces such as door assemblies, door apertures, rocker
panels, fuel filler doors, which require virtually flawless finishes and
more stringent customer requirements than unexposed assemblies. These
products require superior engineering and automated manufacturing and
assembly capabilities due to their exterior visibility, complexity, and
high volume requirements. The combination of these systems and modules
provides the capability to virtually build an entire body-in-white and all
related closure panels.
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While we have the capability to produce small stampings, such as
brackets and braces, we focus on more complex and larger components and
assemblies that typically generate higher dollar content per vehicle as
well as higher margins for the Company. These assemblies, such as the A, B
and C pillars, control arms, leaf springs, door assemblies, door apertures,
deck lids and radiator supports require larger, high tonnage, wide-bed,
fully-automated press capabilities, complex automated weld and hemming
assembly, autophoretic and cataphoretic corrosion resistant coating,
machining, and automated assembly of purchased components.
The charts below detail our major customers and platforms as well as
our major products:
WORLDWIDE WORLDWIDE
CUSTOMERS PLATFORMS
Audi A6, B6, C6, Bodenteil
CAMI Tracker, Metro, Vitara, Swift
DaimlerChrysler Dakota, Cherokee, Ram pickup, Durango, Caravan/Voyager
Fiat Uno. Punto, Bravo, Marea, Ducato, Multipla, Alfa 145/146, Alfa 156,
Alfa 166, Alfa Sportive, Lancia Y, Lancia K, Lancia Lybra
Ford Motor Company Explorer, F-Series Pickup, Focus, Mustang, Ranger, Econoline,
Expedition, Countour/Mystique
General Motors Corvette, Grand Prix, Tahoe, Yukon, S/T Pickup, Suburban, Astro/Safari
Blazer/Jimmy, Aurora, Cavalier, Seville
Honda Accord/Civic
Matra Espace
Mercedes Ebobus, Sprinter, Turen 404, C Class SL, E Class, Unimog
Nissan Micra, Villager/Quest
Opel T300/Corsa, T600/Zaphnia
PSA Peugot Citroen Monospace, Xantia, 205, 405
Renault Megane, Express, Kangoo, Master
Saab 9.3 Convertible, 9.5 Sedan
Saturn LS, sport Coupe, GMT 315 SUV
Toyota Yaris
Volkswagon Golf, Passat
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PRODUCT LINES
STRUCTURAL CHASSIS
Bow-roof panel, door frame, frame rear upper, front body Brackets, cross members, engine cradles, fuel tanks,
hinge pillar, full floor pan, instrument panels, panel back body spring shackles/hangers, spring towers
pillar, panel center pillar inner, rail assembly engine compartment,
rear floor member, roof rails, toe to dash panel
COMPLEX STAMPINGS/ASSEMBLIES SUSPENSION
Floor pan assemblies, frame windshield front, inner Control arms, leaf springs (multi/ conventional/
door panels, heat shields, oil pans, radiator support parabolic),twist axles, control links and spring
assembly mounts
CLASS A
Closure panels, door assemblies, hood/bonnet, roof panels
truck cabs
We have received purchase orders for production commencing after the
current model year, which production typically continues through the
product's life cycle and is subject to the volume requirements of
customers, for the following major products on an annualized basis: Pontiac
Aztec, Buick Rendezvous ($95.0 million), Chrysler RS leaf springs ($24.0
million), GMT360 control arms ($55.5 million), GMT315 front and rear
sub-frame ($28.0 million), Renault W84 closure panels ($50.0 million), PSA
106 door and fender inner panels ($10.0 million) General Motors SUV floor
pans ($15.0 million) and Ford Escort/Focus Structural and apron assembly
($10.0 million) Although we believe these awards may generate the proposed
sales, we cannot assure that such sales will be sustainable as the
automotive industry may experience downturns and a decrease in customer
demand for motor vehicles could adversely affect our sales.
DESIGN AND ADVANCED ENGINEERING
We strive to maintain a technological advantage through investment in
program management, product design, advanced engineering and prototype
capabilities in an effort to exceed the customer's expectations for value
and service. Our engineering staff encompasses such disciplines as computer
aided design ("CAD"), virtual prototyping, draw die and process simulation,
advanced engineering, manufacturing feasibility, and tooling and process
development.
As our customers continue to outsource larger assembled systems which
must be designed at earlier stages of vehicle development rather than the
smaller parts which are attached to them, we are increasingly required to
utilize advanced engineering resources early in the planning process.
Advanced engineering resources create improved engineering design, CAD
feasibility studies, working prototypes and testing programs to meet
customer specifications. Given this increased demand for early involvement
in the design and engineering aspects of production development, we
established a technical center in North America and most recently Europe
that houses our engineering and design groups. We utilize structured
program management based on the Automotive Industry Action Group sanctioned
Advanced Part Quality Planning principles to ensure part quality in all
phases of design and manufacturing. We have an established data management
and CAD department through the Technology Division that supports all major
customer systems. We provide full and complete engineering solutions up
through "black
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box" design. "Black box" design involves the customer setting broad product
requirements and leaving the design, material, tooling and production
to the supplier. We also provide "gray box" engineering capabilities in
which the customer has principal design responsibility while our engineers
work closely with the customer in designing the specifications of the
product material, the part to be produced and the tooling required to
produce the finished product. We are also on-line with all major customers
which accelerates the process of design changes.
Our design and advanced engineering expertise is an important
differentiating factor in maintaining our relationships with and obtaining
new business from our customers and, in management's judgment, was an
essential factor in winning the new business described above. We believe
our design and advanced engineering expertise is among the best in the
industry based on products provided to customers.
CUSTOMERS AND MARKETING
We supply our products on a long-term preferred and sole source basis,
primarily to GM (27%), Ford (24%), DaimlerChrysler (15%), Renault (8%), PSA
(6%), Saturn (4%) and Matra (3%) (percentages are approximates of net sales
for the fiscal year ended March 31, 2000 on a pro forma basis for the
acquisitions of Wackenhut and the Technology Division) with the remaining
net sales comprised of sales primarily to other automotive suppliers. We
have been providing products directly to our customers in the United States
for more than 50 years, and directly to European OEM's for more than 20
years. We currently have locations in the United States, Canada, Mexico,
France, Germany, Italy and Venezuela and provide components for OEMs doing
business in Europe, North America and South America. We believe our
presence in Europe and Mexico is strategically important and has led to
several significant new opportunities with OEMs doing business in these
locations. We also believe the Venezuelan joint venture ("Metalcar")
provides further entree into Mexican and South American markets. We believe
Metalcar's production capabilities and strong management team will provide
us with the means to further penetrate these markets not only for springs,
but also metal stamping and other Company products. We maintain very strong
relationships with our customers and continually strive to exceed customer
expectations and anticipate customer needs. This approach has enabled us to
maintain our status as a long-term supplier with each of our major
customers and as part of a limited group of preferred suppliers invited to
bid for platform work.
With the efforts by the OEMs to reduce the product development cycle
time ("go fast" programs), top suppliers are increasingly charged with
responsibility in the early design and development stages. For example, we
obtain many of our new orders through a presourcing process by which the
customer invites one or a few preferred suppliers to manufacture and design
a component, assembly or module that meets certain price, timing and
functional parameters. Upon selection at the development stage, we
typically agree with the customer to cooperate in developing the product to
meet the specified parameters. Upon completion of the development stage and
the award of the manufacturing business, we receive a blanket purchase
order for those components, assemblies or modules for the life of a vehicle
model or platform, which typically range from five to seven years.
Consequently, the key success factors for OEM suppliers now include total
program management that encompasses state-of-the-art design, reduced launch
cycle times, and the manufacture and delivery of high quality products at
competitive prices.
We believe that the advanced engineering and sales organization at our
technical centers offer services few other suppliers have available for
their customers on a global basis. The group's primary activities are:
- program management;
- quoting/cost estimating;
- assembly/automation;
- CAD design and data control;
- virtual prototyping;
- draw die simulation
- tool process/design
- early phase prototypes
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The sales group is divided into customer oriented business units, each
with a business unit manager responsible for all facets of customer needs,
as well as strategies for growing their particular customer base. The
entire group is dedicated to advanced technical development and servicing a
multitude of customers' needs as one team.
RAW MATERIALS
The cost of raw materials represented approximately 51.6% of our net
sales for the fiscal year ended March 31, 2000 on a pro forma basis for the
acquisitions of Wackenhut and the Technology Division. On an annual basis,
steel represents approximately 65.0% of total raw materials purchases. We
expect to purchase nearly 500,000 tons of steel in fiscal 2001 for use
in our production. The remaining 35.0% of raw materials purchases is
represented by various purchased parts such as forgings, bushings, ball
joints, isolators, corrosion resistant coating, and various fasteners.
We participate with respect to the majority of our North American
platforms in steel purchase programs through Ford, GM and DaimlerChrysler
wherein the steel is purchased by the OEM from the steel mill and sold to
us at a negotiated or matrixed price. These purchase programs effectively
neutralize the exposure to steel price increases and decreases, as any
price increases from the steel mills are either absorbed by the OEM prior
to our purchase of the steel or such increases are reflected in our
purchase of the steel and passed back to the OEM in the product pricing.
COMPETITION
The market for our products is characterized by strong competition
from both captive OEM suppliers and external, non-captive suppliers. We
compete with a limited number of competitors that have the physical assets
and technical resources to produce large bed stampings, complex parts and
subassemblies of multiple parts. Our largest competitors include The Budd
Company, a subsidiary of Thyssen AG; Magna International Inc.; Tower
Automotive, Inc.; Trianon Industries Corp.; Ogihara America Corp.; Wagon
PLC.; Mayflower Corporation, PLC; Shiloh Industries, Inc.; Magnettosre;
Benteler A.G.; and divisions of OEMs with internal stamping and assembly
operations. Within the leaf spring portion of our business our main
competitor is Rassini, Inc., and in the suspension portion of our business
our major competitors are TRW, Inc., Dana Corp. and Benteler AG.
We compete for business at the beginning of the development for new
model platforms, as well as the redesign of current models. This process
can begin from 18 to 36 months prior to the introduction of the new model.
After the customer awards a program, that supplier is generally designated
as the sole source supplier for the life of that program, which typically
lasts 4 to 5 years for passenger cars and up to 10 years for trucks
(particularly for unexposed structural components and assemblies).
EMPLOYEES
At March 31, 2000, we employed approximately 5,500 persons in the
United States, Canada, Mexico, France and Germany, approximately 1,069 are
employed on a salaried basis and the balance are hourly employees.
Substantially all of the hourly employees are represented by various local
unions through collective bargaining agreements. These individual
agreements which are from three to five years in length expire over the
period July 2000 through January 2005.
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In 1994, prior to our acquisition of the facility, we experienced a
two-week work stoppage at the Chatham, Ontario facility. Other than this
event, we have not experienced any organized work stoppages at any time
during the past ten years. At the present time, we believe that our
relations with our employees are good.
REGULATORY MATTERS
Our facilities and operations are subject to a wide variety of
federal, state, local, and foreign environmental laws, regulations, and
ordinances, including those related to air emissions, wastewater
discharges, and chemical and hazardous waste management and disposal
("Environmental Laws"). Our operations also are governed by laws relating
to workplace safety and worker health, primarily the Occupational Safety
and Health Act, and foreign counterparts to such laws. In many
jurisdictions, these laws are complex and change frequently. The nature of
our operations exposes us to risks of liabilities or claims with respect to
environmental and worker health and safety matters. There can be no
assurance that material costs will not be incurred in connection with such
liabilities or claims.
Based on our experience to date, we believe that the future cost of
compliance with existing Environmental Laws (or liability for known
environmental claims) will not have a material adverse effect on our
business, financial condition or results of operations. However, future
events, such as changes in existing Environmental Laws or their
interpretation, may give rise to additional compliance costs or liabilities
that could have a material adverse effect on our business, financial
condition or results of operations. Compliance with more stringent
Environmental Laws, as well as more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing
Environmental Laws, may require additional expenditures by the Company that
may be material.
Certain Environmental Laws hold current owners or operators of land or
businesses liable for their own and for previous owners' or operators'
releases of hazardous or toxic substances, materials or wastes, pollutants
or contaminants, including petroleum and petroleum products ("Hazardous
Substances"). Certain laws, including but not limited to the Comprehensive
Environmental Response, Compensation & Liability Act ("CERCLA"), may impose
joint and several liability on responsible parties. Because of our
operations, the long history of industrial uses at some of our facilities,
the operations of predecessor owners or operators of certain of the
businesses, and the use, production, and releases of Hazardous Substances
at these sites, we are affected by such liability provisions of the
Environmental Laws. Several of our facilities have experienced some level
of regulatory scrutiny in the past and are or may be subject to further
regulatory inspections, future requests for investigation or liability for
past disposal practices.
Our Alma, Michigan plant is listed on the Michigan Department of
Environmental Quality ("MDEQ") list of Michigan Sites of Environmental
Contamination. Based on filings with the MDEQ by the current owner of the
petroleum refinery which adjoins the Alma plant property, the refinery has
been determined by the MDEQ to be the source of certain contamination
existing in the eastern area of the Alma plant property. While we are
currently conducting certain remedial activity at our Alma plant in
connection with this contamination, we may have claims against the refinery
owner relating to this contamination. While we do not expect to incur
significant future costs in connection with this matter, we cannot
guarantee that such future costs will not be material.
The Resource Conservation and Recovery Act and the regulations
thereunder ("RCRA") regulates the generation, treatment and disposal of
hazardous wastes. In the mid-1980s, we entered into a Consent Agreement and
Final Order, through a subsidiary, with the United States Environmental
Protection Agency (the "EPA") relating to the final closure of a surface
water impoundment area at the Alma plant under RCRA. We have remediated the
impoundment soils and sediments and we have implemented a groundwater
monitoring program with EPA approval under RCRA. A final closure report has
been submitted to the EPA. In addition, we are conducting soil
investigation and groundwater monitoring, with MDEQ involvement, in a
separate section of the Alma plant at which contaminants have been detected
by our consultants. Both of these programs may be affected by the suspected
contamination from the petroleum refinery described above. While future
soil and/or groundwater remediation costs,
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if any, are not expected to be material, we cannot predict such costs with
certainty and no guarantee can be made that these costs will not be
material.
We have been named as a potentially responsible party, along with
several other companies, in connection with a former disposal facility
located in the St. Louis, Michigan area. The State of Michigan has begun an
investigation of this facility which we, along with certain other named
parties, are monitoring. While the costs of investigation and remediation,
if any, are not expected to be material, we cannot accurately estimate such
costs at this time.
FORWARD LOOKING STATEMENTS
This report contains statements relating to such matters as
anticipated financial performance, business prospects and other matters
that may be construed as forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. In
addition, the Company may from time to time publish or communicate other
statements that could also be construed to be forward-looking statements.
These statements are or will be based on the Company's estimates,
assumptions and projections, and are subject to risks and uncertainties,
including those specifically listed below, that could cause actual results
to differ materially from those included in the forward-looking statements.
The risks and uncertainties that may affect the operations,
performance, development and results of operations of the Company include
the following: (1) the OEM supplier industry is highly cyclical and, in
large part, impacted by the strength of the economy generally, by
prevailing interest rates and by other factors which may have an effect on
the level of sales of automotive vehicles; (2) future price reductions,
increased quality standards or additional engineering capabilities may be
required by the OEMs, which are able to exert considerable pressure on
their suppliers; (3) the OEMs may decide to in-source some of the work
currently performed by the Company; (4) work stoppages and slowdowns may be
experienced by OEMs and their Tier 1 suppliers, as a result of labor
disputes; (5) there may be a significant decrease in sales of vehicles
using the Company's products or the loss by the Company of the right to
supply any of such products to its major customers; (6) increased
competition could arise in the OEM supplier industry; and (7) changing
federal, state, local and foreign laws, regulations and ordinances relating
to environmental matters could affect the Company's operations.
ITEM 2. PROPERTIES.
Our corporate headquarters, engineering, technical center and sales
offices are currently located in Troy, a suburb of Detroit, Michigan, close
to our core of North American automotive customers. Our manufacturing
plants are strategically located near OEM manufacturing sites.
We operate over 575 presses ranging from under 100 ton to 3,000 ton
capabilities. We are capable of producing components and assemblies from
the smallest brackets to full-size, Class A door and closure panels with
our unique wide-bed (180 inch), automated press line. Production systems
include welding robots, pick and place robots and other state-of-the-art
automation, as well as autophoretic, cataphoretic and hunting corrosion
resistant coating systems.
As OEMs have increased quality standards and implemented just-in-time
and sequenced delivery/inventory management methods, the consistency of
quality, as well as the timeliness and reliability of shipments by OEM
suppliers, have become crucial in meeting logistical demands of the OEMs
and reducing operating costs of the supplier. We have responded by
developing and adopting manufacturing practices that seek to maximize
quality and eliminate waste and inefficiency in our own operations and in
those of our customers. Our manufacturing and engineering capabilities
enable us to design and build high-quality, efficient manufacturing
systems, processes and
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equipment. We have invested heavily in our commitment to quality through
education of employees and implementation of cost management and control
systems from the plant floor up.
All suppliers are required to meet numerous quality standards in order
to qualify as a preferred and long-term supplier to the OEMs. The QS-9000
standards were developed by international and domestic automobile and truck
manufacturers to ensure that their suppliers meet consistent quality
standards that can be independently audited. The QS-9000 standards provide
for the standardization and documentation of a supplier's policies and
procedures to improve suppliers' efficiencies. The European automobile and
truck manufacturers have developed similar standards to the QS-9000
standards (EAQF). We are QS-9000 certified and our operations in Europe are
EAQF, QS-9000 and ISO 9002 certified.
In addition to the QS-9000 standard, each OEM maintains its own
certification or award system for preferred suppliers based on the
supplier's demonstrated quality, delivery and certain commercial
considerations. Ford requires that all suppliers receive its Q1 rating in
order to quote for new production business. GM's Supplier of the Year Award
provides certain competitive advantages to the recipients but is not a
requirement for current GM suppliers to bid on new business.
DaimlerChrysler allows suppliers who have received its Gold Pentastar Award
to retain any current business when it is replaced by a new model without
competitive bidding. Other OEMs maintain various award programs for their
suppliers that recognize outstanding performance by the supplier. We have
received DaimlerChrysler's Gold Pentastar Award for each of our facilities
that have DaimlerChrysler as a customer. We have the Q1 rating from Ford at
all plants that are required to have the Q1 rating.
A summary of our major facilities, including the facilities of our
less than majority owned affiliates is set forth below:
Country Facility Size (Sq. Ft.) Country Facility Size (Sq. Ft.)
------- -------- -------------- ------- -------- --------------
United States Alma, Michigan 389,000 Mexico Saltillo (1) 20,000
Argos, Indiana 386,000 Silao (1) 42,000
Corydon, Indiana 200,000 Ramos Arizpe (1)(2) 330,000
Chicago, Illinois 160,000
Greencastle, Indiana 214,000 France Douai (3) 600,000
Lapeer, Michigan 85,000 Elancourt (1) 37,000
Hillman, Michigan 6,760
Masury, Ohio 150,000 Orbec 188,000
Oscoda, Michigan 57,000 St. Florent 431,000
Prudenville, Michigan 76,000
Troy, Michigan (1) 54,000 Germany Altensteiger 301,000
Troy CET 16,000
Iselshausen 132,000
Canada Cambridge, Ontario 290,000 Wolfsberg 134,000
Chatham, Ontario 190,000
Wallaceburg, Ontario 240,000 Venezuela (4) Valencia 122,000
Italy Turin (3) 110,000
(1) All properties above are owned, with the exception of the Silao,
Saltillo and Ramos Arizpe facilities and the Troy office. These
properties are leased with lease expiration dates ranging from
August 2000 to June 2005.
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(2) We have entered into a cross border asset usage facility for this
location. This metal stamping and manufacturing center was
completed in November 1999 and supports the GM hood, door and
underbody assembly (Pontiac, Aztec and Buick Rendezvous) as well
as other customer opportunities.
(3) The Douai, France location has two facilities. The Turin, Italy
location has four facilities.
(4) Owned by Metalurgica Carabobo, S.A., a Venezuelan joint venture
of which we have a 49% interest.
ITEM 3. LEGAL PROCEEDINGS
We are subject to various claims, lawsuits and administrative
proceedings related to matters arising in the normal course of business. In
the opinion of management, after reviewing the information that is
currently available with respect to such matters and consulting with legal
counsel, any liability which may ultimately be incurred with respect to
these matters will not materially affect our financial position. See Item 1
"Business-Regulatory Matters".
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the Company's security
holders during the fourth quarter ended March 31, 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
There is no established trading market for any class of common equity
of the Company. As of June 1, 2000, there were 21 shareholders of record of
the Company's common stock.
We have not paid cash dividends during the past two fiscal years and
do not plan to pay cash dividends in the near term. We are restricted in
our ability to pay dividends under certain debt covenants.
The Company did not sell any equity securities during the year ended
March 31, 2000 that were not registered under the Securities Act of 1933,
as amended.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth (a) selected consolidated historical
financial data of BMG North America Limited ("BMG" or the "Predecessor")
for the period from April 1, 1995 through October 27, 1995, and
(b) selected consolidated historical financial data of the Company from
October 28, 1995 through March 31, 1996 and the years ended March 31, 1997,
1998, 1999 and 2000. The selected consolidated historical financial data
for period April 1, 1995 through October 27, 1995, the period October 28,
1995 through March 31, 1996, and for the year ended March 31, 1997 was
derived from the audited consolidated financial statements of the
Predecessor and the Company not included herein. The selected consolidated
historical financial data for the years ended March 31, 1998, 1999 and 2000
was derived from the audited consolidated financial statements of the
Company, which are included elsewhere in this Report, together with the
report of PricewaterhouseCoopers LLP, independent accountants. The
following table should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
Consolidated Financial Statements of the Company and the related notes and
other financial information presented elsewhere in this Report.
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Historical
-------------------------------------------------------------------------
Predecessor Company
-------------------------------------------------------------------------
4/1/95 10/28/95-
10/27/95 3/31/96 3/31/97 3/31/98 3/31/99 3/31/00
-------------------------------------------------------------------------
(Dollars in thousands)
Statement of Operations Data:
Net Sales $49,043 $35,572 $136,861 $410,321 $591,645 $809,065
Gross Profit 2,148 3,948 11,773 41,901 55,067 96,126
Selling, General and Administrative 3,922 2,235 7,685 21,180 32,129 49,247
Restructuring Provision - - - 1,610 1,151
(Gain) loss on Sale of Equipment - - - (1,602) (777) 193
Equipment Impairment and
Nonrecurring charges (a) - - 287 - - -
-------------------------------------------------------------------------
Operating Income (Loss) (1,774) 1,713 3,801 20,713 22,564 46,686
Interest Expense 1,048 1,096 3,388 10,710 20,903 31,350
Other Income (Expense) - - 2,201 321 4,445 1,486
Income (Loss) Before Income Taxes (2,822) 617 2,614 10,324 6,106 16,822
Provision (Benefit) for Income Taxes (938) 202 1,065 4,733 2,953 9,216
-------------------------------------------------------------------------
Net Income (Loss) $(1,884) $415 $1,549 $5,591 $3,153 $7,606
=========================================================================
Net Income (Loss) per share $- $9.10 $9.37 $13.74 $5.92 $20.29
Balance Sheet Data (end of period):
Cash and Cash Equivalents $- $- $9,671 $18,321 $19,008 $17,643
Accounts Receivable 13,312 8,338 47,626 65,273 152,281 139,912
Inventories 4,429 3,719 13,411 21,305 48,104 53,187
Total Assets 59,770 49,200 243,694 320,032 542,930 598,812
Total Debt 23,233 26,758 99,829 139,448 263,862 273,676
Redeemable Preferred Stock - - 39,300 40,192 40,319 40,451
Total Shareholder Equity 9,329 935(b) 2,341 6,118 928 4,229
OTHER DATA:
Depreciation and amortization $919 $687 $5,041 $20,279 $25,450 $31,971
Capital Expenditures 5,111 3,466 3,326 16,723 33,625 37,843
EBITDA (c) $(855) $2,400 $11,043 $40,654 $51,818 $80,210
Gross Margin (d) 4.38% 11.10% 8.60% 10.21% 9.31% 11.88%
---------------------
(a) This provision includes income before taxes for the
discontinuance of Laserweld International, L.L.C. and Parallel
Group International, Inc. Management does not anticipate that
these costs will be a part of future operations.
(b) The reduction in equity of $8.4 million from October 27, 1995 to
March 31, 1996, is primarily a result of the elimination of the
Predecessor's equity as a part of the purchase accounting
adjustments made upon the acquisition of the Predecessor on
October 27, 1995.
(c) EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization. EBITDA should not be construed as
a substitute for income from operations, net income or cash flow
from operating activities for the purpose of analyzing the
Company's operating performance, financial position and cash
flows.
(d) Gross margin is defined as gross profit as a percent of net sales
for each of the applicable periods.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements of the Company and notes thereto included
elsewhere in this Report. The historical financial information for the
Company has been impacted by several recent acquisitions. The historical
information for the fiscal year ended March 31, 2000 includes the complete
results of operations for Lobdell Emery Corporation ("Lobdell"), which was
acquired on January 10, 1997, Howell Industries, Inc. ("Howell"), which was
acquired on August 13, 1997, RPI Holdings, Inc. ("RPIH"), which was
acquired on November 25, 1997, the suspension division of Eaton Corporation
(the "Suspension Division"), which was acquired on April 1, 1998, and
Cofimeta S.A. and its subsudiaries ("Cofimeta"), which was acquired on
February 5, 1999. The historical information for the fiscal year ended
March 31, 2000 includes only a portion of the operating results of
Wackenhut and the Technology Division, acquired June 28, 1999 and February
16, 2000, respectively. Each of these acquisitions was accounted for using
the purchase method of accounting. The historical information for the
fiscal year ended March 31, 1999 includes only a portion of the results of
operations for Cofimeta and does not include the operating results of
Wackenhut or the Technology Division. The historical information for the
fiscal year ended March 31, 1998 includes only a portion of the results of
operations for Howell and RPIH, and does not include the operating results
of the Suspension Division.
FISCAL YEAR ENDED MARCH 31, 2000 COMPARED TO FISCAL YEAR ENDED MARCH 31,
1999
Net Sales -- Net sales for the year ended March 31, 2000 were $809.1
million. This represents an increase of $217.5 million as compared to net
sales for the fiscal year ended March 31, 1999 of $591.6 million. Net sales
for the fiscal year ended March 31, 1999 included net sales of Cofimeta
only from the acquisition date of February 5, 1999 through March 31, 1999.
The increase for fiscal 2000 was due principally from the incremental sales
for Cofimeta and the acquisitions of the Wackenhut and the Technology
Division ($200.5 million). The remaining increase resulted from continued
strength of the sport utility, light truck and van segments, the launch of
the Saturn LS, incremental business on the Dodge Durango platform, the
impact of the General Motors strike ($12.7 million reduction included in
prior year) and increased volumes for the Renault Espace and Kangoo
platforms. The increase in sales was offset by the balance out of certain
General Motors light truck and SUV platforms and the reduction in European
cataphoretic volumes. On a pro forma basis, had the net sales from all
acquisitions been included for the entire fiscal 2000, net sales would have
been $838.5 million.
Gross Profit -- Gross profit was $96.1 million or 11.8% of net sales
for the year ended March 31, 2000 as compared to $55.1 million or 9.3% of
net sales for the year ended March 31, 1999. This represents an increase of
$41.0 million as compared to the prior year. The gross profit increase is
related to the incremental sales resulting from the acquisitions, combined
with operating improvements made throughout the year on existing as well as
acquired sales. Gross profit was also increased based on productivity
improvements, fixed costs reduction through plant rationalization
(previously announced Hamilton, Indiana and Athens, Tennessee facility
closures), increased uptime through employment of quick die change
technology and recovery from the impact of the GM strike ($5.2 million).
Gross profit was adversely impacted by investments made for program
launches (Pontiac Aztek in Mexico, Saturn LS, DaimlerChrysler
Durango/Dakota) and premium costs associated with customer demand in excess
of tool capacity. Continued efforts are being made through plant and
capacity rationalization and maximization of asset utilization to improve
the overall performance of operations.
In December 1999, the Company entered into an agreement with Grainger
Integrated Supply, a division of W.W. Grainger, Inc. ("Grainger") for the
management of its North American routine maintenance and manufacturing
supplies. As a part of the agreement, Grainger agreed to purchase from the
Company, selected supply inventories at cost. In accordance with the
Companies policy, these costs were expensed as originally purchased and a
portion of the expense was reversed.
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Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses
were $49.2 million or 6.1% of net sales as compared to $32.1 million or
5.4% for the year ended March 31, 1999. The increase in spending can be
directly associated with the European acquisitions, including the
establishment and staffing of a European technical center. In addition, we
continue to support ongoing and new customer program launches, through
global tool management, training and commitment to product innovation. We
intend to invest in the necessary resources to support customer engineering
requirements and global program management needs.
Operating Income -- Income from operations was $46.7 million or 5.8%
of net sales for the year ended March 31, 2000 as compared to $22.6 million
or 3.8% of net sales for the year ended March 31, 1999. For fiscal 2000,
operating income benefited from acquisitions completed during the year. The
increase is also a result of operating income related to gross margin
improvements through fixed cost reduction and manufacturing process
improvements, offset by SG&A spending as explained above.
Other Income - Other income for the year ended March 31, 1999 was $1.5
million or 0.2% of net sales compared to other income of $4.4 million or
0.7% of net sales for the year ended March 31, 1999. The decrease was due
primarily to the inclusion in the March 31, 1999 year-end of other income
related to the sale of marketable securities held for strategic purposes.
Interest Expense - The increase in expense of $10.5 million was due to
the issuance of $40.0 million of 10 1/8% Senior Subordinated Notes due
2007, Series C (the "Series C Notes") on December 8, 1998. The Series C
Notes represent incremental borrowings issued at an effective interest rate
of approximately 9.685%. The balance of the increase is a result of
incremental borrowings related to the acquisitions of Cofimeta, Wackenhut
and the Technology Division. The increase was offset during the year by
strategic working capital initiatives.
Income Tax -- Income tax expense was $9.2 million for the period ended
March 31, 2000 as compared to $3.0 million for the year ended March 31,
1999. The increased income tax of $6.2 million is a result of the increase
of income as explained previously as well as an overall increase in
effective rate related to the impact of foreign operations. We expect the
overall effective rate to be reduced in the future based on strategic
foreign tax planning and the management of foreign tax credits.
Net Income - Due to the foregoing, net income was $7.6 million or 0.9%
of net sales for the year ended March 31, 2000 as compared to $3.2 million
or 0.5% of net sales for the year ended March 31, 1999.
FISCAL YEAR ENDED MARCH 31, 1999 COMPARED TO FISCAL YEAR ENDED MARCH 31,
1998
Net Sales -- Net sales for the year ended March 31, 1999 were $591.6
million. This represents an increase of $181.3 million as compared to net
sales for the fiscal year ended March 31, 1998 of $410.3 million. Net sales
for the fiscal year ended March 31, 1998 included net sales of Howell only
from the acquisition date of August 13, 1997 through March 31, 1998 and net
sales of RPIH only from the acquisition date of November 25, 1997 through
March 31, 1998. The increase for the year was due principally from the
incremental sales for Howell and RPIH as well as the acquisitions of the
Suspension Division and Cofimeta ($197.9 million). Net sales also increased
as a result of the strength of light truck and sport utility vehicle
production, specifically the T300 and F Series platforms and C/K door
volumes. Sales increases were offset during the year by the effect of the
GM strike ($12.7 million), the delayed launch of the WIN126 platform ($4.3
million), and the discontinuation of certain customer platforms. On a pro
forma basis, had the net sales from all acquisitions been included for the
entire fiscal 1999, net sales would have been $772.9 million.
Gross Profit -- Gross profit was $55.1 million or 9.3% of net sales
for the year ended March 31, 1999 as compared to $41.9 million or 10.2% of
net sales for the year ended March 31, 1998. This represents an increase of
$13.2 million as compared to the prior year. The gross profit increase is
related to the incremental sales resulting
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from the acquisitions, combined with operating improvements made
throughout the year on existing as well as acquired sales. Gross Profit was
unfavorably impacted by the GM strike ($5.2 million), the delay in the
WIN126 launch ($1.6 million), and the reduction in steel scrap resale
prices ($4.8 million). Gross Profit was adversely impacted by investments
made for program launches (closure panels and rear underbody components for
a new platform in Mexico, Saturn LS, WIN126) and by investments made for
capacity rationalization. Continued efforts are being made through plant
and capacity rationalization and maximization of asset utilization to
improve the overall performance of operations.
Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses
were $32.1 million or 5.4% of net sales as compared to $21.8 million or
5.3% for the year ended March 31, 1998. The increase as a percentage of net
sales is primarily due to the support of program launches (CAMI, Saturn and
Ford) as well as the resources necessary to support the newly awarded
programs for General Motors (closure panels and rear underbody components
for a new platform to be assembled solely in Mexico and chassis components
for the North American production of global platforms).
Operating Income -- Income from operations was $21.9 million or 3.7%
of net sales for the year ended March 31, 1999 as compared to $20.1 million
or 4.9% of net sales for the year ended March 31, 1998. For fiscal 1999,
operating income benefited from the growth in the light truck and SUV
programs as well as acquisitions completed during the year. The decrease in
operating margin reflects the effects mentioned above (GM strike, WIN126
launch delay, scrap resale price reductions) as well as the effects of
restructuring provisions.
Other Income - Other income for the year ended March 31, 1999 was $4.4
million or 0.7% of net sales compared to other income of $0.3 million or
0.1% of net sales for the year ended March 31, 1998. The increase was due
primarily to the sale of marketable securities held for strategic purposes
and income from the joint venture interest in Metalcar.
Interest Expense - The increase in expense of $10.2 million was due
primarily to the issuance of the $35.0 million of 10 1/8% Senior
Subordinated Notes Due 2007, Series B (the "Series B Notes") on April 1,
1998, and the issuance of the Series C Notes on December 8, 1998. The
Series B Notes and Series C Notes represent incremental borrowings issued
at effective interest rates of approximately 9.25% and 9.685% respectively.
The balance of the increase can be attributed to the impact of the General
Motors strike on operating cash flow and the interim financing of customer
tooling for current program launches.
Income Tax -- Income tax expense was $2.3 million for the period ended
March 31, 1999 as compared to $4.1 million for the year ended March 31,
1998. The decreased income tax of $1.8 million is a result of the reduction
of income as explained previously.
Net Income - Due to the foregoing, net income was $3.2 million or 0.5%
of net sales for the year ended March 31, 1999 as compared to $5.6 million
or 1.4% of net sales for the year ended March 31, 1998.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Net income adjusted for non-cash charges generated approximately
$38.0 million of cash for the year ended March 31, 2000. Cash increased
during the period based on a net change in working capital items of $58.2
million. The increase in cash was offset by an increase in prepaid expenses
and other current assets $21.5 million, reimbursable tooling $6.6 million,
a decrease in restructuring reserve of $4.3 million and an overall increase
in refundable taxes, non current assets and accrued expenses $9.6. During
the year, the Company used
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approximately $9.1 million for investing activities, including the
acquisitions of the Wackenhut and the Technology Division.
On May 14, 1999, we entered into an amended and restated credit
agreement with NBD Bank, on behalf of itself and as agent for a syndicate
of other lenders, providing for a $35.0 million revolving credit facility
to finance customer tooling, a $30.0 million term loan and a $110.0 million
revolving credit facility (the "Senior Credit Facility"). At March 31,
2000, we had $28.5 million outstanding under the term loan, $0.1 million
outstanding under the working capital revolver, no borrowings under the
tooling revolver and $3.2 million in outstanding letters of credit to
support workers compensation commitments. Approximately $141.7 million
was available under the revolver at March 31, 2000, reduced for the effect
of the Letters of Credit, including $35.0 million available under the
revolver for customer tooling. At June 1, 2000 we had approximately $80.8
million available under the Senior Credit Facility. The obligations under
the Senior Credit Facility are secured by substantially all of our assets
and the assets of certain of our subsidiaries. The Senior Credit Facility
contains certain customary covenants, including reporting and other
affirmative covenants, financial covenants, and negative covenants, as well
as customary events of default, including non-payment of principal,
violation of covenants, and cross-defaults to certain other indebtedness,
including the indebtedness evidenced by the notes described below.
On June 9, 1999 we completed an exchange offer for our outstanding
Notes. Pursuant to the exchange offer, all of the Series C Notes and $159.6
million aggregate principal amount of the Series A and Series B Notes were
exchanged for our registered 10 1/8% Senior Subordinated Notes due 2007,
Series D, which are substantially identical to, and rank pari passu in
right of payment with the Notes.
We believe the proceeds of the Notes have enhanced our ability to meet
our growth and business objectives. However, interest payments on the Notes
represents a significant liquidity requirement for us. We are required
to make scheduled semi-annual interest payments on the Notes of
approximately $10.1 million on June 15 and December 15 each year until
their maturity on June 15, 2007 or until the Notes are redeemed.
Cash outlays for capital expenditures were $37.8 million, or 4.7% of
net sales for the year ending March 31, 2000 as compared to $33.6 million,
or 5.7% of net sales for the year ended March 31, 1999. The increase of
$4.2 million was due primarily to other capital expenditures related to
press equipment and rebuilds, safety and maintenance equipment, automation
and other productivity improvement expenditures, and other items including
computers and welding equipment.
For fiscal 2001, our capital expenditures are expected to be $53.9
million, consisting of a $32.8 million investment to support new business
and increase capacity, $9.0 million for maintenance, rebuilds and
improvements, and $12.1 million in other expenditures, including health,
safety, environmental and maintenance items.
We believe that cash generated from operations, together with amounts
available under the Senior Credit Facility will be adequate to meet our
debt service requirements, capital expenditures and working capital needs
for the foreseeable future, although no assurance can be given in this
regard. Our future operating performance and ability to service or
refinance the Notes and to extend or refinance our other indebtedness will
be subject to future economic conditions and to financial, business and
other factors that are beyond our control.
RAMOS ARIZPE - MEXICO FACILITY
On March 31, 1999 we entered into a cross-border asset usage facility
through a wholly-owned Mexican subsidiary for the acquisition of new
equipment for and construction of our new facility in Ramos Arizpe, Mexico.
Under U.S. Generally Accepted Accounting Principles, this transaction is
classified as an operating lease. The approximately 330,000 sq. ft.
facility supports a GM hood, door and underbody assembly program (SUV/
Hybrid vehicle), that began production in May 2000. The program is expected
to generate approximately $95.0 million of sales when in full production.
We were awarded substantially all closure panels and
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rear underbody components for the program. Plant rationalization has
allowed for the transfer of equipment already owned to the facility. The
lease payments for the facility will be approximately $7.0 million per
year. The award of the program is in line with our expected growth into
Mexico and is seen as key to our future success in that country.
YEAR 2000
We did not experience any significant disruptions to our business as a
result of the conversion to the year 2000. We spent approximately $1.4
million on external costs and approximately $2.9 million in capital
expenditures, to support our year 2000 project.
While it is possible that the Company or some of its major suppliers
may not yet be aware of some Y2K issues and the related implications, we
believe the identification of such issues to be unlikely. The financial
impact of any unknown issues has not and cannot be estimated by management.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, we are exposed to market risk
associated with fluctuations in foreign exchange rates and interest rates.
We conservatively manage these risks through the use of derivative
financial instruments in accordance with management's guidelines.
We enter into all hedging transactions for periods consistent with the
underlying exposures. We do not enter into derivative instruments for
trading purposes.
Foreign Exchange. We enter into foreign currency forward contracts to
protect ourselves from adverse currency rate fluctuations on foreign
currency commitments. These commitments are generally for terms of less
than one year. The foreign currency contracts are executed with banks that
we believe are creditworthy and are denominated in currencies of major
industrialized countries. The gains and losses relating to the foreign
currency forward and option contracts are deferred and included in the
measurement of the foreign currency transaction subject to the hedge. We
believe that any gain or loss incurred on foreign currency forward
contracts is offset by the direct effects of currency movements on the
underlying transactions.
We have performed a quantitative analysis of our overall currency rate
exposure at March 31, 2000. Based on this analysis, a 10% change in
currency rates would not have a material effect on our earnings.
Interest Rates. We generally manage risk associated with interest rate
movements through the use of or combination of variable and fixed rate
debt. Our exposure as a result of variable interest rates relates primarily
to outstanding floating rate debt instruments that are indexed to U.S. or
European Monetary Union short-term money market rates.
We have performed a quantitative analysis of our overall interest rate
exposure at March 31, 2000. Based on this analysis, a 10% change in the
average cost of our variable rate debt would not have a material effect on
our earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and schedules filed herewith are set forth on
the Index to Financial Statements and Financial Statement Schedules on page
F-1 of the separate financial section of this Report and are incorporated
herein by reference.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the name, age and position of each of
the directors and executive officers of Oxford Automotive. Each director of
Oxford Automotive will hold office until the next annual meeting of
shareholders or until his successor has been elected and qualified.
Officers of Oxford Automotive serve at the discretion of the Board of
Directors.
NAME AGE POSITIONS
Selwyn Isakow 48 Chairman of the Board of Directors
Rex E. Schlaybaugh, Jr 51 Vice Chairman of the Board of Directors and
Secretary
Steven M. Abelman 49 Director, President and Chief Executive
Officer
Manfred J. Walt 47 Director
Dennis K. Pawley 58 Director
Aurelian Bukatko 49 Senior Vice President-Chief Financial Officer
Larry C. Cornwall 52 Executive Vice President
John H. Ferguson 52 Vice President-Financial Operations and
Assistant Secretary
Selwyn Isakow, Chairman of the Board of Directors. Mr. Isakow has been
a director of Oxford Automotive since its inception in 1995, was the
President of Oxford Automotive from 1995 to May 1997, and was appointed
Chairman of the Board in May 1997. Since 1985, Mr. Isakow has been the
President of The Oxford Investment Group, Inc. ("Oxford Investment"), a
private investment and corporate development company that acquires majority
equity positions on behalf of its principals in industrial products
manufacturing, financial services, niche distribution and other selected
companies. Mr. Isakow generally serves as Chairman of the Board and a
director of all such portfolio companies. Mr. Isakow is also a director of
Champion Enterprises, Inc. and Ramco Gershenson Properties Trust, and
serves on the boards of numerous community organizations. From 1982 to
1985, Mr. Isakow was the Executive Vice President of Comerica Incorporated,
a regional bank holding company, and from 1978 to 1982, was a principal at
Booz, Allen and Hamilton, management consultants.
Rex E. Schlaybaugh, Jr., Vice Chairman of the Board of Directors and
Secretary. Mr. Schlaybaugh has been the Secretary and a director of Oxford
Automotive since its inception in 1995 and was appointed Vice Chairman of
the Board in May 1997. Mr. Schlaybaugh was appointed the Vice Chairman of
Oxford Investment in May 1997. Mr. Schlaybaugh has been a member of the
firm of Dykema Gossett PLLC since 1985. Mr. Schlaybaugh is also a director
of certain other portfolio companies of Oxford Investment. Mr. Schlaybaugh
is also a member of the Board of Directors of the Manufacturers Life
Insurance Company (U.S.A.), the Michigan State Chamber of Commerce and is a
Trustee of Oakland University.
Steven M. Abelman, Director, President and Chief Executive Officer.
Mr. Abelman has been President, Chief Executive Officer and a Director of
Oxford Automotive since May 1997. Prior to joining Oxford Automotive, Mr.
Abelman was Deputy Chief Executive Officer of Bundy International and
President of Bundy North America ("Bundy"), an automotive supplier of brake
and fuel delivery systems, from February 1996 until May 1997 and prior to
that he was President of Bundy North America from September 1995 until
February 1996. From December 1991 to September 1995, Mr. Abelman was Vice
President and General Manager of Augat Wiring Systems, a manufacturer of
automotive wiring systems and components.
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Manfred J. Walt, Director. Mr. Walt has been a director of Oxford
Automotive since May 1997. Mr. Walt has been the Executive Vice President
and Chief Financial Officer of Central Park Lodges Ltd., a Canadian
assisted living company located in Toronto, Canada, since May 1998. From
October 1997 to May 1998, Mr. Walt was the Sr. Vice President of Gentra,
Inc., a Real Estate Company based in Toronto, Canada. From 1989 to
September 1997, Mr. Walt was the Managing Partner-Financial Services of
Edper Brascan Corporation ("Edper"), a diversified natural resources,
energy and property development company. Gentra, Inc. is an affiliate of
Edper. From 1980 to 1989, Mr. Walt served in various capacities with Edper.
Mr. Walt is also director of Central Park Lodges Ltd. and Balanced Care
Corporation, a public corporation engaged in the operation of assisted
living facilities.
Dennis K. Pawley, Director. Mr. Pawley has been a director of Oxford
Automotive since January 1999. Mr. Pawley has been the President and Chief
Operating Officer of Performance Learning, a consulting company located in
Las Vegas, Nevada, since February 1999. From 1991 to 1998, Mr. Pawley
served as the Executive Vice President of Manufacturing for DaimlerChrysler
in Auburn Hills, Michigan.
Aurelian Bukatko, Senior Vice President-Chief Financial Officer. Mr.
Bukatko has been Senior Vice President-Chief Financial Officer of Oxford
Automotive since February 1999. From December 1997 to February 1999, Mr.
Bukatko was Corporate Treasurer of Hayes-Lemmerz International, a worldwide
manufacturer of wheels, brake drums and rotors for motor vehicles. From
August 1996 to November 1997, Mr. Bukatko served as Director of Global
Currency Management for the Lear Corporation, a worldwide supplier of
automotive interiors. From September 1991 to July 1996, Mr. Bukatko was the
Treasurer and Financial Director, International for Lear Seating in
Gustavsburg, Germany. Before joining Lear in 1991, Mr. Bukatko spent
sixteen years at Inland Steel Industries, Inc. where he held various
financial positions.
Larry C. Cornwall, Executive Vice President. Mr. Cornwall was
appointed Executive Vice President of Oxford Automotive in May 2000. From
June 1999 to May 2000, Mr. Cornwall was the Senior Vice President-Global
Business Development and from May 1997 to June 1999, Mr. Cornwall was the
Vice President-Sales and Engineering of Oxford Automotive. From October
1995 to May 1997, Mr. Cornwall was the Senior Vice President-Sales and
Engineering at BMG. From 1991 to 1995, Mr. Cornwall was Vice President of
Sales and Engineering at Veltri International, an automotive stamper.
John H. Ferguson, Vice President-Financial Operations and Assistant
Secretary. Mr. Ferguson was appointed as a Vice President-Financial
Operations and Assistant Secretary of Oxford Automotive in May 1997. Prior
to that time, Mr. Ferguson was with Bundy, where he acted as Group Plant
Manager from 1994 to 1996 and as Corporate Controller from 1992 to 1994.
From 1984 to 1992, Mr. Ferguson held several positions with GenCorp. Inc.,
an automotive tire supplier, including Controller of the Automotive
Products Group.
Certain of the officers and directors of Oxford Automotive are also
directors or officers of Oxford Automotive subsidiaries.
BOARD COMMITTEES
The Board of Directors have established an Executive Committee, an
Audit Committee, and a Compensation Committee. The Executive Committee is
responsible for exercising all of the duties of the Board of Directors that
may lawfully be delegated to it by the Board of Directors under Michigan
Law. The Executive Committee consists of Messrs. Isakow, Schlaybaugh and
Abelman. The Audit Committee is responsible for reviewing with management
our financial controls and accounting and reporting activities. The Audit
Committee reviews the qualifications of our independent auditors, makes
recommendations to the Board of Directors regarding the selection of
independent auditors, reviews the scope, fees and results of any audit and
reviews non-audit services and related fees. The Audit Committee consists
of Messrs. Schlaybaugh and Walt. The Compensation Committee is responsible
for the administration of all salary and incentive compensation plans for
our officers and key employees, including bonuses. Salaries and bonuses
will be reviewed by the Compensation Committee and will be adjusted in
light of our performance, the responsibilities of each of our officers in
meeting corporate performance objectives and
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other factors, such as length of service and subjective assessments. The
Compensation Committee consists of Messrs. Isakow and Walt.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth certain information as to the compensation
earned by our Chief Executive Officer and our four other most highly paid
officers (the "Named Executive Officers") for the last three fiscal years.
Summary Compensation Table
Annual Compensation
--------------------------
Name and Principal All Other Compensation (1)
Position Year Salary ($) Bonus ($) ($)
Steven M. Abelman, 2000 320,833 121,680 2,594
President and CEO (2) 1999 291,669 74,500 2,687
1998 230,769 150,000 937
Larry C. Cornwall, 2000 250,625 60,060 1,975
Executive Vice President- 1999 199,583 37,500 2,069
1998 161,846 68,000 2,354
Aurelian Bukatko, Senior 2000 200,000 46,800 1,500
Vice President and CFO (3) 1999 - - -
1998 - - -
Selwyn Isakow, 2000 158,333 84,240 -
Chairman (4) 1999 108,333 37,500 -
1998 95,577 101,250 -
Rex E. Schlaybaugh, Jr., 2000 158,333 84,240 -
Vice Chairman 1999 150,000 37,500 -
1998 138,462 101,250 -
(1) "All Other Compensation" is comprised of contributions made by
the Company to the accounts of each of the Named Executive
Officers under the Company's 401K Plan.
(2) Mr. Abelman was appointed President and Chief Executive Officer
in May 1997. See "-Employment Agreements."
(3) Mr. Bukatko was appointed Senior Vice President-Chief Financial
Officer of Oxford Automotive in February, 1999. Mr. Bukatko has
agreed not to compete with the company for a period following
termination of his employment and the company has agreed to
provide Mr. Bukatko severance payments equal to his base salary
for three months following termination of his employment without
cause.
(4) Mr. Isakow was the President of the Company from its inception
until May 1997, for which he did not receive any compensation
from the Company. Steven M. Abelman was appointed President and
Chief Executive Officer in May 1997. Mr. Isakow received
compensation during the last three fiscal years in connection
with his position as Chairman of the Board of the Company.
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EMPLOYMENT AGREEMENTS
As of May 1, 1997, as amended July 1, 1999, Oxford Automotive and
Steven M. Abelman entered into an Employment and Noncompetition Agreement. The
agreement provides that Mr. Abelman will serve as President and Chief Executive
Officer of Oxford Automotive on an "at-will" basis. The agreement provides that
Mr. Abelman will receive an annual base salary, will be eligible to receive a
bonus of up to 60% of his salary as determined by the Board of Directors of
Oxford Automotive, and will be entitled to certain fringe benefits. Mr. Abelman
has also agreed not to compete with the Company during the period of his
employment and for two years following the termination of his employment,
subject to certain exceptions if there has been a change of control of Oxford
Automotive prior to such termination. Upon the termination of his employment
without cause, Mr. Abelman is entitled to severance payments equal to 1.5 times
his annual base salary.
On November 24, 1995, BMG and Larry C. Cornwall entered into an
Employment Agreement. The agreement provides that Mr. Cornwall will serve as an
executive officer of BMG on an "at-will" basis. Mr. Cornwall has subsequently
been appointed to his present position with Oxford Automotive. The agreement
provides that Mr. Cornwall will receive an annual base salary, will be eligible
to receive a bonus of up to 35% of his salary as determined by the Board of
Directors of BMG, will be eligible to participate in the Company's profit
sharing plan, and will be entitled to certain fringe benefits. Upon the
termination of the agreement, Mr. Cornwall will be entitled to continue to
receive his base salary for the longer of three months or the Canadian statutory
requirement.
See also Item 13 "Certain Relationships and Related Transactions."
DIRECTOR COMPENSATION AND ARRANGEMENTS
We pay fees to our non-employee directors of up to $2,000 per meeting
and reimburse the out-of-pocket expenses related to directors' attendance at
each Board and committee meeting. In addition, we may elect to adopt a
non-employee director option plan or other similar plan to provide for grants of
stock options or other benefits as a means of attracting and retaining highly
qualified independent directors for the Company. Members of the Board of
Directors are elected pursuant to certain shareholder agreements by and among
the Company and certain of its shareholders. See Item 12 "Security Ownership of
Certain Beneficial Owners and Management."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On August 4, 1997 a Compensation Committee, whose members are Selwyn
Isakow and Manfred Walt, was appointed by the Board of Directors. Mr. Isakow is
our Chairman and was our President from our inception in 1995 to May 1997.
Pursuant to the terms of the Indentures for our outstanding 10 1/8% Senior
Subordinated Notes due 2007, we are not permitted to enter into any transaction
(including employee compensation arrangements) with any Affiliate (as defined)
unless the transaction is arm's length and, if the transaction involves amounts
in excess of $1
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million in any one year, the terms of the transaction are set forth in
writing and approved by a majority of the disinterested members of the
Board of Directors. For similar transactions in excess of $5 million in any
one year, an opinion of a recognized investment banking firm that such
transaction is fair, from a financial standpoint, is also required.
Mr. Isakow controls Oxford Investment, a private investment and
corporate development company, and Mr. Schlaybaugh is the Vice Chairman of
Oxford Investment. We have entered into a management agreement with Oxford
Investment. Pursuant to the terms of this management agreement, Oxford
Investment performs various consulting, management and financial advisory
services on our behalf. We pay Oxford Investment a monthly management fee
of $83,334 and will pay an investment banking fee, for acquisitions of $2.5
million or more, of 1.0% or 1.25% (for acquisitions outside of North
America) of the aggregate acquisition cost for advice and assistance in
connection with such acquisition, with a minimum fee of $200,000. No
investment banking fee will be paid to Oxford Investment in connection with
acquisitions for aggregate consideration of less than $2.5 million. The
initial term of the agreement will end on December 31, 2001, but will
automatically extend for additional one-year periods thereafter unless
either party terminates the agreement. In addition, pursuant to the
management agreement, Oxford Investment licenses to us the name "Oxford
Automotive" which is owned by Oxford Investment.
During the fiscal year ended March 31, 2000, we paid Oxford Investment
management fees and expenses of approximately $1.065 million, and
investment banking fees of $899,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of June 1, 2000, there were 309,750 issued and outstanding shares of
the Common Stock, without par value, of the Company (the "Common Stock").
The following table sets forth information as of June 1, 2000 with respect
to the Common Stock beneficially owned by each of our directors, the Named
Executive Officers, all of our directors and executive officers as a group,
and by other holders known to us as having beneficial ownership of more
than 5% of the Common Stock. Selwyn Isakow and our other shareholders have
entered into certain agreements, each of which contain substantially
identical terms, the result of which gives Mr. Isakow voting control over
100% of the Common Stock, except under certain circumstances. See "--
Shareholder Agreements." Unless otherwise specified, the address for each
person is 1250 Stephenson Highway, Troy, Michigan 48083.
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------ ------ --------
Selwyn Isakow (1) (3). . . . . . . . . . . . . . . . . 164,584 53.13%
40900 Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
--------------------------------------------------------- --------------- ----------------
Rex E. Schlaybaugh, Jr . . . . . . . . . . . . . . . . . 20,900 6.75%
40900 Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
--------------------------------------------------------- --------------- ----------------
Steven M. Abelman (2). . . . . . . . . . . . . . . . . . 12,326 3.98%
--------------------------------------------------------- --------------- ----------------
Manfred J. Walt. . . . . . . . . . . . . . . . . . . . . 2,300 0.74%
175 Bloor St., E., S. Tower, Suite 601
Toronto, Ontario, Canada M4W 3R8
--------------------------------------------------------- --------------- ----------------
Dennis K. Pawley N/A N/A
7000 Las Vegas Blvd. N.
Las Vegas, Nevada 89115
--------------------------------------------------------- --------------- ----------------
Aurelian Bukatko (3). . . . . . . . . . . . . . . . . . . 3,000 0.97%
--------------------------------------------------------- --------------- ----------------
Larry C. Cornwall . . . . . . . . . . . . . . . . . . . . 7,000 2.26%
--------------------------------------------------------- --------------- ----------------
Robert H. Orley . . . . . . . . . . . . . . . . . . . . . 20,600 6.65%
40900 Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
--------------------------------------------------------- --------------- ----------------
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--------------------------------------------------------- --------------- ----------------
Gregg L. Orley. . . . . . . . . . . . . . . . . . . . . . 20,600 6.65%
40900 Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
--------------------------------------------------------- --------------- ----------------
All directors and officers as a group (8 persons) (1)(2) 215,610 69.61%
(1) Includes 140,124 shares owned by Hilsel Investment
Company Limited Partnership, of which Tridec
Management, Inc. is General Partner. Mr. Isakow is the
President and a shareholder of Tridec Management, Inc.
In addition, Mr. Isakow may be deemed to be the
beneficial owner of all of the outstanding shares of
Common Stock as a result of certain voting power over
such shares pursuant to the shareholder agreements
described below and certain purchase options that may
be exercised by Mr. Isakow with respect to 46,540
outstanding shares of Common Stock.
(2) Mr. Abelman's Employment and Noncompetition Agreement
with Oxford Automotive provides Oxford Automotive or
its assigns with the right to repurchase his shares of
Common Stock if his employment is terminated for any
reason.
(3) Mr. Bukatko's shares are subject to a Pledge
Agreement in favor of Mr. Isakow. Under the Pledge
Agreement, Mr. Bukatko has sole voting power over his
shares but is not permitted to dispose of his shares
without Mr. Isakow's consent.
SHAREHOLDER AGREEMENTS
Each holder of Common Stock is a party to a shareholder agreement that
provides for certain restrictions on transfer by shareholders and grants
certain other shareholders the option to purchase the shares of a
shareholder upon his death. Each surviving shareholder has the right to
exercise this option within 30 days of the death of a shareholder. The
exercising shareholders will divide the deceased shareholder's shares as
they agree or, if they are not able to agree, pro rata. If the exercising
shareholders are not able to agree on a purchase price with the estate of
the deceased shareholder, then the per share purchase price shall be the
per share value of the Company based on the greater of the value of the
Company as a going concern or on a liquidation basis, as determined by an
independent appraisal. The purchase price shall be paid by an initial cash
payment of up to 20% of the purchase price with the balance paid pursuant
to a five-year, unsecured promissory note bearing interest at the prime
rate. The agreements also provide that each shareholder will grant a proxy
to Mr. Isakow to vote all of the shareholder's shares at any meeting of the
Company; provided, however, that if holders of shares having a majority in
interest of the shares of Common Stock determine that it is in the best
interest of all of the shareholders to sell all or substantially all of the
assets of the Company or to cause the Company to merge or consolidate with
or into another corporation, Mr. Isakow shall exercise the proxies provided
to him consistent with that decision. As a result, except as described
above, Mr. Isakow has voting control over 100% of the Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As of March 31, 1997, Mr. Abelman issued a note to the Company in
connection with his acquisition of shares of the Common Stock. The
principal amount of the note was $130,000 and the note bears interest at
the prime rate plus 1.0%, which rate is adjusted on March 31 of each year
to reflect the then current prime rate. Principal and interest on the note
is payable in equal annual installments with interest on the unpaid
principal, with the final payment due May 31, 2002. As of March 31, 2000
the principal amount outstanding of the note was $78,000.
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On February 1, 1999 we entered into a Consulting Services Agreement
(the "Consulting Agreement") with Performance Learning, Inc., a Nevada
corporation, ("Performance Learning"). Dennis K. Pawley, a director of
Oxford Automotive is the President and Chief Operating Officer and a
shareholder of Performance Learning. Under the Consulting Agreement,
Performance Learning has agreed to provide consulting services to us for
the period from February 1999 - April 2001. As compensation for such
consulting services we paid Performance Learning $225,370 during fiscal
2000. We pay Performance Learning $5,000 per day for each day a principal
of Performance Learning performed consulting services for the Company,
$1,000 per day for each day a non-principal of Performance Learning
performed consulting services for the Company, certain other nominal
quarterly changes, and the reimbursement of reasonable expenses it incurred
in connection with performing the consulting services.
See also Item 11 "Executive Compensation - Compensation Committee
Interlocks and Insider Participation."
LEGAL
Rex E. Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the
Board and a director of the Company. Dykema Gossett PLLC, of which Mr.
Schlaybaugh is a member, has performed legal services for the Company since
its inception. The Company expects to continue to retain this firm for
various legal services.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The financial statements, supplementary financial information, and
financial statement schedules filed herewith are set forth on the Index to
Financial Statements and Financial Statement Schedules on page F-1 of the
separate financial section of this Report, which is incorporated herein by
reference.
A list of Exhibits included as part of this report is set forth in the
Exhibit Index that immediately precedes such exhibits and is incorporated
herein by reference.
(b) The following reports on Form 8-K were filed by the Company during the
quarter ended March 31, 2000:
(i) Report on Form 8-K, dated February 16, 2000, was filed by the
Company on March 1, 2000; such report contained information under Item 2
with respect to the acquisition of the Technology Division.
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OXFORD AUTOMOTIVE, INC.
INDEX TO FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULES
Description Page
Report of Independent Accountants............................................ F-2
Consolidated Balance Sheets as of March 31, 2000 and 1999.................... F-3
Consolidated Statements of Operations for the years ended March 31, 2000,
1999 and 1998............................................................... F-4
Consolidated Statements of Comprehensive Income and Changes in Shareholders'
Equity for the years ended March 31, 2000, 1999 and 1998.................... F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2000,
1999 and 1998............................................................... F-6
Notes to Consolidated Financial Statements................................... F-7
Financial Statement Schedules:
II - Valuation and Qualifying Accounts
F-1
29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Oxford Automotive, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of comprehensive income and changes in
shareholders' equity and of cash flows present fairly, in all material respects,
the financial position of Oxford Automotive, Inc. and its subsidiaries (the
Company) at March 31, 2000 and 1999 and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 1998
in conformity with accounting principles generally accepted in the United
States. In addition, in our opinion, the financial statement schedules listed in
the accompanying index present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statements schedules are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Detroit, Michigan
June 9, 2000
F-2
30
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
MARCH 31,
2000 1999
ASSETS
Current assets
Cash and cash equivalents $ 17,643 $ 19,008
Trade receivables, net 139,912 152,281
Inventories 53,187 48,104
Refundable income taxes 2,027
Reimbursable tooling 25,038 23,201
Deferred income taxes 2,374 3,669
Prepaid expenses and other current assets 38,228 18,225
----------- -----------
Total current assets 278,409 264,488
Other noncurrent assets 34,876 29,677
Deferred income taxes 34,278 25,366
Property, plant and equipment, net 251,249 223,399
----------- -----------
TOTAL ASSETS $ 598,812 $ 542,930
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 144,701 $ 109,343
Accrued expenses and other current liabilities 59,529 54,444
Restructuring reserve 4,089 8,747
Current portion of borrowings 11,055 11,504
----------- -----------
Total current liabilities 219,374 184,038
Pension liability 9,601 7,069
Postretirement medical benefits liability 46,953 42,703
Deferred income taxes 7,294 11,867
Other noncurrent liabilities 8,289 3,648
Long-term borrowings - less current portion 262,621 252,358
----------- -----------
Total liabilities 554,132 501,683
----------- -----------
Commitments and contingent liabilities (Note 14)
Redeemable Series A $3.00 cumulative preferred stock, $100
stated value - 457,541 shares authorized, 397,539 shares
issued and outstanding in 2000 and 1999 (Notes 3 and 12) 40,451 40,319
----------- -----------
Shareholders' equity
Common stock, no par value, 400,000 shares authorized; 309,750
shares issued and outstanding at March 31, 2000 and 1999 1,050 1,050
Accumulated other comprehensive income (9,690) (6,705)
Retained earnings 12,869 6,583
----------- -----------
Total shareholders' equity 4,229 928
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 598,812 $ 542,930
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-3
31
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
----------------------------------------------
2000 1999 1998
Net sales $ 809,065 $ 591,645 $ 410,321
Cost of sales 712,939 536,578 368,420
----------- ----------- -----------
GROSS PROFIT 96,126 55,067 41,901
Selling, general and administrative 49,247 32,129 21,180
Restructuring provision 1,151 1,610
(Gain) Loss on sale of equipment 193 (777) (1,602)
----------- ----------- ------------
OPERATING INCOME 46,686 22,564 20,713
Other income (expense)
Interest expense (31,350) (20,903) (10,710)
Other 1,486 4,445 321
----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 16,822 6,106 10,324
Provision for income taxes (9,216) (2,953) (4,733)
----------- ----------- ------------
NET INCOME 7,606 3,153 5,591
Accrued dividends and accretion on
redeemable preferred stock 1,320 1,320 1,334
----------- ----------- -----------
NET INCOME APPLICABLE TO COMMON STOCK $ 6,286 $ 1,833 $ 4,257
=========== =========== ===========
NET INCOME PER SHARE (BASIC AND DILUTED) $ 20.29 $ 5.92 $ 13.74
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-4
32
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN
SHAREHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
ACCUMULATED
OTHER
CAPITAL COMPREHENSIVE RETAINED
STOCK INCOME EARNINGS TOTAL
BALANCES AT MARCH 31, 1997 1,050 (281) 1,572 2,341
Comprehensive income
Net income 5,591 5,591
Foreign currency translation adjustments (623) (623)
Unrealized gain on marketable securities 969 969
Equity adjustment for minimum pension
liability (net of tax of $169) 253 253
--------
Comprehensive income 6,190
Accrued dividends and accretion of
redeemable preferred stock (1,334) (1,334)
Excess of purchase price over predecessor
basis (1,079) (1,079)
--------- -------- --------- --------
BALANCES AT MARCH 31, 1998 1,050 318 4,750 6,118
Comprehensive income
Net income 3,153 3,153
Foreign currency translation adjustments (6,054) (6,054)
Reclassification adjustment for net
gains realized in net income (969) (969)
--------
Comprehensive income (3,870)
Accrued dividends and accretion of
redeemable preferred stock (1,320) (1,320)
--------- -------- --------- --------
BALANCES AT MARCH 31, 1999 1,050 (6,705) 6,583 928
Comprehensive income
Net income 7,606 7,606
Foreign currency translation adjustments (2,985) (2,985)
--------
Comprehensive income 2,401
Accrued dividends and accretion of
redeemable preferred stock (1,320) (1,320)
--------- --------- --------- --------
BALANCES AT MARCH 31, 2000 $ 1,050 $ (9,690) $ 12,869 $ 4,229
========= ======== ========= ========
The accompanying notes are an integral part of the financial statements.
F-5
33
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS, except share-related data)
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
---------------------------------------------
2000 1999 1998
OPERATING ACTIVITIES
Net income $ 7,606 $ 3,153 $ 5,591
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 32,038 25,450 20,279
Deferred income taxes (1,853) (7,963) 137
(Gain) loss on sale of equipment 181 (777) (1,586)
Gain on sale of marketable securities (3,459)
Changes in operating assets and liabilities affecting cash
Trade receivables 18,290 (38,692) (4,615)
Inventories 747 (2,718) 1,496
Reimbursable tooling (6,580) (4,502) (7,368)
Prepaid expenses and other assets (21,510) 4,250 569
Other noncurrent assets (5,614) (4,139) (836)
Trade accounts payable 34,267 28,971 11,416
Accrued expenses and other liabilities (1,961) 6,533 (2,997)
Restructuring reserve (4,332) (7,051) (745)
Income taxes payable/(refundable) (2,027) 1,601 2,914
Other noncurrent liabilities 4,936 5,087 1,731
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 54,188 5,744 25,986
----------- ----------- -----------
INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired (9,117) (75,080) (24,219)
Purchase of property, plant and equipment (37,843) (33,625) (16,723)
Proceeds from sale of equipment 3,986 1,550 5,433
Purchases of marketable securities (892) (7,658)
Proceeds from sale of marketable securities 12,009
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (42,974) (96,038) (43,167)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from borrowing arrangements - 108,544 126,653
Principal payments on borrowing arrangements (10,042) (10,161) (93,782)
Payment of preferred stock dividends (1,192) (1,194) (1,193)
Debt financing costs (378) (5,195) (5,372)
------------ ------------ -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (11,612) 91,994 26,306
------------ ----------- -----------
Effect of exchange rate changes on cash (967) (1,013) (475)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,365) 687 8,650
Cash and cash equivalents at beginning of period 19,008 18,321 9,671
----------- ----------- -----------
Cash and cash equivalents at end of period $ 17,643 $ 19,008 $ 18,321
=========== =========== ===========
Cash paid for interest $ 28,926 $ 19,583 $ 7,338
=========== =========== ===========
Cash paid for income taxes $ 12,140 $ 2,900 $ 4,670
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-6
34
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Oxford Automotive, Inc. (the Company) is a full-service supplier of metal
stampings and welded assemblies used as original equipment components
primarily by North American and European original equipment automotive
manufacturers. The Company's products are used in a wide variety of sport
utility vehicles, light and medium trucks, vans and passenger cars. The
Company primarily operates from plants located in the United States,
Canada, France, Germany and Mexico. The Company's hourly workforce is
represented by various unions.
Net sales to the Company's three primary customers as a percentage of
total sales are as follows:
YEAR ENDED MARCH 31,
--------------------------
2000 1999 1998
General Motors Corporation 32% 47% 54%
Ford Motor Company 25% 35% 31%
DaimlerChrysler AG 16% 13% 9%
Accounts receivable from General Motors Corporation, Ford Motor Company
and DaimlerChrysler AG represent approximately 27%, 21% and 20%
respectively, of the March 31, 2000 accounts receivable balance.
Although the Company is directly affected by the economic well being of
the automotive industry and customers referred to above, management does
not believe significant credit risk exists at March 31, 2000. The Company
does not require collateral to reduce such risk and historically has not
experienced significant losses related to receivables from individual
customers or groups of customers in the automotive industry.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of Oxford Automotive, Inc. and its wholly-owned subsidiaries,
BMG Holdings, Inc. (BMGH); Howell Industries, Inc. (Howell); Lobdell
Emery Corporation (Lobdell); RPI Holdings, Inc. (RPIH); Oxford Automotive
France (Oxford France); Oxford Automotriz de Mexico S.A. de C.V. (Oxford
Mexico); Oxford Suspension, Inc.; Oxford Suspension Ltd.(Suspension Ltd);
Wackenhut GmbH (Wackenhut); CE Technologies and Tool and Engineering
(collectively Technology Division). Intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-7
35
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
At March 31, 2000 and 1999, the carrying amount of financial instruments
such as cash and cash equivalents, trade receivables and payables
approximated their fair values. The carrying amount of the borrowings at
March 31, 2000 and 1999 approximated their fair values based on the
variable interest rates available to the Company for similar
arrangements, excluding the Senior Subordinated Notes, which had a fair
value of $189,500 at March 31, 2000. The Company had no outstanding
forward foreign currency exchange contracts at March 31, 2000.
CASH EQUIVALENTS
The Company considers all highly-liquid investments with maturity of
three months or less when purchased to be cash equivalents.
REVENUE RECOGNITION
Revenue is recognized by the Company upon shipment of product to the
customer.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
principally determined by the last-in, first-out (LIFO) method for the
Company's United States operations and by the first-in first-out (FIFO)
method for the Company's international operations.
MANUFACTURING SUPPLIES
Maintenance, Repair and Other (MRO) material used in the manufacturing
process is expensed as incurred. On December 15, 1999, the Company
signed an integrated supply and services arrangement with Grainger
Supply, Inc. and sold substantially all of its MRO supplies from the
North American Operations to Grainger. The Company is reporting the
remaining $6 million of revenue at March 31, 2000 over the life of the
contract as the supplies are consumed and the repurchase obligation is
reduced.
REIMBURSABLE TOOLING
Reimbursable tooling represents net costs incurred on tooling projects
for which the Company expects to be reimbursed by customers. Ongoing
estimates of total costs to be incurred on each tooling project are made
by management. Losses, if any, are recorded when known and in cases where
billings exceed costs incurred, the related tooling gain is recognized
upon acceptance of the tooling by the customer. Certain of the Company's
tooling costs are financed through lending institutions and are
reimbursed by customers on a piece price basis. These tooling assets are
classified as either accounts receivable ($719 and $1,551 at March 31,
2000 and 1999, respectively) or equipment depending upon the ultimate
title holder of the tooling assets.
F-8
36
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost and include
expenditures for improvements which materially increase the useful lives
of existing assets. Expenditures for normal repair and maintenance are
charged to operations as incurred. For federal income tax purposes,
depreciation is computed using accelerated and straight-line methods. For
financial reporting purposes, depreciation is computed principally using
the straight-line method over the following estimated useful lives:
YEARS
Land improvements 15
Buildings and improvements 30-40
Machinery and equipment 3-20
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived assets in accordance with Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by the Company be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be fully recoverable. The Company
recognizes impairment losses for assets or groups of assets where the sum
of the estimated future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the related asset or group
of assets. The amount of the impairment loss recognized is the excess of
the carrying amount over the fair value of the asset or group of assets
being measured.
MARKETABLE SECURITIES
Marketable securities at March 31, 1998, mainly composed of equity
securities, are classified as available-for-sale securities and are
reported at fair value using quoted market prices. Unrealized holding
gains and losses are included as a separate component of shareholders'
equity until realized. During fiscal year 1999 the Company sold its
marketable securities, recognizing a gain before taxes of $3,459.
EQUITY INVESTMENT
As discussed in Note 3, the Company holds a 49% interest in Metalurgica
Carabobo, S.A. (Metalcar), a Venezuelan joint venture. The Company
accounts for this investment under the equity method. At March 31, 2000,
this investment, classified in other noncurrent assets, is carried at
$6,214 compared with underlying equity in net assets of $4,083. The
difference between these amounts is amortized over 40 years. Income
recognized in fiscal year 2000 amounted to $298, net of taxes. Cash
dividends received from Metalcar 1999 were $490. There were no dividends
paid during 2000.
F-9
37
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL
Goodwill represents the excess of cost over the fair value of net assets
of acquired entities and is amortized on a straight-line basis over its
expected benefit not to exceed 40 years.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations which do not contribute to current or
future revenue generation are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable and the
costs can be reasonably estimated. Estimated costs are based upon enacted
laws and regulations, existing technology and the most probable method of
remediation. The costs determined are not discounted and exclude the
effects of inflation and other social and economic factors.
INCOME TAXES
Deferred taxes are provided to give recognition to the effect of expected
future tax consequences of temporary differences between the carrying
amounts for financial reporting purposes and the tax bases for income tax
purposes of assets and liabilities.
FOREIGN EXCHANGE CONTRACTS
Gains and losses of foreign currency firm commitment hedges are deferred
and included in the basis of the transactions underlying the commitments.
FOREIGN CURRENCY TRANSLATION
The foreign currency financial statements of BMGH, Suspension Ltd.,
Oxford Europe, Oxford France and Wackenhut, where the local currency is
the functional currency, are translated using exchange rates in effect at
period end for assets and liabilities and at weighted average exchange
rates during the period for operating statement accounts. The resulting
foreign currency translation adjustments are recorded as a separate
component of shareholders' equity. Exchange gains and losses resulting
from foreign currency transactions are included in operating results
during the period in which they occur.
CHANGE IN ACCOUNTING PRINCIPLES
The Company adopted Statement of Position (SOP) 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" during
1999. The SOP requires that the following costs be capitalized as a
long-lived asset: external direct costs incurred in developing or
obtaining internal-use software; payroll and related costs for employees
who are directly associated with the internal-use software project (to
the extent of their time spent directly on the project); and interest
costs incurred in developing software for internal use. The proposed SOP
also provides that training costs included in the purchase price of
computer software be expensed as incurred. During fiscal year 2000 and
1999, the Company capitalized $132 and $300 respectively of internal
costs in accordance with this statement that previously would have been
expensed.
In June 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 137, "Accounting for Derivatives
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB Statement No. 133 - an amendment of FASB No. 133." Statement No. 137
defers the effective date of Statement No. 133 by one year to fiscal
years beginning after June
F-10
38
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
15, 2000. Accordingly, the Company plans to adopt Statement No. 133
beginning with the Fiscal Year ended March 31, 2001. Implementation of
this Statement is not expected to have a material impact on the Company's
result of operations.
RECLASSIFICATIONS
Certain amounts from the prior year have been reclassified to conform
with the current year presentation.
3. ACQUISITIONS
On August 13, 1997, the Company acquired all of the outstanding common
stock of Howell for approximately $23,700 in cash, including acquisition
costs. The acquisition was financed through the proceeds of the
subordinated notes described in Note 8. The acquisition has been recorded
in accordance with the purchase method of accounting. Accordingly, the
purchase price plus direct cost of the acquisition have been allocated to
the assets acquired and liabilities assumed based on their estimated fair
values at the date of acquisition and Howell's operating results have
been included with those of the Company since the date of acquisition.
On November 25, 1997, Oxford purchased all of the outstanding common
stock of RPIH for $2,500 in cash. The acquisition was financed through
the proceeds of the senior subordinated notes described in Note 8. The
acquisition has been recorded in accordance with the purchase method of
accounting. Accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed based on their estimated fair
values at the date of acquisition. RPIH's operating results have been
included with those of the Company since the date of acquisition.
The majority shareholder of Oxford was also the majority shareholder of
RPIH. The excess of purchase price over predecessor basis is a result of
the common ownership by the majority shareholder of Oxford and represents
the portion of the fair value of the net assets acquired in excess of
their book value, multiplied by the majority shareholder's ownership
percentage in RPIH. The Company has recorded this amount as a deduction
from retained earnings in the accompanying statement of comprehensive
income and changes in shareholders' equity.
On April 1, 1998, the Company purchased the assets of the Suspension
Division of Eaton Corporation (Suspension) for cash and acquisition
expenses of approximately $54,350, including the investment in the
Metalcar joint venture. The acquisition was financed through the proceeds
of the Notes described in Note 8, including the issuance of $35,000 of
Series B 10.125% Senior Subordinated Notes Due 2007. The acquisition has
been recorded in accordance with the purchase method of accounting.
Accordingly, the purchase price plus direct cost of the acquisition have
been allocated to the assets acquired and liabilities assumed based on
their estimated fair values at the date of acquisition and Suspension's
operating results have been included with those of the Company since the
date of acquisition.
On February 5, 1999, Oxford France acquired 100% of the shares of
Cofimeta S.A. and approximately 99% of the shares of its four
subsidiaries; Somenor S.A.; Aubry S.A.; Ecrim S.A.; and Socori
Technologies S.A (collectively "Cofimeta"). Cofimeta was acquired for
$37,045 million in cash, including acquisition costs, and deferred
payments of $26,172. The acquisition was financed through proceeds from
the Credit Agreement, as described in Note 8. The acquisition has been
recorded in accordance with the purchase method of accounting.
Accordingly, the purchase price plus direct cost of the acquisition have
been allocated to the assets acquired and liabilities
F-11
39
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
3. ACQUISITIONS (CONTINUED)
assumed based on their estimated fair values at the date of acquisition.
During the March 31, 2000 fiscal year, purchase accounting was finalized,
resulting in the recording of additional deferred tax assets of $4,441,
an increase of $3,217 of accrued expenses and other current liabilities
as well as the reduction in the reserves established in purchase
accounting of $3,865. The net result of the adjustments was recorded as a
reduction in property, plant and equipment and is being amortized over
the remaining useful life of the assets. Cofimeta's operating results
have been included with those of the Company since the date of
acquisition.
On June 28, 1999, the Company purchased, through Oxford Automotive Europe
APS, a wholly-owned subsidiary ("Oxford Europe") all the outstanding
stock of Gebr. Wackenhut GmbH Karosserie-und Fahrzeugfabrik ("Wackenhut")
The Company agreed to pay DM 1 for the shares, provide DM 5 million
(US$2,642) in subordinated debt and additional paid in capital,
restructure approximately DM 63.4 million (US$33,500) in bank debt, and
purchase approximately DM 18.6 million (US$9,800) in bank and shareholder
debt for DM 1. The acquisition, subordinated debt, and additional paid in
capital were financed from the Company's available cash and credit
facility. The acquisition has been recorded in accordance with the
purchase method of accounting. Accordingly, the purchase price plus
direct costs of the acquisition ($2,778) have been allocated to the
assets acquired and liabilities assumed based on their estimated fair
values at the date of acquisition and Wackenhut's operating results have
been included with those of the Company since the date of acquisition.
The estimated fair market value of assets acquired and liabilities
assumed is summarized as follows:
Current assets $ 14,126
Noncurrent assets 211
Property, plant and equipment 23,002
Deferred tax asset 6,586
Current liabilities (10,566)
Long-term liabilities (30,581)
------------
$ 2,778
============
On February 16, 2000, the Company acquired the automotive engineering, design
and prototype service business of Farley Inc. (the "Technology Division"). The
purchase price for the Technology Division was $6,339 including closing costs,
subject to a Closing Date working capital adjustment, if applicable. On the
Closing Date, $5,070 of the total purchase price was paid to Farley and $1,000
was placed in escrow, pending any applicable purchase price adjustment or
indemnification claim. The acquisition of the Technology Division was financed
from the Company's available working capital. The Technology Division is a full
service provider of early phase product design as well as a leader in large die
prototyping and complex weld assemblies. The division also provides supplemental
design and engineering services to the automotive OEM's and Tier 1 suppliers.
The acquisition has been recorded in accordance with the purchase method of
accounting. Accordingly, the purchase price plus direct cost of the acquisition
have been allocated to the assets acquired and liabilities assumed
F-12
40
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
3. ACQUISITIONS (CONTINUED)
based on their estimated fair values at the date of acquisition and the
Technology Division's operating results have been included with those of
the Company since the date of acquisition.
The estimated fair market value of assets acquired and liabilities
assumed is summarized as follows:
Current assets $ 3,234
Other noncurrent assets 29
Goodwill 594
Property, plant and equipment 4,848
Deferred tax asset 320
Current liabilities (2,523)
Long-term liabilities (163)
---------------
$ 6,339
===============
The following unaudited pro forma combined results of operations of the
Company have been prepared as if the acquisitions of Howell, RPIH,
Suspension, and Cofimeta, Wackenhut and the Technology Division had
occurred at the beginning of fiscal 2000 and 1999. The pro forma
information is not intended to be a projection of future results.
YEAR ENDED MARCH 31,
----------------------
2000 1999
(UNAUDITED)
Net sales $ 838,516 $ 844,054
Net income (loss) $ 6,493 $ 3,868
Net income (loss) applicable to common shares $ 20.96 $ 12.48
Net income (loss) per common share $ 20.96 $ 12.48
The foregoing unaudited pro forma results of operations reflect
adjustments for additional interest expense related to the financing of
the acquisitions and depreciation expense, as a result of the revaluation
of property, plant and equipment, net of the related tax benefit.
F-13
41
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
4. ACCOUNTS RECEIVABLE
Accounts receivable are comprised of the following at March 31:
2000 1999
Trade receivables $ 144,734 $ 156,787
Less - allowance (4,822) (4,506)
-------------- ---------------
Trade receivables, net $ 139,912 $ 152,281
============= ==============
Oxford France sells accounts receivable to various financial institutions
for which it surrenders control. The balance of account receivables
transferred that remained uncollected was approximately $39,589 and
$40,810 respectively at March 31, 2000 and 1999. In addition, included in
prepaid assets and accounts receivable respectively, are retention
amounts and amounts factored but not yet financed for approximately $
4,222 and $23,132 respectively at March 31, 2000 and 1999.
5. INVENTORIES
Inventories are comprised of the following at March 31:
2000 1999
Raw materials $ 24,870 $ 23,154
Finished goods and work-in-process 32,607 28,646
------------- --------------
57,477 51,800
LIFO and other reserves (4,290) (3,696)
------------- --------------
$ 53,187 $ 48,104
============= ==============
The Company does not separately identify finished goods from
work-in-process.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at March 31:
2000 1999
Land and land improvements $ 11,466 $ 7,492
Buildings and improvements 51,988 39,895
Machinery and equipment 241,629 195,576
Construction-in-process 18,536 26,715
------------- --------------
323,619 269,678
Less - accumulated depreciation (72,370) (46,279)
------------- --------------
$ 251,249 $ 223,399
============= ==============
F-14
42
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
6. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Certain property with a net book value of $3,617 was idle at March 31,
2000. Management intends to redeploy these assets among its operating
facilities and does not believe that the net book value of these assets
is impaired at March 31, 2000.
In 2000 and 1999, the Company sold assets acquired in connection with the
acquisition of Lobdell and recorded gains or (loss) on the sales of these
assets of $ (615) and $600, respectively.
As discussed in Note 10, certain of the Company's facilities were closed
during the years ended March 31, 1999 and 1998. As management intends to
sell these facilities, the net book value of the land and buildings,
approximating $2,432, is classified in prepaid expenses and other current
assets as of March 31, 2000 in the accompanying consolidated balance
sheet.
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following at March 31:
2000 1999
Employee compensation $ 21,602 $ 21,483
Accrued income, value added and other taxes 6,779 9,683
Accrued interest 7,200 6,276
Accrued workers' compensation 4,051 4,156
Deferred income 3,010
Advances from customers 2,496 2,085
Accrued property taxes 1,751 1,836
Accrued medical benefits 1,012 1,258
Other 11,628 7,667
------------- --------------
$ 59,529 $ 54,444
============= ==============
F-15
43
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
8. BORROWING ARRANGEMENTS
Borrowings consist of the following at March 31:
2000 1999
10.125% SENIOR SUBORDINATED NOTES DUE
2007, OXFORD $ 202,734 $ 203,111
BANK SYNDICATE - TERM LOAN, OXFORD
Interest at variable rate over 30 day LIBOR (8.04% at
March 31, 2000). Quarterly principal payments beginning
July 1999, matures July 2004. 28,500 30,000
BANK SYNDICATE--REVOLVING CREDIT LINE, OXFORD
Interest at prime rate (9.75% at March 31, 2000),
repaid in full during fiscal 2000. 69
SHARE PURCHASE OBLIGATION, OXFORD FRANCE
Principal amount of $9,173 less unamortized discount
of $861. Interest payable at 3%; discounted
at 10%. Annual payments beginning February 2000,
matures February 2002. 8,312 12,946
DEBT OBLIGATION, OXFORD FRANCE
Principal amount of $3,931 less unamortized discount
of $400. Interest payable at 2%; discounted
at 10%. Annual payments beginning February 2000,
matures February 2002. 3,531 5,680
CONTINUATION PLAN DEBT, OXFORD FRANCE
Principal amount of $9,593 less unamortized discount
of $3,398. Non-interest bearing; discounted at 10%.
Annual payments beginning June 1999,
matures June 2008. 6,195 6,464
DEBT OBLIGATION, WACKENHUT
Term loan. Principal amount of $19,539, less unamortized
discount of $6,236 Interest rate 5.25%, discounted at 10%
Semi-annual payments beginning March 2004
matures June 30, 2009. 13,303
DEBT OBLIGATION, WACKENHUT
Revolving Credit. Interest rate at competitive rates. 8,107
DEBT OBLIGATION, WACKENHUT
Term loan. Land and Building Interest rate 5.69%
Semi-annual payments beginning January 31, 2001
matures July 31, 2009. 1,539
INDUSTRIAL DEVELOPMENT REVENUE BONDS, CREATIVE
$8,500 issued September 27, 1995, floating rate interest
(3.3% at March 31, 1999). Quarterly principal payments
based on graduated maturity schedule. Backed by
letter of credit. 2,195
Other 1,386 3,466
------------- --------------
Total 273,676 263,862
Less - current portion of long-term borrowings (11,055) (11,504)
------------- --------------
Long-term borrowings - less current portion $ 262,621 $ 252,358
============= ==============
F-16
44
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
8. BORROWING ARRANGEMENTS (CONTINUED)
On June 24, 1997, the Company issued $125,000 of Series A 10.125% Senior
Subordinated Notes Due 2007. On April 1, 1998, the Company issued $35,000
of Series B 10.125% Senior Subordinated Notes Due 2007. On December 8,
1998, the Company issued $40,000 of Series C 10.125% Senior Subordinated
Notes Due 2007. The Series A, Series B, and the Series C Notes are
collectively referred to as "the Notes". The Notes mature on June 15,
2007 and require semi-annual interest payments of approximately $10,125.
The proceeds from the Notes were primarily used to repay certain of the
Company's indebtedness and finance the Company's acquisitions of Howell,
RPIH, Suspension and Cofimeta as described in Note 3. The Notes are
unsecured and issued by Oxford and guaranteed by certain of its
wholly-owned subsidiaries. The Company is restricted regarding the
payment of dividends.
Concurrent with the issuance of the Notes, the Company entered into a
credit agreement with a syndicate of banks (the Credit Agreement), as
subsequently amended, under which the Company may borrow up to $175,000,
of which a maximum of $30,000 is available for letters of credit. At
March 31, 2000, there was $69 outstanding under the revolving line of
credit, $28,500 was outstanding under the term loan and $3,225 was
outstanding under letters of credit, leaving $141,706 unused and
available. The terms of the Credit Agreement contain, among other
provisions, requirements for maintaining defined levels of tangible net
worth, total debt to cash flows, interest coverage, fixed charge coverage
and certain restrictions on the payment of dividends. Facility fees on
the aggregate amount of the Credit Agreement ranging from 0.375% to 0.50%
are payable quarterly. Borrowings are secured by substantially all of the
assets of Oxford. As part of the Wachenhut acquisition, the Company
assumed a revolving line of credit with a limit of 35 million DM.
Interest is calculated based on a competitive variable rate.
Aggregate maturities of long-term borrowings at March 31, 2000 are as
follows:
2001 11,055
2002 14,315
2003 7,628
2004 10,316
2005 8,438
Thereafter 221,924
-----------
$ 273,676
===========
F-17
45
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
9. INCOME TAXES
The Company's income tax provision (benefit) consists of the following:
YEAR ENDED MARCH 31
-----------------------------------------
2000 1999 1998
Current
Federal $ 3,624 $ 6,037 $ 3,116
State 1,662 1,719 1,757
Foreign 6,401 3,160
----------- ----------- -----------
11,687 10,916 4,873
----------- ----------- -----------
Deferred
Federal (2,538) (3,067) 2,300
State 8 (317) (608)
Foreign 59 (4,579) (1,832)
----------- ----------- -----------
(2,471) (7,963) (140)
----------- ----------- -----------
$ 9,216 $ 2,953 $ 4,733
=========== =========== ===========
The difference between the statutory rate and the Company's effective
rate was as follows:
YEAR ENDED MARCH 31
-----------------------------------------
2000 1999 1998
Statutory rate 35.0% 35.0% 35.0%
Foreign rates varying from 35%, 35%
and 34%, respectively 5.8 0.1 (0.5)
FSC benefit (1.5) (5.6)
State taxes, net of federal benefit 6.4 15.1 6.9
Effect of foreign earnings taxed in US 7.2
Nondeductible items 1.4 5.8 1.9
Other .5 (2.0) 2.5
----- ------ -----
Effective income tax rate 54.8% 48.4% 45.8%
===== ====== =====
F-18
46
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
9. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and
(liabilities) are as follows at March 31:
2000 1999
Deferred tax liabilities
Tax depreciation in excess of book $ (26,762) $ (27,495)
Debt related (4,302) (3,125)
Other (360) (170)
------------- --------------
Gross deferred tax liabilities (31,424) (30,790)
------------- --------------
Deferred tax assets
Postretirement medical benefits 16,746 16,353
Workers' compensation 1,610 1,698
Medical benefits accrual 550 503
Allowance for bad debts 1,606 1,379
AMT credit carryforward 970 721
Pension benefits 5,287 4,058
Net operating loss carryforwards 25,377 13,770
Restructuring reserve 1,592 3,498
Foreign tax credit 2,207 1,445
Inventory 2,291 (149)
Other 2,546 4,982
------------- --------------
Gross deferred tax assets 60,782 48,258
------------- --------------
Valuation allowance - (300)
------------- --------------
Net deferred tax asset $ 29,358 $ 17,168
============= ==============
A valuation allowance is provided on the tax benefits otherwise
associated with certain tax attributes unless it is considered more
likely than not that the benefit will be realized.
The Company has net operating loss carryforwards for federal income tax
purposes with potential future tax deductions of approximately $1,681 at
March 31, 2000. The federal net operating losses expire during 2011. The
Company also has Foreign Tax Credit carryforwards for federal income tax
purposes of $2,207 and $1,444 respectively at March 31, 2000 and 1999.
These credits expire in 2004. In addition, the Company has Alternative
Minimum Tax Credit carryforwards of $970, which have no expiration date.
The Company has net operating loss carryforwards for Canadian income tax
purposes with potential future tax deductions of approximately $29,750 at
March 31, 2000. The Canadian net operating losses expire from 2004 to
2007.
F-19
47
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
9. INCOME TAXES (CONTINUED)
The company also has net operating losses for French tax purposes with
potential future tax deductions of approximately $20,170 at March 31,
2000, which do not have an expiration date.
In addition to losses identified above, the Company has net operating
loss carryforwards for German tax purposes with potential future tax
deductions of approximately $14,014 at March 31, 2000. These losses can
be carried forward indefinitely.
10. RESTRUCTURING RESERVES
A summary of the restructuring activity is presented below.
BALANCE AT MARCH 31, 1997 7,050
1998 provision 1,610
Restructuring accrual associated with the acquisition
of Howell 1,339
Reduction in workforce and other cash outflows (2,355)
Reversal of excess accruals to noncurrent assets (1,281)
--------------
BALANCE AT MARCH 31, 1998 6,363
1999 provision 1,151
Restructuring accrual associated with the acquisition
of Suspension and Cofimeta 10,291
Reduction in workforce and other cash outflows (8,257)
Reversal of excess accruals to noncurrent assets (801)
--------------
BALANCE AT MARCH 31, 1999 8,747
Restructuring accrual associated with the acquisition
of Wackenhut and the Technology Division 3,750
Reduction in workforce and other cash outflows (4,543)
Reversal of excess accruals to non current assets and currency fluctuations (3,865)
--------------
BALANCE AT MARCH 31, 2000 $ 4,089
==============
In connection with the acquisition of Lobdell described in Note 3,
management established certain restructuring reserves aggregating $7,050
in Lobdell's opening balance sheet based upon its plan to exit certain
activities of Lobdell. Management's restructuring plan included the sale
of certain subsidiaries, closure of a Lobdell owned manufacturing
facility and sale of the current Lobdell owned corporate offices.
Included in the restructuring reserves at March 31, 1997 were costs for
severance and benefits for employees to be relocated and terminated
$5,052 and other restructuring related costs $1,998.
In connection with management's plans to reduce costs and improve
operating efficiencies at other facilities, the Company recorded a
provision for restructuring of $1,610 during the year ended
F-20
48
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
10. RESTRUCTURING RESERVES (CONTINUED)
March 31, 1998 and established restructuring reserves aggregating $1,339
in Howell's opening balance sheet. The restructuring reserve established
in Howell's opening balance sheet represents management's best estimate
of the costs to be incurred in connection with the closure of a leased
Howell facility. As a result of this closure, no employees are expected
to be terminated.
The provision for restructuring recorded during the years ended March 31,
1999 and 1998 represents costs associated with management's plans to
close two Company facilities. Costs recorded in 1998 primarily relate to
fixed assets. Costs recorded in 1999 primarily relate to severance costs.
As a result of these closures, 189 employees were permanently separated.
The accrual recorded in connection with the acquisition of Suspension
$1,710 represents costs associated with management's plan to close the
operating facility in Hamilton. Management expects that approximately 119
employees will be permanently severed as a result of this closure. This
restructuring action was completed by September 1999.
In connection with the acquisition of Cofimeta, management established
certain restructuring reserves aggregating $8,581. Management's
restructuring plan includes a facility closure and the termination of
certain production processes. Included in the restructuring reserve at
March 31, 1999 were costs for severance and benefits for employees to be
terminated of $7,485 and other restructuring costs, primarily property
losses, of $1,096. The March 31, 2000 balance of $1,328 reflects cash
outflows during the period as well as the reversal of approximately
$3,865 of restructuring reserves. These restructuring actions should be
completed during fiscal year 2001.
In connection with the acquisition of Wackenhut, described in Note 3,
management established certain restructuring reserves aggregating $2,950.
Management's restructuring plan includes a facility closure and the
termination of certain production processes. Included in the
restructuring reserve at March 31, 2000 were costs for severance and
benefits for employees to be terminated of $858 and other restructuring
costs of $1,149. These restructuring actions should be completed during
fiscal year 2001.
In connection with the acquisition of the Technology Division, described
in Note 3, management established certain restructuring reserves
aggregating $800 for severance and benefits for employees to be
terminated. At March 31, 2000, the balance of restructuring reserves
related to the Technology Division was $762. These restructuring actions
should be completed during fiscal year 2001.
The reversal of excess accruals recorded during the years ended March 31,
2000, 1999 and 1998 are due to management's finalization of its
restructuring plans established in purchase accounting. No future
requirement for these accruals exists. These reversals were recorded as a
reduction of noncurrent assets.
11. BENEFIT PLANS
The Company sponsors 18 noncontributory plans covering substantially all
employees meeting the age and length of service requirements as specified
in the plans. The plan covering salaried
F-21
49
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
employees provides pension benefits that are based on a percentage of the
employee's average monthly compensation during the five highest
consecutive years out of their last ten years, and their years of
credited service up to a maximum of 30 years. The hourly plans do not
provide for increases in future compensation levels. The Company's
funding policy for the plan covering salaried employees is to make
contributions in amounts sufficient to annually fund the plan's current
service cost and the initial past service cost, plus interest, over a
period of 30 years. Plans covering hourly employees generally provide
benefits of stated amounts based on their unique labor agreements for
each year of service. The Company's funding policy for these plans is to
make at least the minimum annual contributions required by applicable
regulations.
The Company sponsors seven defined contribution 401(k) plans. The Company
generally contributes 25% of the first 6% of the base compensation that a
participant contributes to the plans.
In addition to the Company's pension plans, the Company sponsors unfunded
defined benefit medical plans that provide postretirement medical
benefits to certain full-time employees meeting the age, length of
service and contractual requirements as specified in the plans.
The following table sets forth the plans' funded status and amounts
recognized on the Company's balance sheets at March 31:
OTHER
POSTRETIREMENT
PENSION PLANS BENEFIT PLANS
------------------- ------------------
2000 1999 2000 1999
CHANGES IN PLAN ASSETS
Beginning balance $ 106,183 $ 71,224 $ - $ -
Assets acquired 33,525
Actual return on plan assets 16,358 4,197
Employer contributions 3,258 5,353 1,513 1,334
Benefits paid from plan assets (5,266) (4,948) (1,513) (1,334)
Other 893 (3,168)
----------- ----------- ----------- ----------
Ending balance 121,426 106,183
----------- ----------- ----------- ----------
CHANGE IN BENEFIT OBLIGATIONS
Beginning balance 109,518 72,529 48,006 40,661
Obligations assumed 2,330 31,633 163 3,612
Service cost 3,927 3,943 1,654 1,510
Interest cost 7,168 7,118 3,532 3,522
Plan amendments 899 1,591
Actuarial loss (gain) (5,234) 767 (1,172) 35
Total benefits paid (5,286) (4,948) (1,513) (1,334)
Other (1,652) (3,115) (432)
----------- ----------- ----------- ----------
Ending balance 111,670 109,518 50,238 48,006
----------- ----------- ----------- ----------
FUNDED STATUS 9,756 (3,335) (50,238) (48,006)
Unrecognized net actuarial loss (gain) (11,732) 4,327 794 5,303
Unrecognized prior service cost 2,346 1,509 2,491
----------- ----------- ----------- ----------
F-22
50
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
NET AMOUNT RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEET $ 370 $ 2,501 $ (46,953) $ (42,703)
=========== =========== =========== ==========
AMOUNTS RECOGNIZED IN THE CONSOLI-
DATED BALANCE SHEET CONSIST OF
Prepaid benefit cost $ 9,971 $ 9,570 $ - $ -
Accrued benefit liability (9,601) (7,069) (46,953) (42,703)
----------- ----------- ----------- ----------
Net amount recognized $ 370 $ 2,501 $ (46,953) $ (42,703)
=========== =========== =========== ==========
PENSION PLANS IN WHICH BENEFIT OBLIGATION
EXCEEDS PLAN ASSETS AT MARCH 31,
2000 1999
Fair value of plan assets $ 11,562 $ 38,637
Benefit obligation 14,521 44,382
COMPONENTS OF NET PERIODIC BENEFIT COST
2000 1999 1998
Pension benefits
Service cost $ 3,927 $ 3,943 $ 2,153
Interest cost 7,168 7,118 4,828
Expected return on plan assets (9,232) (9,044) (5,041)
Amortization of prior service cost 8 40
Recognized actuarial net loss 18 2
----------- ----------- ----------
Net periodic benefit cost $ 1,871 $ 2,075 $ 1,942
=========== =========== ==========
Net periodic benefit cost of defined
contribution plans $ 656 $ 452 $ 355
=========== =========== ==========
Other postretirement benefits
Service cost $ 1,654 $ 1,510 $ 1,025
Interest cost 3,532 3,522 2,711
Recognized actuarial net loss 182 35
----------- ----------- ----------
Net periodic benefit cost $ 5,368 $ 5,067 $ 3,736
=========== =========== ==========
2000 1999 1998
Pension benefits
Discount rate
U.S. plans 7.75% 7.25% 7.25%
Canadian plans 7.00% 6.50% 6.50%
German plans 6.00%
Expected return on assets
U.S. plans 9.00% 8.50-9.00% 9.00%
F-23
51
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
11. BENEFIT PLANS (CONTINUED)
Canadian plans 8.50% 8.50% 8.50%
German Plans
Salary progression
U.S. plans 4.50% 4.50% 4.50%
Canadian plans 5.50% 5.50% 5.50%
German plans 3.50%
Other retirement benefits
Discount rate 7.75% 7.25% 7.25%
The weighted average annual assumed healthcare cost trend rate is
7.3%-8.5% in 2000 trending to 6.5% in 2008 and thereafter for retirees
less than 65 years of age. The healthcare cost trend rate assumption has
a significant effect on the amounts reported. For example, increasing the
assumed healthcare cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of
March 31, 2000 by approximately $6,642 and net periodic postretirement
benefit cost for the year ended March 31, 2000 by approximately $682.
In addition to the above plans, the Company has a non-funded pension
arrangement in France covering all employees. At March 31, 2000, accrued
pension costs of $2,576 were included in accrued expenses.
12. REDEEMABLE PREFERRED STOCK
In connection with the acquisition of Lobdell, Series A $3.00 Cumulative
Preferred Stock (Series A Preferred) with a fair value of $39,754 was
issued. The annual dividend on the Series A Preferred is $3.00 per share,
payable semi-annually. Dividends on the Series A Preferred are
cumulative, but do not bear interest. Under the terms of the issuance of
the Series A Preferred (the Stock Agreement), the holders of the Series A
Preferred maintain limited voting rights. Holders are entitled to vote on
any provisions that would adversely affect their rights or privileges or
management's plans to issue any equity securities that would rank prior
to the Series A Preferred. Holders are also entitled to elect at least
one director of Lobdell, which, under certain provisions of the Stock
Agreement, may increase to two.
Lobdell is required to redeem all shares of Series A Preferred on
December 31, 2006 at a price of $100 per share, plus all declared or
accumulated but unpaid dividends. If Oxford does not commence an initial
public offering of common stock (IPO) prior to June 30, 2006, then the
redemption price of the Series A Preferred is $103 per share. If an IPO
does not occur by December 31, 2001, each holder of Series A Preferred
has the option to redeem annually a maximum of 20 percent of the shares
held at a price of $100 per share on each December 31, beginning in 2002.
Beginning February 1, 1999, Series A Preferred holders are allowed to
transfer, sell or assign the shares. Lobdell has the right of first
refusal to purchase any of the shares transferred, sold or assigned by a
holder of Series A Preferred.
Holders of Series A Preferred are entitled to convert their shares to
Oxford common stock issued in connection with an IPO. Individual holders
may convert a maximum of 50% of their shares, but the
F-24
52
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
total of all Series A Preferred shares converted may not exceed 25% of
the shares issued in the IPO.
The Series A Preferred has been included in the accompanying consolidated
balance sheet at its fair value at the date of issuance of $39,754, and
has been adjusted for accrued dividends and accretion totaling $697 and
$565 for the years ended March 31, 2000 and 1999, respectively.
13. RELATED PARTY TRANSACTIONS
The Company is charged fees and expenses by a related party, The Oxford
Investment Group, Inc., for consulting, finance and management services.
Fees and expenses charged to the Company by The Oxford Investment Group,
Inc. approximated $1,065, $1,076, and $1,005 for the years ended March
31, 2000, 1999 and 1998, respectively. In connection with the
acquisitions of the Technology Division, Wackenhut, Suspension Division
and Cofimeta, Howell, and Lobdell, investment banking fees of $899,
$1,747, and $230 were paid to The Oxford Investment Group, Inc., during
the periods ended March 31, 2000, 1999 and 1998, respectively.
As described in Note 3, the majority shareholder of the Company was also
the majority shareholder of RPIH.
14. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
As of March 31, 2000, the Company had long-term operating leases covering
certain machinery and equipment. The minimum rental commitments under
noncancellable operating leases with lease terms in excess of one year
are as follows as of March 31, 2000:
2001 $ 8,920
2002 14,797
2003 12,400
2004 11,978
2005 11,497
--------------
$ 59,592
==============
MEXICAN ASSET USAGE AGREEMENT
On March 31, 1999 Oxford Mexico entered into an asset usage agreement for
the acquisition of new equipment for and construction of a new facility
being built in Ramos Arizpe, Mexico through a special purpose entity
(SPE). This agreement is classified as an operating lease. Payments for
the facility under this agreement, which vary based upon interest rates
at LIBOR plus 2.88% - 4.0%, will be approximately $7,000 per year
beginning on April 1, 2001. The asset usage agreement is for five years,
with renewal options covering an additional four years. In addition to
the lease payments, Oxford has guaranteed up to $63,000 of the debt of
the SPE.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws and regulations
which govern environmental matters. These laws regulate the discharge of
materials into the environment and may require the Company to remove or
mitigate the environmental effects of the disposal or release
F-25
53
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
of petroleum or chemical substances. The Company has identified several
environmental matters resulting from prior operations. Due to the
relatively early stage of investigation of certain of these identified
matters as well as potential indemnification by other potentially
responsible parties, management is unable to reasonably estimate the
ultimate cost of remediating certain of these identified environmental
matters. The Company has recorded a liability in other noncurrent
liabilities of approximately $1,063 and $1,712 at March 31, 2000 and
1999, respectively, for estimated costs of known environmental matters.
GENERAL
The Company is subject to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of
business. In the opinion of management, after reviewing the information
which is currently available with respect to such matters and consulting
with legal counsel, any liability which may ultimately be incurred with
respect to these matters will not materially affect the financial
position, results of operations or cash flows of the Company.
F-26
54
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
------------------------------------------------------------------------------
15. SEGMENT INFORMATION
Effective April 1, 1998, the Company adopted SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information". This statement
establishes reportable standards for reporting information about
operating segments in annual financial statements and related disclosures
about products and geographic areas. The Company has one reportable
segment in the global automotive original equipment supply industry. Net
sales and operating income (loss) are attributed to geographic regions
based upon their location of origin. Net sales, operating income (loss)
and identifiable assets by geographic area are as follows:
YEAR ENDED MARCH 31
------------------------------------------
2000 1999 1998
Net sales
United States $ 367,245 $ 378,227 $ 324,335
Canada 193,077 167,547 85,030
Mexico 14,770 9,666 956
France 191,070 36,205
Germany 42,903
------------ ----------- -----------
$ 809,065 $ 591,645 $ 410,321
============ =========== ===========
Operating income (loss)
United States $ 18,906 $ 20,046 $ 22,893
Canada 1,472 2,116 (462)
Mexico 6,337 (1,152) (1,718)
France 15,489 1,554
Germany 4,482
------------ ----------- -----------
$ 46,686 $ 22,564 $ 20,713
============ =========== ===========
Identifiable assets
United States $ 302,860 $ 307,489 $ 262,708
Canada 105,040 107,338 52,376
Mexico 27,265 5,373 4,948
France 121,219 122,730
Germany 42,428
------------ ----------- -----------
$ 598,812 $ 542,930 $ 320,032
============ ========== ===========
F-27
55
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
16. SUBSEQUENT EVENT
On April 3, 2000 (the "Closing Date") pursuant to a Purchase and Sale
Agreement, dated as of February 5, 2000 (the "Purchase Agreement"), among
a wholly-owned indirect subsidiary of the Company (the Purchaser) and
Agostino Gessaroli, Irene Salezzi, Denis Gessaroli, Luana Gessaroli,
Officine Meccaniche Gessaroli S.p.A., and Gess.car di Gessaroli Agostino
& C. S.a.s. (collectively, "Sellers") the Purchaser acquired the Group
Gessaroli business of Sellers (the "Gessaroli Group"). The purchase price
was ITL 24.0 billion ($11.8 million US) plus up to ITL 5.3 billion ($2.7
million US) for the payment of income taxes and debt, subject to a
Closing Date net asset adjustment, if applicable. On the Closing Date,
ITL 21.6 billion ($10.7 million US) of the total purchase price was paid
to Sellers and ITL 2.4 billion ($1.2 million US) was held back, pending
any applicable purchase price adjustment or indemnification claim.
The Gessaroli Group's integrated manufacturing operations cover all
functions of design, engineering, die and mold construction, parts
production and assembly for its metal formed components, modules and
injection molded products. The Company intends to continue and expand the
current operations of the Gessaroli Group.
17. CONDENSED CONSOLIDATING INFORMATION
The Notes were issued by Oxford Automotive, Inc. and guaranteed by
certain of its wholly-owned subsidiaries, including Lobdell, Howell,
BMGH, RPIH, Suspension and the Technology Division (the Guarantor
Subsidiaries). The Notes are not guaranteed by other consolidated
subsidiaries, Oxford Mexico, Oxford Europe and Wackenhut (the
Non-guarantor Subsidiaries). The guarantee of the Notes by the Guarantor
Subsidiaries is full and unconditional. The following condensed
consolidated financial information presents the financial position,
results of operations and cash flows of (i) the Company as if it
accounted for its subsidiaries on the equity method, (ii) the Guarantor
Subsidiaries on a combined basis and (iii) the Non-guarantor
Subsidiaries.
F-28
56
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
ASSETS
Current assets
Cash $ 8,563 $ 8,839 $ 241 $ - $ 17,643
Receivables (net) 12,372 41,952 85,588 139,912
Inventories 20,462 32,725 53,187
Income taxes refundable 3,515 (1,488) 2,027
Reimbursable tooling 19,843 6,120 (925) 25,038
Deferred income taxes 388 1,986 2,374
Prepaid expenses and other 6,809 26,620 4,799 38,228
--------- -------- --------- --------- ---------
TOTAL CURRENT ASSETS 51,490 103,993 122,926 278,409
Other noncurrent assets 11,389 448 23,039 34,876
Deferred income taxes 16,930 17,348 34,278
Property, plant and equipment (net) 8,536 51,857 190,856 251,249
Investment in consolidated subsidiaries 104,719 45,766 (150,485)
--------- -------- --------- --------- ---------
TOTAL ASSETS $ 176,134 $173,228 $ 399,935 $(150,485) $ 598,812
========= ======== ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 53,517 $ 40,822 $ 50,362 $ $ 144,701
Intercompany accounts (133,574) 1,485 132,089
Restructuring reserve 3,335 754 4,089
Accrued expenses and other 12,443 33,070 14,016 59,529
Current portion of borrowings 4,500 6,423 132 11,055
--------- -------- --------- --------- ---------
TOTAL CURRENT LIABILITIES (63,114) 85,135 197,353 219,374
Pension liability 2,175 7,426 9,601
Postretirement medical benefits 46,953 46,953
Deferred income taxes and other (1,997) 9,291 7,294
Other noncurrent liabilities 4,631 3,658 8,289
Long-term borrowings 226,734 35,690 197 262,621
--------- -------- --------- --------- ---------
TOTAL LIABILITIES 161,623 127,631 264,878 554,132
Redeemable preferred stock 40,451 40,451
--------- -------- --------- --------- ---------
Shareholders' equity
Common stock 1,050 39,882 97,349 (137,231) 1,050
Accumulated other comprehensive income (6,914) (2,776) (9,690)
Retained earnings 13,461 12,629 33 (13,254) 12,869
--------- -------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 14,511 45,597 94,606 (150,485) 4,229
--------- -------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 176,134 $173,228 $ 399,935 $(150,485) $ 598,812
========= ======== ========= ========= =========
F-29
57
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
ASSETS
Current assets
Cash $ 9,741 $ 9,158 $ 109 $ - $ 19,008
Receivables (net) 114 45,345 106,822 152,281
Inventories 14,402 33,702 48,104
Income taxes refundable
Reimbursable tooling 3,010 8,766 11,425 23,201
Deferred income taxes 536 3,133 3,669
Prepaid expenses and other 2,151 13,174 2,900 18,225
--------- -------- --------- --------- ---------
TOTAL CURRENT ASSETS 15,552 90,845 158,091 264,488
Other noncurrent assets 10,898 13,572 30,573 55,043
Property, plant and equipment (net) 4,003 28,259 191,137 223,399
Investment in consolidated subsidiaries 87,546 45,166 (132,712)
--------- -------- --------- --------- ---------
TOTAL ASSETS $ 117,999 $132,676 $ 424,967 $(132,712) $ 542,930
========= ======== ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,046 $ 34,906 $ 72,391 $ $ 109,343
Intercompany accounts (130,223) 4,573 125,650
Restructuring reserve 6,676 2,071 8,747
Accrued expenses and other 5,432 24,596 24,416 54,444
Current portion of borrowings 1,877 6,301 3,326 11,504
--------- -------- --------- --------- ---------
TOTAL CURRENT LIABILITIES (120,868) 77,052 227,854 184,038
Pension liability 7,069 7,069
Postretirement medical benefits 42,703 42,703
Deferred income taxes and other 1,975 13,540 15,515
Long-term borrowings 231,234 20,070 1,054 252,358
--------- -------- --------- --------- ---------
TOTAL LIABILITIES 110,366 99,097 292,220 501,683
Redeemable preferred stock 40,319 40,319
--------- -------- --------- --------- ---------
Shareholders' equity
Common stock 1,050 37,045 91,002 (128,047) 1,050
Accumulated other comprehensive income (1,955) (4,750) (6,705)
Retained earnings 6,583 (1,511) 6,176 (4,665) 6,583
--------- -------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 7,633 33,579 92,428 (132,712) 928
--------- -------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 117,999 $132,676 $ 424,967 $(132,712) $ 542,930
========= ======== ========= ========= =========
F-30
58
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
Sales $ - $248,743 $ 560,322 $ - $ 809,065
Cost of sales 268 207,941 504,730 712,939
---------- -------- --------- -------- ----------
GROSS PROFIT (268) 40,802 55,592 96,126
Selling, general and administrative expenses (4,452) 14,928 38,771 49,247
Restructuring provision
Gain on sale of equipment (436) 629 193
---------- -------- --------- -------- ----------
OPERATING INCOME 4,184 26,310 16,192 46,686
Other income (expense)
Interest expense (5,170) (4,703) (21,477) (31,350)
Other 111 1,334 41 1,486
---------- -------- --------- -------- ----------
INCOME BEFORE BENEFIT (PROVISION)
FOR INCOME TAXES (875) 22,941 (5,244) 16,822
Benefit (provision) for income taxes (245) (8,799) (172) (9,216)
---------- -------- --------- -------- ----------
INCOME BEFORE EQUITY IN INCOME OF
CONSOLIDATED SUBSIDIARIES (1,120) 14,142 (5,416) 7,606
Equity in income of consolidated subsidiaries 8,726 (8,726)
---------- -------- --------- -------- ----------
NET INCOME $ 7,606 $ 14,142 $ (5,416) $ (8,726) $ 7,606
========== ======== ========= ======== ==========
F-31
59
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
Sales $ - $ 45,871 $ 545,774 $ - $ 591,645
Cost of sales 42,896 493,682 536,578
---------- -------- --------- -------- ----------
GROSS PROFIT 2,975 52,092 55,067
Selling, general and administrative expenses (2,054) 2,648 31,535 32,129
Restructuring provision (59) 1,210 1,151
Gain on sale of equipment (16) (761) (777)
---------- -------- --------- -------- ----------
OPERATING INCOME 2,054 402 20,108 22,564
Other income (expense)
Interest expense (2,438) (595) (17,870) (20,903)
Other 3,682 (306) 1,069 4,445
---------- -------- --------- -------- ----------
INCOME BEFORE BENEFIT (PROVISION)
FOR INCOME TAXES 3,298 (499) 3,307 6,106
Benefit (provision) for income taxes (1,179) 107 (1,881) (2,953)
---------- -------- --------- -------- ----------
INCOME BEFORE EQUITY IN INCOME OF
CONSOLIDATED SUBSIDIARIES 2,119 (392) 1,426 3,153
Equity in income of consolidated subsidiaries 1,034 (1,034)
---------- -------- --------- -------- ----------
NET INCOME $ 3,153 $ (392) $ 1,426 $ (1,034) $ 3,153
========== ======== ========= ======== ==========
F-32
60
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR
PARENT SUBSIDIARY SUBSIDIARIES CONSOLIDATED
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 15,464 $ 15,104 $ 23,620 $ 54,188
INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired (9,176) 59 (9,117)
Purchase of property, plant and equipment (5,209) (11,416) (21,218) (37,843)
Purchase of marketable securities
Proceeds from sale of equipment 724 3,262 3,986
Proceeds from sale of marketable securities
--------- --------- ---------- ----------
NET CASH (USED IN)
INVESTING ACTIVITIES (14,385) (10,633) (17,956) (42,974)
--------- --------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowing arrangements
Principal payments on borrowing arrangements (1,877) (3,862) (4,303) (10,042)
Payment of preferred stock dividends (1,192) (1,192)
Debt financing costs (378) (378)
--------- --------- ---------- ----------
NET CASH (USED IN) FINANCING ACTIVITIES (2,255) (3,862) (5,495) (11,612)
--------- ---------- ---------- ----------
Effect of foreign currency rate fluctuations on cash (926) (41) (967)
--------- --------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (1,176) (317) 128 (1,365)
Cash at beginning of period 9,741 9,158 109 19,008
--------- --------- ---------- ----------
Cash at end of period $ 8,565 $ 8,841 $ 237 $ 17,643
========= ========= ========== ==========
F-33
61
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR
PARENT SUBSIDIARY SUBSIDIARIES CONSOLIDATED
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (24,520) $ (4,569) $ 34,833 $ 5,744
INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired (91,396) 16,316 (75,080)
Purchase of property, plant and equipment (2,221) (2,069) (29,335) (33,625)
Purchase of marketable securities (892) (892)
Proceeds from sale of equipment 16 1,534 1,550
Proceeds from sale of marketable securities 12,009 12,009
--------- --------- ---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (82,500) 14,263 (27,801) (96,038)
--------- --------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowing arrangements 108,544 108,544
Principal payments on borrowing arrangements (261) (9,900) (10,161)
Payment of preferred stock dividends (1,194) (1,194)
Debt financing costs (5,195) (5,195)
--------- --------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 103,088 (11,094) 91,994
--------- --------- ---------- ----------
Effect of foreign currency rate fluctuations on cash (858) (155) (1,013)
--------- --------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (3,932) 8,836 (4,217) 687
Cash at beginning of period 13,673 322 4,326 18,321
--------- --------- ---------- ----------
Cash at end of period $ 9,741 $ 9,158 $ 109 $ 19,008
========= ========= ========== ==========
F-34
62
OXFORD AUTOMOTIVE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLAR AMOUNTS IN THOUSANDS)
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, MARCH 31, MARCH 31,
2000 1999 1998
---- ---- ----
Balance, beginning of period 4,506 400 1,272
Additions
Acquisition 717 4,195 200
Provision for additional allowance 524 11
Deductions
Currency translation adjustments (1)
Reversals (644)
Doubtful accounts (charged) recovered (925) (100) (427)
----- ------ -----
Balance, end of period 4,822 $4,506 $400
===== ====== =====
63
SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on June 19, 2000.
OXFORD AUTOMOTIVE, INC.
By: /S/ Steven M. Abelman
------------------------
Steven M. Abelman
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on June 19, 2000.
SIGNATURE TITLE
--------- -----
/S/ Selwyn Isakow Chairman of the Board and Director
- --------------------------------
Selwyn Isakow
/S/ Rex E. Schlaybaugh, Jr. Vice Chairman of the Board and Director
- --------------------------------
Rex E. Schlaybaugh, Jr.
/S/ Steven M. Abelman President, Chief Executive Officer and
- -------------------------------- Director
Steven M. Abelman
/S/ Aurelian Bukatko Senior Vice President-Chief Financial
- -------------------------------- Officer (Principal Accounting and
Aurelian Bukatko Financial Officer)
/S/ Manfred J. Walt Director
- --------------------------------
Manfred J. Walt
Director
- --------------------------------
Dennis K. Pawley
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
No Annual Report or Proxy Materials have been or will be sent to
security holders
64
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Asset Purchase Agreement, dated as of February 16, 2000, among
CE Technologies, Inc. and Tool and Engineering Company, both
wholly-owned subsidiaries of Oxford Automotive, Inc., and
Farley, Inc., and Tool & Engineering Company of Detroit, Inc.
(previously filed as Exhibit 2.1 to the Registrant's Current
Report on Form 8-K dated February 16, 2000, and incorporated
herein by reference)
2.2 Purchase Agreement, dated as of February 5, 2000, among Oxford
Automotive France SAS, a wholly-owned indirect subsidiary of
Oxford Automotive, Inc. and Agostino Gessaroli, Irene Salezzi,
Denis Gessaroli, Luana Gessaroli, Officine Meccaniche
Gessaroli S.p.A., and Gess.car di Gessaroli Agostino &
C.S.a.s. (previously filed as Exhibit 2.1 to the Registrant's
Current Report on Form 8-K dated April 3, 2000, and
incorporated herein by reference)
3.1 Articles of Incorporation of the Company (previously filed as
Exhibit 3.1 to the Registrant's Registration Statement on Form
S-4, File No. 333-32975, and incorporated herein by reference)
3.2 Bylaws of the Company (previously filed as Exhibit 3.11 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
4.1 Indenture, dated as of June 15, 1997, by and among the
Company, the Subsidiary Guarantors and First National Trust
Association, as Trustee (including form of the 10 1/8% Senior
Subordinated Notes Due 2007, form of the Guaranty, and form of
Supplemental Indenture) (previously filed as Exhibit 4.1 to
the Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
4.2 Indenture, dated as of December 1, 1998, by and among the
Company, the Subsidiary Guarantors and U.S. Bank Trust
National Association, as Trustee (including form of the 10
1/8% Senior Subordinated Notes Due 2007, Series C, form of
Guaranty, and form of Supplemental Indenture) (previously
filed as Exhibit 4.1 to the Registrant's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 31, 1998, and
incorporated herein by reference)
4.3 Amended and Restated Credit Agreement between the Company and
NBD Bank, as agent, dated May 14, 1999 (previously filed as
Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1999, and incorporated herein
by reference)
65
4.4 First Amendment to Amended and Restated Credit Agreement,
dated as of December 23, 1999, among Oxford Automotive, Inc.,
the Borrowing Subsidiaries and the Lenders identified therein
and Banc One, Michigan, formerly known as NBD Bank, as agent
for the Lenders (previously filed as Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1999, and incorporated herein by
reference)
4.5 Form of Amended and Restated Pledge Agreement and Irrevocable
Proxy in favor of NBD Bank (now known as Bank One, Michigan)
(previously filed as Exhibit 4.1 to the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30,
1999, and incorporated herein by reference)
4.6 Form of Amended and Restated Security Agreement in favor of
NBD Bank (now known as Bank One, Michigan) (previously filed
as Exhibit 4.2 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1999, and
incorporated herein by reference)
4.7 Form of Amended and Restated Security Agreement in favor of
First Chicago NBD Bank, Canada (previously filed as Exhibit
4.3 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1999, and incorporated
herein by reference)
4.8 Form of Amended and Restated Guaranty Agreement in favor of
NBD Bank (now known as Bank One, Michigan) (previously filed
as Exhibit 4.4 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1999, and
incorporated herein by reference)
4.9 Form of Amended and Restated Guarantee in favor of NBD Bank
(now known as Bank One, Michigan) (previously filed as Exhibit
4.5 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1999, and incorporated
herein by reference)
10.1 Form of Director Indemnification Agreement (previously filed
as Exhibit 10.2 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
10.2 Employment and Noncompetition Agreement between the Company
and Steven M. Abelman (previously filed as Exhibit 10.3 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
10.3 Employment Agreement between BMG North America and Larry C.
Cornwall (previously filed as Exhibit 10.5 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
66
10.4 Shareholders Agreement among certain of the Shareholders of
the Company and BMG-MI, Inc. (now known as Oxford Automotive,
Inc.), dated October 23, 1995 (previously filed as Exhibit
10.6 to the Registrant's Registration Statement on Form S-4,
File No. 333-32975, and incorporated herein by reference)
10.5 Shareholders Agreement among certain of the Shareholders of
the Company and the Company dated January 10, 1997 (previously
filed as Exhibit 10.7 to the Registrant's Registration
Statement on Form S-4, File No. 333-32975, and incorporated
herein by reference)
10.6 Management and Consulting Agreement between the Company and
The Oxford Investment Group, Inc., dated June 24, 1997
(previously filed as Exhibit 10.8 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
10.7 Amendment to Management Agreement, dated November 24, 1997
(previously filed as Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1998,
and incorporated herein by reference)
10.8 Purchase Agreement among the Registrant and the Initial
Purchasers of the 10 1/8% Senior Subordinated Notes Due 2007,
Series C, dated December 1, 1998 (previously filed as Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the
fiscal Quarter ended December 31, 1998, and incorporated
herein by reference)
10.9 Asset Use Agreement between Automotive Business Trust 1999-A
and Oxford Automotriz de Mexico S.A. de C.V. dated March 31,
1999 (previously filed as Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended March 31,
1999, and incorporated herein by reference)
10.10 Guaranty of the Company in favor of Automotive Business Trust
1999-A dated March 31, 1999 (previously filed as Exhibit 10.13
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 1999, and incorporated herein by
reference)
10.11 *Amendment to Employment and Noncompetition Agreement between
Oxford Automotive, Inc. and Mr. Abelman dated as of July 1,
1999.
10.12 *Noncompetition and employment arrangement between Oxford
Automotive, Inc. and Mr. Bukatko, effective February 1999.
12 *Statement regarding computation of ratios
21 *Subsidiaries of the Registrant
27 *Financial Data Schedule