1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--- ---
Commission file number 0-21139
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4508 IDS CENTER 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
(612) 342-2311
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the Registrant's Class A common stock, par
value $.01 per share, at October 31, 2000 was 14,338,439 shares. The number of
shares outstanding of the Registrant's Class B common stock, par value $.01 per
share, at October 31, 2000 was 3,320,303 shares.
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DURA AUTOMOTIVE SYSTEMS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements:
Condensed Consolidated Statements of Income for the Three Months
Ended September 30, 2000 and 1999 (unaudited) 3
Condensed Consolidated Statements of Income for the Nine Months
Ended September 30, 2000 and 1999 (unaudited) 4
Condensed Consolidated Balance Sheets at September 30, 2000
(unaudited) and December 31, 1999 5
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 (unaudited) 6
Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 21
PART II OTHER INFORMATION
Item 1. Legal Proceedings 28
SIGNATURE 29
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ITEM 1 - FINANCIAL INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Three Months Ended September 30,
--------------------------------------
2000 1999
----------------- ----------------
Revenues $ 587,081 $ 580,886
Cost of sales 493,450 491,479
----------------- ----------------
Gross profit 93,631 89,407
Selling, general and administrative expenses 41,406 37,344
Amortization expense 6,814 6,632
----------------- ----------------
Operating income 45,411 45,431
Interest expense, net 27,284 24,449
----------------- ----------------
Income before provision for income taxes,
equity in losses of affiliate and minority
interests 18,127 20,982
Provision for income taxes 7,260 8,664
Equity in losses of affiliate and minority
interests -- 415
Minority interest - dividends on trust preferred
securities, net 612 612
----------------- ----------------
Net income $ 10,255 $ 11,291
================= ================
Basic earnings per common share $ 0.59 $ 0.65
================= ================
Diluted earnings per common share $ 0.58 $ 0.63
================= ================
The accompanying notes are an integral part of these
condensed consolidated statements.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Nine Months Ended September 30,
--------------------------------------
2000 1999
----------------- ----------------
Revenues $ 1,977,540 $ 1,530,754
Cost of sales 1,660,367 1,292,366
----------------- ----------------
Gross profit 317,173 238,388
Selling, general and administrative expenses 128,971 92,320
Product recall charge 16,000 --
Amortization expense 20,885 17,221
----------------- ----------------
Operating income 151,317 128,847
Interest expense, net 82,553 55,509
----------------- ----------------
Income before provision for income taxes,
equity in losses of affiliate and minority
interests 68,764 73,338
Provision for income taxes 27,781 29,595
Equity in losses of affiliate and minority
interests 914 2,908
Minority interest - dividends on trust preferred
securities, net 1,834 1,834
----------------- ----------------
Income before extraordinary item and
accounting change 38,235 39,001
Extraordinary item - loss on early
extinguishment of debt, net -- (5,402)
Cumulative effect of change in accounting, net -- (3,147)
----------------- ----------------
Net income $ 38,235 $ 30,452
================= ================
Basic earnings per common share:
Income before extraordinary item and
accounting change $ 2.19 $ 2.46
Extraordinary item -- (0.34)
Cumulative effect of change in accounting -- (0.20)
----------------- ----------------
Net income $ 2.19 $ 1.92
================= ================
Diluted earnings per common share:
Income before extraordinary item and
accounting change $ 2.13 $ 2.35
Extraordinary item -- (0.31)
Cumulative effect of change in accounting -- (0.18)
----------------- ----------------
Net income $ 2.13 $ 1.86
================= ================
The accompanying notes are an integral part of these
condensed consolidated statements.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
September 30, December 31,
Assets 2000 1999
- ------------------------------------------------------------------ ----------------- ----------------
(unaudited)
Current assets:
Cash and cash equivalents $ 11,625 $ 23,697
Accounts receivable, net 453,998 478,542
Inventories 133,842 136,562
Other current assets 167,673 154,704
----------------- ----------------
Total current assets 767,138 793,505
----------------- ----------------
Property, plant and equipment, net 500,344 500,894
Goodwill, net 1,024,812 1,067,937
Deferred income taxes and other assets, net 72,791 82,531
----------------- ----------------
$ 2,365,085 $ 2,444,867
================= ================
Liabilities and Stockholders' Investment
- ------------------------------------------------------------------
Current liabilities:
Accounts payable $ 278,057 $ 281,413
Accrued liabilities 254,621 296,431
Current maturities of long-term debt 55,124 52,712
----------------- ----------------
Total current liabilities 587,802 630,556
----------------- ----------------
Long-term debt, net of current maturities 758,571 776,750
Subordinated notes 387,840 401,560
Other noncurrent liabilities 141,940 149,755
Mandatorily redeemable convertible trust preferred securities 55,250 55,250
Stockholders' investment:
Common stock - Class A 142 141
Common stock - Class B 33 33
Additional paid-in capital 339,591 339,041
Treasury stock (1,604) --
Retained earnings 146,507 108,272
Accumulated other comprehensive loss -
cumulative translation adjustment (50,987) (16,491)
----------------- ----------------
Total stockholders' investment 433,682 430,996
----------------- ----------------
$ 2,365,085 $ 2,444,867
================= ================
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS - UNAUDITED)
Nine Months Ended September 30,
------------------------------------
2000 1999
---------------- ---------------
OPERATING ACTIVITIES:
Net income $ 38,235 $ 30,452
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 66,067 55,915
Deferred income taxes (1,868) (1,974)
Equity in losses of affiliates and minority interest 914 2,908
Extraordinary loss on extinguishment of debt -- 5,402
Cumulative effect of change in accounting, net -- 3,147
Changes in other operating items (21,806) (14,953)
---------------- ---------------
Net cash provided by operating activities 81,542 80,897
---------------- ---------------
INVESTING ACTIVITIES:
Capital expenditures, net (76,513) (57,947)
Acquisitions, net of cash acquired (19,836) (434,948)
---------------- ---------------
Net cash used in investing activities (96,349) (492,895)
---------------- ---------------
FINANCING ACTIVITIES:
Short-term borrowings (repayments), net 2,123 (4,094)
Long-term debt borrowings (repayments), net (3,986) 445,572
Debt issuance costs -- (19,537)
Common stock repurchases (1,604) --
Proceeds from issuance of common stock and
exercise of stock options 551 3,745
---------------- ---------------
Net cash provided by (used in) financing activities (2,916) 425,686
---------------- ---------------
EFFECT OF EXCHANGE RATE ON CASH 5,651 (16,503)
---------------- ---------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (12,072) (2,815)
CASH AND CASH EQUIVALENTS:
Beginning of period 23,697 20,544
---------------- ---------------
End of period $ 11,625 $ 17,729
================ ===============
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ 69,965 $ 37,426
Cash paid for income taxes $ 2,633 $ 13,291
The accompanying notes are an integral part of these
condensed consolidated statements.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
We have prepared the condensed consolidated financial statements of Dura
Automotive Systems, Inc. ("Dura"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information furnished
in the condensed consolidated financial statements includes normal recurring
adjustments and reflects all adjustments which are, in our opinion, necessary
for a fair presentation of the results of operations and statements of financial
position for the interim periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. We believe that the disclosures are
adequate to make the information presented not misleading when read in
conjunction with the financial statements and the notes thereto included in our
Annual Report on Form 10-K, as filed with the Securities and Exchange Commission
for the period ended December 31, 1999.
Revenues and operating results for the three and nine months ended
September 30, 2000 are not necessarily indicative of the results to be expected
for the full year.
Certain prior period amounts have been reclassified to conform with the
current period presentation.
2. INVENTORIES
Inventories consisted of the following (in thousands):
September 30, December 31,
2000 1999
----------------- -----------------
Raw materials $ 72,103 $ 85,609
Work-in-process 32,973 21,162
Finished goods 28,766 29,791
----------------- -----------------
$ 133,842 $ 136,562
================= =================
3. EARNINGS PER SHARE
Basic earnings per share were computed by dividing net income by the
weighted average number of Class A and Class B common shares outstanding during
the period. Diluted earnings per share include (i) the effects of outstanding
stock options and warrants using the treasury stock method and (ii) the
conversion of the Preferred Securities, as follows (in thousands, except per
share amounts):
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Three Months Nine Months
Ended September 30, Ended September 30,
------------------------ -----------------------
2000 1999 2000 1999
---------- ---------- --------- ----------
Net income $ 10,255 $ 11,291 $ 38,235 $ 30,452
Interest expense on mandatorily redeemable
convertible preferred securities, net of tax 612 612 1,834 1,834
---------- ---------- --------- ----------
Net income applicable to common
stockholders - diluted $ 10,867 $ 11,903 $ 40,069 $ 32,286
========== ========== ========= ==========
Weighted average number of Class A
common shares outstanding 14,150 14,085 14,130 12,553
Weighted average number of Class B
common shares outstanding 3,320 3,322 3,320 3,324
---------- ---------- --------- ----------
17,470 17,407 17,450 15,877
Dilutive effect of outstanding stock options
after application of the treasury stock method 13 123 14 114
Dilutive effect of warrants -- 152 101 102
Dilutive effect of mandatorily redeemable
convertible preferred securities, assuming
conversion 1,289 1,289 1,289 1,289
---------- ---------- --------- ----------
Diluted shares outstanding 18,772 18,971 18,854 17,382
========== ========== ========= ==========
Basic earnings per share $ 0.59 $ 0.65 $ 2.19 $ 1.92
========== ========== ========= ==========
Diluted earnings per share $ 0.58 $ 0.63 $ 2.13 $ 1.86
========== ========== ========= ==========
4. PRODUCT RECALL CHARGE
In the second quarter of 2000, Dura settled two product recall issues
through a cost sharing agreement with a significant customer. As a result of
this agreement, Dura recorded a one-time pretax charge to operations of $16.0
million to cover amounts not previously reserved. These recalls were announced
in the first half of 1999 and involved concerns associated with Trident
Automotive plc (Trident) speed control cables and a secondary hood latch. Dura
acquired Trident in April of 1998.
5. 1999 FACILITY CONSOLIDATION CHARGE
In the fourth quarter of 1999, Dura began to implement a comprehensive
plan (the "Plan") to consolidate certain facilities designed to lower its cost
structure and improve the long-term competitive position of Dura. As a result of
the Plan, Dura recognized charges to operations of $16.2 million. Included in
this charge are the costs associated with consolidating and eliminating certain
facilities and associated lease obligations of $1.4 million; severance related
to employee terminations of $13.2 million; and asset impairments of $1.6
million. Costs incurred and charged to the reserves as of September 30, 2000
amounted to $1.1 million related to lease and other closure costs, $4.9 million
in severance and $1.6 million related to asset impairment. The Plan originally
called for the termination of approximately 5 salaried plant management and 313
hourly plant manufacturing employees, of which 3 salaried and 51 hourly
employees had been terminated as of September 30, 2000 (see note 12).
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6. FACILITY REORGANIZATION RELATED TO ACQUISITIONS
Dura has implemented reorganization plans designed to integrate the
operations of recent acquisitions. As of September 30, 2000, purchase
liabilities recorded in conjunction with the acquisitions included approximately
$36.2 million for costs associated with the shutdown and consolidation of
certain acquired facilities and $25.6 million for severance and other related
costs. Adjustments to the reserve recorded during the nine months ended
September 30, 2000 included a net increase of $4.2 million for costs related to
acquired facilities and a net reduction of $0.7 million in severance and other
related costs. All adjustments were reflected as an adjustment to goodwill.
Costs incurred and charged to the reserves during the nine months ended
September 30, 2000 amounted to $13.0 million related to acquired facilities and
$10.8 million in severance and other related costs.
7. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
September 30, December 31,
2000 1999
----------------- -----------------
Credit Agreement:
Tranche A and B term loans $ 521,279 $ 550,521
Revolving credit facility 262,953 208,751
Other 29,463 70,190
----------------- -----------------
813,695 829,462
Less - Current maturities (55,124) (52,712)
----------------- -----------------
Total long-term debt $ 758,571 $ 776,750
================= =================
In connection with the acquisitions of Adwest and Excel in March 1999,
Dura entered into an amended and restated $1.15 billion credit agreement
("Credit Agreement"). The Credit Agreement provides for revolving credit
facilities of $400.0 million, a $275.0 million tranche A term loan, a $275.0
million tranche B term loan and a $200.0 million interim term loan facility. As
of September 30, 2000, rates on borrowings under the Credit Agreement ranged
from 6.3% to 9.0%. Borrowings under the tranche A term loan are due and payable
in March 2005 and borrowings under the tranche B term loan are due and payable
in March 2006. The revolving credit facility is available until March 2005. The
Credit Agreement contains various restrictive covenants which limit
indebtedness, investments, rental obligations and cash dividends. The Credit
Agreement also requires Dura to maintain certain financial ratios including
minimum liquidity and interest coverage. Dura was in compliance with the
covenants as of September 30, 2000. Borrowings under the Credit Agreement are
collateralized by substantially all assets of Dura.
The Credit Agreement provides Dura with the ability to denominate a
portion of its revolving credit borrowings in foreign currencies up to an amount
equal to $100.0 million. As of September 30, 2000, $222.0 million of borrowings
were denominated in US dollars, $6.0 million of borrowings were denominated in
Canadian dollars, $3.3 million of borrowings were denominated in Australian
dollars, and $31.7 million of borrowings were denominated in British pound
sterling.
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8. SENIOR SUBORDINATED NOTES
In April 1999, Dura completed the offering of $300.0 million and Euro
100.0 million of senior subordinated notes ("Subordinated Notes"). The
Subordinated Notes mature in May 2009 and bear interest at 9% per year, which is
payable semi-annually. Net proceeds from this offering of approximately $394.7
million were used to repay the $200.0 million interim term loan, approximately
$78.1 million to retire other indebtedness and approximately $118.9 million was
used for general corporate purposes. These notes are collateralized by
guarantees of certain of Dura's subsidiaries.
9. COMPREHENSIVE INCOME
Comprehensive income reflects the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For Dura, comprehensive income represents net income
adjusted for foreign currency translation adjustments. Comprehensive income for
the periods is as follows (in thousands):
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net income $ 10,255 $ 11,291 $ 38,235 $ 30,452
Other comprehensive income:
Foreign currency translation adjustment (11,763) (200) (34,496) (18,134)
----------- ----------- ----------- -----------
Comprehensive income (loss) $ (1,508) $ 11,091 $ 3,739 $ 12,318
=========== =========== =========== ===========
10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement requires the
recognition of derivative instruments as assets and liabilities, based on their
fair value, and specifies certain methods for the recognition of related gains
and losses. In June 2000, the FASB issued SFAS No. 138, which amends and
clarifies certain guidance in SFAS No. 133.
Dura is in the process of implementing processes and procedures to
quantify the impact of adopting these statements effective January 1, 2001. The
effect of adopting these statements on Dura's financial position and results of
operations during 2001 will depend in part on the fair value of derivatives held
as of January 1, 2001 and future derivative transactions entered into.
Currently, Dura does not anticipate the adoption to materially impact its
results of operations.
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11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION
The following condensed consolidating financial information presents
balance sheets, statements of income and cash flow information related to Dura's
business. Each Guarantor, as defined, is a direct or indirect wholly owned
subsidiary of Dura has fully and unconditionally guaranteed the 9% senior
subordinated notes issued by Dura Operating Corp., on a joint and several basis.
Separate financial statements and other disclosures concerning the Guarantors
have not been presented because management believes that such information is not
material to investors.
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11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------ -------------- ------------- -------------- ----------------
Assets
Current assets:
Cash and cash equivalents $ 2,574 $ 1,143 $ 7,908 $ -- $ 11,625
Accounts receivable, net 199,246 44,240 210,512 -- 453,998
Inventories 48,159 22,656 63,027 -- 133,842
Other current assets 89,176 13,851 64,646 -- 167,673
Due from affiliates 85,202 42,547 10,259 (138,008) --
------------ -------------- ------------- -------------- ----------------
Total current assets 424,357 124,437 356,352 (138,008) 767,138
------------ -------------- ------------- -------------- ----------------
Property, plant and equipment,
net 194,350 51,110 254,884 -- 500,344
Investment in subsidiaries 490,556 27,558 49,593 (567,707) --
Notes receivable from
affiliates 354,993 118,796 35,573 (509,362) --
Goodwill, net 477,897 60,974 485,941 -- 1,024,812
Deferred income taxes and other
assets, net 15,903 15,568 41,320 -- 72,791
------------ -------------- ------------- -------------- ----------------
$ 1,958,056 $ 398,443 $ 1,223,663 $ (1,215,077) $ 2,365,085
============ ============== ============= ============== ================
Liabilities and Stockholders'
Investment
Current liabilities:
Accounts payable $ 120,514 $ 23,862 $ 133,681 $ -- $ 278,057
Accrued liabilities 111,609 17,750 125,262 -- 254,621
Current maturities of long-
term debt 32,795 14 22,315 -- 55,124
Due to affiliates 45,936 29,997 62,075 (138,008) --
------------ -------------- ------------- -------------- ----------------
Total current liabilities 310,854 71,623 343,333 (138,008) 587,802
------------ -------------- ------------- -------------- ----------------
Long-term debt, net of
current maturities 677,823 -- 80,748 -- 758,571
Subordinated notes 387,840 -- -- -- 387,840
Other noncurrent liabilities 39,053 30,866 72,021 -- 141,940
Notes payable to affiliates 2,567 57,382 449,413 (509,362) --
------------ -------------- ------------- -------------- ----------------
Total liabilities 1,418,137 159,871 945,515 (647,370) 1,876,153
------------ -------------- ------------- -------------- ----------------
Mandatorily redeemable
convertible trust preferred
securities 55,250 -- -- -- 55,250
Stockholders' investment: 484,669 238,572 329,135 (567,707) 484,669
Accumulated other compre-
hensive loss - cumulative
translation adjustment -- -- (50,987) -- (50,987)
------------ -------------- ------------- -------------- ----------------
$ 1,958,056 $ 398,443 $ 1,223,663 $ (1,215,077) $ 2,365,085
============ ============== ============= ============== ================
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11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- -------------- --------------
Revenues $ 270,735 $ 87,332 $ 241,769 $ (12,755) $ 587,081
Cost of sales 228,729 73,821 203,655 (12,755) 493,450
----------- ----------- ----------- -------------- --------------
Gross profit 42,006 13,511 38,114 -- 93,631
Selling, general and
administrative expenses 18,401 3,930 19,075 -- 41,406
Amortization expense 3,292 566 2,956 -- 6,814
----------- ----------- ----------- -------------- --------------
Operating income 20,313 9,015 16,083 -- 45,411
Interest expense, net 16,630 669 9,985 -- 27,284
----------- ----------- ----------- -------------- --------------
Income (loss) before provision
for income taxes, equity in
earnings of affiliates
and minority interest 3,683 8,346 6,098 -- 18,127
Provision for income taxes 1,955 2,595 2,710 -- 7,260
Minority interests and equity in
earnings of affiliates, net (9,139) -- (1,383) 10,522 --
Minority interest-dividends on
trust preferred securities, net 612 -- -- -- 612
----------- ----------- ----------- ------------- --------------
Net income $ 10,255 $ 5,751 $ 4,771 $ (10,522) $ 10,255
=========== =========== =========== ============= ==============
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11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ -------------- --------------
Revenues $ 926,918 $ 308,824 $ 780,604 $ (38,806) $ 1,977,540
Cost of sales 783,260 254,988 660,925 (38,806) 1,660,367
----------- ----------- ------------ -------------- --------------
Gross profit 143,658 53,836 119,679 -- 317,173
Selling, general and
administrative expenses 59,957 12,869 56,145 -- 128,971
Product recall charge 16,000 -- -- -- 16,000
Amortization expense 9,886 1,699 9,300 -- 20,885
----------- ----------- ------------ -------------- --------------
Operating income 57,815 39,268 54,234 -- 151,317
Interest expense, net 47,128 2,009 33,416 -- 82,553
----------- ----------- ------------ -------------- --------------
Income before provision for
income taxes, equity in
earnings of affiliates
and minority interest 10,687 37,259 20,818 -- 68,764
Provision for income taxes 6,088 12,154 9,539 -- 27,781
Minority interests and equity in
earnings (loses) of affiliates, net (35,470) -- (5,882) 42,266 914
Minority interest-dividends on
trust preferred securities, net 1,834 -- -- -- 1,834
----------- ----------- ------------ -------------- --------------
Net income $ 38,235 $ 25,105 $ 17,161 $ (42,266) $ 38,235
=========== =========== ============ ============== ==============
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11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- ----------- ----------- -------------- --------------
OPERATING ACTIVITIES:
Net income (loss) $ 38,235 $ 25,105 $ 17,161 $ (42,266) $ 38,235
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 29,284 6,789 29,994 -- 66,067
Deferred income taxes -- -- (1,868) -- (1,868)
Equity in losses of affiliates
and minority interest (35,470) -- (5,882) 42,266 914
Changes in other operating
items 747 (3,009) (19,544) -- (21,806)
--------- ----------- ----------- -------------- --------------
Net cash provided by operating
activities 32,796 28,885 19,861 -- 81,542
--------- ----------- ----------- -------------- --------------
INVESTING ACTIVITIES:
Acquisitions, net of cash -- (9,190) (10,646) -- (19,836)
Acquired
Capital expenditures, net (27,936) (7,401) (41,176) -- (76,513)
--------- ----------- ----------- -------------- --------------
Net cash used in investing
activities (27,936) (16,591) (51,822) -- (96,349)
--------- ----------- ----------- -------------- --------------
FINANCING ACTIVITIES:
Short-term borrowings
(repayments), net 14,721 (318) (12,280) -- 2,123
Long-term borrowings
(repayments), net 16,086 (79) (19,993) -- (3,986)
Debt financing (to)/from
affiliates (19,587) (10,468) 30,055 -- --
Common stock repurchases (1,604) -- -- -- (1,604)
Proceeds from issuance of
common stock and exercise
of stock options 551 -- -- -- 551
--------- ----------- ----------- -------------- --------------
Net cash provided by (used in)
financing activities 10,167 (10,865) (2,218) -- (2,916)
--------- ----------- ----------- -------------- --------------
EFFECT OF EXCHANGE
RATE ON CASH (13,720) -- 19,371 -- 5,651
--------- ----------- ----------- -------------- --------------
NET CHANGE IN CASH
AND CASH EQUIVALENTS 1,307 1,429 (14,808) -- (12,072)
CASH AND CASH
EQUIVALENTS:
Beginning of period 1,267 (286) 22,716 -- 23,697
--------- ----------- ----------- -------------- --------------
End of period $ 2,574 $ 1,143 $ 7,908 $ -- $ 11,625
========= =========== =========== ============== ==============
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11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ------------- ------------- --------------- ----------------
Assets
Current assets:
Cash and cash equivalents $ 277 $ 704 $ 22,716 $ -- $ 23,697
Accounts receivable, net 161,403 94,542 222,597 -- 478,542
Inventories 36,062 32,513 67,987 -- 136,562
Other current assets 66,920 23,171 64,613 -- 154,704
Due from affiliates 167,536 136,813 10,666 (315,015) --
------------- ------------- ------------- --------------- ----------------
Total current assets 432,198 287,743 388,579 (315,015) 793,505
------------- ------------- ------------- --------------- ----------------
Property, plant and equipment,
net 125,328 117,960 257,606 -- 500,894
Investment in subsidiaries 558,950 29,042 43,459 (631,451) --
Notes receivable from
affiliates 450,669 3,466 36,557 (490,692) --
Goodwill, net 355,605 186,117 526,215 -- 1,067,937
Deferred income taxes and other
assets, net 38,651 13,756 30,124 -- 82,531
------------- ------------- ------------- --------------- ----------------
$ 1,961,401 $ 638,084 $ 1,282,540 $ (1,437,158) $ 2,444,867
============= ============= ============= =============== ================
Liabilities and Stockholders'
Investment
Current liabilities:
Accounts payable $ 102,983 $ 37,324 $ 141,106 $ -- $ 281,413
Accrued liabilities 93,727 51,379 151,325 -- 296,431
Current maturities of long-
term debt 16,247 2,159 34,306 -- 52,712
Due to affiliates 155,773 111,204 48,038 (315,015) --
------------- ------------- ------------- --------------- ----------------
Total current liabilities 368,730 202,066 374,775 (315,015) 630,556
------------- ------------- ------------- --------------- ----------------
Long-term debt, net of
current maturities 661,737 79 114,934 -- 776,750
Subordinated notes 401,560 -- -- -- 401,560
Other noncurrent liabilities 26,637 55,467 67,651 -- 149,755
Notes payable to affiliates -- 36,565 454,127 (490,692) --
------------- ------------- ------------- --------------- ----------------
Total liabilities 1,458,664 294,177 1,011,487 (805,707) 1,958,621
------------- ------------- ------------- --------------- ----------------
Mandatorily redeemable
convertible trust preferred
securities 55,250 -- -- -- 55,250
Stockholders' investment: 447,487 343,907 287,544 (631,451) 447,487
Accumulated other compre-
hensive loss - cumulative
translation adjustment -- -- (16,491) -- (16,491)
------------- ------------- ------------- --------------- ----------------
$ 1,961,401 $ 638,084 $ 1,282,540 $ (1,437,158) $ 2,444,867
============= ============= ============= =============== ================
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17
11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ------------- ------------- --------------- ----------------
Revenues $ 197,921 $ 168,478 $ 219,506 $ (5,019) $ 580,886
Cost of sales 165,192 144,029 187,277 (5,019) 491,479
------------- ------------- ------------- --------------- ----------------
Gross profit 32,729 24,449 32,229 -- 89,407
Selling, general and
administrative expenses 19,597 3,820 13,927 -- 37,344
Amortization expense 2,448 1,399 2,785 -- 6,632
------------- ------------- ------------- --------------- ----------------
Operating income 10,684 19,230 15,517 -- 45,431
Interest expense, net 14,970 770 8,709 -- 24,449
------------- ------------- ------------- --------------- ----------------
Income before provision for
income taxes, equity in
earnings (losses) of affiliates
and minority interest (4,286) 18,460 6,808 -- 20,982
Provision (benefit) for income
taxes (1,520) 7,257 2,927 -- 8,664
Minority interest and equity in
earnings (losses) of affiliates,
net (14,669) -- 12 15,072 415
Minority interest-dividends on
trust preferred securities, net 612 -- -- -- 612
------------- ------------- ------------- --------------- ----------------
Net income (loss) $ 11,291 $ 11,203 $ 3,869 $ (15,072) $ 11,291
============= ============= ============= =============== ================
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18
11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ------------- ------------- --------------- ----------------
Revenues $ 555,031 $ 433,914 $ 556,855 $ (15,046) $ 1,530,754
Cost of sales 468,985 367,969 470,458 (15,046) 1,292,366
------------- ------------- ------------- --------------- ----------------
Gross profit 86,046 65,945 86,397 -- 238,388
Selling, general and
administrative expenses 44,313 10,701 37,306 -- 92,320
Amortization expense 5,441 3,950 7,830 -- 17,221
------------- ------------- ------------- --------------- ----------------
Operating income 36,292 51,294 41,261 -- 128,847
Interest expense, net 33,447 2,353 19,709 -- 55,509
------------- ------------- ------------- --------------- ----------------
Income before provision for
income taxes, equity in
earnings (losses) of affiliates
and minority interest 2,845 48,941 21,552 -- 73,338
Provision for income taxes 1,020 18,108 10,467 -- 29,595
Minority interest and equity in
earnings (losses) of affiliates,
net (35,619) -- (2,445) 40,972 2,908
Minority interest-dividends on
trust preferred securities, net 1,834 -- -- -- 1,834
------------- ------------- ------------- --------------- ----------------
Income (loss) before
extraordinary item 35,610 30,833 13,530 (40,972) 39,001
Extraordinary item - loss on
early extinguishment of
debt, net (2,011) -- (3,391) -- (5,402)
Cumulative effect of change
in accounting, net (3,147) -- -- -- (3,147)
------------- ------------- ------------- --------------- ----------------
Net income (loss) $ 30,452 $ 30,833 $ 10,139 $ (40,972) $ 30,452
============= ============= ============= =============== ================
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19
11. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1999
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ------------- ------------- --------------- ----------------
OPERATING ACTIVITIES:
Net income (loss) $ 30,452 $ 30,833 $ 10,139 $ (40,972) $ 30,452
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization 18,747 13,235 23,933 -- 55,915
Deferred income taxes -- -- (1,974) -- (1,974)
Equity in losses of affiliates (39,138) -- 1,074 40,972 2,908
Extraordinary loss on
extinguishment of debt 2,011 -- 3,391 -- 5,402
Cumulative effect of change in
accounting, net 3,147 -- -- -- 3,147
Changes in other operating items 60,526 (38,008) (37,471) -- (14,953)
------------- ------------- ------------- --------------- ----------------
Net cash provided by (used in)
operating activities 75,745 6,060 (908) -- 80,897
------------- ------------- ------------- --------------- ----------------
INVESTING ACTIVITIES:
Acquisitions, net (225,265) -- (209,683) -- (434,948)
Capital expenditures, net (7,486) (15,942) (34,519) -- (57,947)
------------- ------------- ------------- --------------- ----------------
Net cash used for investing
activities (232,751) (15,942) (244,202) -- (492,895)
------------- ------------- ------------- --------------- ----------------
FINANCING ACTIVITIES:
Short-term borrowings
(repayments), net (6,921) 1,085 1,742 -- (4,094)
Long-term borrowings
(repayments), net 760,125 (9,760) (304,793) -- 445,572
Debt issuance costs (19,537) -- -- -- (19,537)
Debt financing (to)/from
affiliates (359,509) 19,569 339,940 -- --
Proceeds from issuance of common
stock and exercise of stock
options 3,745 -- -- -- 3,745
------------- ------------- ------------- --------------- ----------------
Net cash provided by
financing activities 377,903 10,894 36,889 -- 425,686
------------- ------------- ------------- --------------- ----------------
EFFECT OF EXCHANGE
RATE ON CASH -- (5) (16,498) -- (16,503)
------------- ------------- ------------- --------------- ----------------
NET CHANGE IN CASH
AND CASH EQUIVALENTS 220,897 1,007 (224,719) -- (2,815)
CASH AND CASH
EQUIVALENTS:
Beginning of period 1,247 (557) 19,854 -- 20,544
------------- ------------- ------------- --------------- ----------------
End of period $ 222,144 $ 450 $ (204,865) $ -- $ 17,729
============= ============= ============= =============== ================
-19-
20
12. SUBSEQUENT EVENT
As a result of the reduced demand in the recreational vehicle industry
and the utilization of available capacity within Dura's automotive operations
resulting from Dura's focus on lean manufacturing, Dura has begun to take the
following actions in the fourth quarter of 2000:
- Discontinue manufacturing operations at two of its North
American facilities and relocate production to other Dura
facilities. The closures include the automotive and
recreational vehicle component facility in Elkhart, Ind. and
the automotive parking brake manufacturing facility in East
Jordan, MI.
- Combine the Driver Controls and Engineered Products divisions
into a single division, Cockpit Systems. Additionally, Dura
will reduce and consolidate certain support activities to
achieve an appropriate level relative to remaining operations
and future business requirements.
- A previously planned European facility closure will no longer
occur due to customer and capacity issues; however, we
continue to study our European manufacturing capacity for
additional cost reduction opportunities.
These actions will result in a fourth quarter restructuring charge of
$5.7 million and the reversal of a restructuring charge previously booked in the
fourth quarter of 1999 of $7.6 million. The fourth quarter 2000 charge will
require cash payments of approximately $5.3 million over the next twelve months
combined with asset impairments of approximately $0.4 million.
The decision to exit the two facilities will result in a reduction in
the work force of approximately 50 salaried and 426 hourly employees.
Additionally, in order to maintain the appropriate balance of support activities
relative to business operations conducted by Dura including the consolidation of
the two divisions into one, it will be necessary to rationalize these activities
throughout the company. This action will result in an additional reduction of
approximately 55 salaried employees. The restructuring actions are expected to
be complete by the end of 2001.
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21
ITEM 2: 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 (MD&A) should be read in conjunction with the MD&A
included in Dura's Annual Report on Form 10-K for the period ended December 31,
1999.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1999
Revenues -- Revenues were $587.1 million for the three months ended September
30, 2000 compared to $580.9 million for the comparable period of 1999. The
increase in revenues is primarily the result of the full quarter impact of the
operations of the Meritor seat track business acquired during the fourth quarter
of 1999. Partially offsetting the Meritor seat track revenue was unfavorable
exchange rate fluctuations primarily related to the devaluation of the Euro and
U.K. pound, continued weakness in the recreational vehicle market and production
cuts related to the Firestone tire recall.
Cost of Sales -- Cost of sales were $493.5 million for the three months ended
September 30, 2000 compared to $491.5 million for the comparable period of 1999.
Cost of sales as a percentage of revenues for the three months ended September
30, 2000 was 84.1% compared to 84.6% for the comparable period of 1999. The
corresponding increase in gross margin is due primarily to the implementation of
Dura's restructuring plan and continued focus on cost reduction.
S, G & A Expenses -- Selling, general and administrative expenses were $41.4
million for the three months ended September 30, 2000 compared to $37.3 million
for the comparable period of 1999. As a percentage of revenues, selling, general
and administrative expenses were 7.1% for the three months ended September 30,
2000 compared to 6.4% for the comparable period of 1999. These increases are due
primarily to incremental costs from the Meritor seat track acquisition discussed
above, ongoing consulting expenses for developing a web based sourcing program,
the Six-Sigma Black Belt cost reduction program and a continued focus on
research and development of new products.
Amortization Expense -- Amortization expense for the three months ended
September 30, 2000 was $6.8 million compared to $6.6 million for the comparable
period of 1999. The increase is primarily due to the Meritor seat track
acquisition.
Interest Expense -- Interest expense for the three months ended September 30,
2000 was $27.3 million compared to $24.4 million for the comparable period of
1999. The increase was due principally to borrowings incurred related to the
Meritor seat track acquisition.
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22
Income Taxes -- The effective income tax rate was 40.1% for the three months
ended September 30, 2000 and 41.3% for the comparable period of 1999. The
effective rates differed from the statutory rates as a result of higher foreign
tax rates, the effects of state taxes and non-deductible goodwill amortization.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
Revenues -- Revenues were $1,977.5 million for the nine months ended September
30, 2000 compared to $1,530.8 million for the comparable period of 1999. The
increase in revenues is primarily the result of the impact of the operations of
Excel, Adwest and the Meritor seat track business acquired during the first and
fourth quarter of 1999. Partially offsetting the Excel, Adwest and Meritor seat
track revenue was unfavorable exchange rate fluctuations primarily related to
the devaluation of the Euro and U.K. pound, continued weakness in the
recreational vehicle market and production cuts related to the Firestone tire
recall.
Cost of Sales -- Cost of sales were $1,660.4 million for the nine months ended
September 30, 2000 compared to $1,292.4 million for the comparable period of
1999. Cost of sales as a percentage of revenues for the nine months ended
September 30, 2000 was 84.0% compared to 84.4% for the comparable period of
1999. The corresponding increase in gross margin is due primarily to the
implementation of Dura's restructuring plan and continued focus on cost
reduction.
S, G & A Expenses -- Selling, general and administrative expenses were $129.0
million for the nine months ended September 30, 2000 compared to $92.3 million
for the comparable period of 1999. As a percentage of revenues, selling, general
and administrative expenses were 6.5% for the nine months ended September 30,
2000 compared to 6.0% for the comparable period of 1999. These increases are due
primarily to incremental costs from the acquisitions discussed above, ongoing
consulting expenses for developing a web based sourcing program, the Six-Sigma
Black Belt cost reduction program and a continued focus on research and
development of new products.
Product Recall Charge -- In the second quarter of 2000, Dura settled two product
recall issues through a cost sharing agreement with a significant customer. As a
result of this agreement, Dura recorded a one-time pretax charge to operations
of $16.0 million to cover amounts not previously reserved. The payments related
to this charge will be made over a three-year period and have begun in July of
2000. These recalls were announced in the first half of 1999 and involved
concerns associated with Trident speed control cables and a secondary hood
latch. Dura acquired Trident in April of 1998.
Amortization Expense -- Amortization expense for the nine months ended September
30, 2000 was $20.9 million compared to $17.2 million for the comparable period
of 1999. The increase is due to additional goodwill amortization as a result of
the acquisitions discussed above.
Interest Expense -- Interest expense for the nine months ended September 30,
2000 was $82.6 million compared to $55.5 million for the comparable period of
1999. The increase is due principally to borrowings incurred related to the
acquisitions of Excel, Adwest and Meritor during 1999.
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23
Income Taxes -- The effective income tax rate was 40.4% for the nine months
ended September 30, 2000 and 40.4% for the comparable period of 1999. The
effective rates differed from the statutory rates as a result of higher foreign
tax rates, the effects of state taxes and non-deductible goodwill amortization.
SUBSEQUENT EVENT
As a result of the reduced demand in the recreational vehicle industry and the
utilization of available capacity within Dura's automotive operations resulting
from Dura's focus on lean manufacturing, Dura has begun to take the following
actions in the fourth quarter of 2000:
- Discontinue manufacturing operations at two of its North
American facilities and relocate production to other Dura
facilities. The closures include the automotive and
recreational vehicle component facility in Elkhart, Ind. and
the automotive parking brake manufacturing facility in East
Jordan, MI.
- Combine the Driver Controls and Engineered Products divisions
into a single division, Cockpit Systems. Additionally, Dura
will reduce and consolidate certain support activities to
achieve an appropriate level relative to remaining operations
and future business requirements.
- A previously planned European facility closure will no longer
occur due to customer and capacity issues; however, we
continue to study our European manufacturing capacity for
additional cost reduction opportunities.
These actions will result in a fourth quarter restructuring charge of $5.7
million and the reversal of a restructuring charge previously booked in the
fourth quarter of 1999 of $7.6 million. The fourth quarter 2000 charge will
require cash payments of approximately $5.3 million over the next twelve months
combined with asset impairments of approximately $0.4 million. We expect that
the cash costs of these actions will be recovered within approximately one year.
The decision to exit the two facilities will result in a reduction in the work
force of approximately 50 salaried and 426 hourly employees. Additionally, in
order to maintain the appropriate balance of support activities relative to
business operations conducted by Dura including the consolidation of the two
divisions into one, it will be necessary to rationalize these activities
throughout the company. This action will result in an additional reduction of
approximately 55 salaried employees. The restructuring actions are expected to
be complete by the end of 2001.
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24
LIQUIDITY AND CAPITAL RESOURCES
In connection with the acquisitions of Excel and Adwest in March 1999, Dura
entered into an amended and restated $1.15 billion credit agreement ("Credit
Agreement"). The Credit Agreement provides for revolving credit facilities of
$400.0 million, a $275.0 million tranche A term loan, a $275.0 million tranche B
term loan and a $200.0 million interim term loan facility. As of September 30,
2000, rates on borrowings under the Credit Agreement ranged from 6.3% to 9.0%.
Borrowings under the tranche A term loan are due and payable in March 2005 and
borrowings under the tranche B term loan are due and payable in March 2006. The
revolving credit facility is available until March 2005. The Credit Agreement
contains various restrictive covenants that limit indebtedness, investments,
rental obligations and cash dividends. The Credit Agreement also requires Dura
to maintain certain financial ratios including minimum liquidity and interest
coverage. Dura was in compliance with the covenants as of September 30, 2000.
Borrowings under the Credit Agreement are collateralized by substantially all
assets of Dura.
The Credit Agreement provides Dura with the ability to denominate a portion of
its revolving credit borrowings in foreign currencies up to an amount equal to
$100.0 million. As of September 30, 2000, $222.0 million of borrowings were
denominated in US dollars, $6.0 million of borrowings were denominated in
Canadian dollars, $3.3 million of borrowings were denominated in Australian
dollars and $31.7 million of borrowings were denominated in British pound
sterling.
In April 1999, the Company completed the offering of $300.0 million and Euro
100.0 million of senior subordinated notes ("Subordinated Notes"). The
Subordinated Notes mature in May 2009 and bear interest at 9% per year, which is
payable semi-annually. Net proceeds from this offering of approximately $394.7
million were used to repay the $200.0 million interim term loan, approximately
$78.1 million to retire the indebtedness and approximately $118.9 million was
used for general corporate purposes. These notes are collateralized by
guarantees of certain of Dura's subsidiaries.
During the first nine months of 2000, Dura provided cash from operations of
$81.5 million, compared to a $80.9 million in 1999. Cash generated from
operations before changes in working capital items was $59.7 million for 2000
compared to $65.9 million for 1999. Working capital resulted in a use of cash of
$21.8 million in 2000 compared to a use of cash of $15.0 million in 1999. The
increase in cash used by working capital is primarily the result of the timing
of cash receipts and cash payments.
Net cash used in investing activities was $96.3 million for the first nine
months of 2000 as compared to $492.9 million in 1999. Net capital expenditures
totaled $76.5 million for the first nine months of 2000 primarily for equipment
and dedicated tooling purchases related to new and replacement programs with an
additional $19.8 million used for acquisitions. This compares with net capital
expenditures of $57.9 million in 1999 and $434.9 million spent primarily on the
acquisitions of Excel and Adwest. The acquisitions made during the first nine
months of 2000 included the purchase of the Jack Division of Ausco Products,
Inc. a supplier of mechanical jacks for the automotive industry and the purchase
of additional ownership in Pollone S.A. Industria E Comercio (Brazil) and Bowden
TSK (U.K.).
-24-
25
Net cash used for financing activities totaled $2.9 million for the first nine
months of 2000 compared with cash provided of $425.7 million in 1999.
Approximately $1.9 million of cash was repaid through net borrowings.
At September 30, 2000, Dura had unused borrowing capacity of approximately
$124.8 million under its most restrictive debt covenant. Dura believes the
borrowing availability under its credit agreement, together with funds generated
by operations, should provide liquidity and capital resources to pursue its
business strategy for the foreseeable future, with respect to working capital,
capital expenditures, and other operating needs. Dura estimates its 2000 capital
expenditures will approximate $100 million.
During 1999, Dura established the Deferred Income Leadership Stock Purchase Plan
(the "Deferred Income Stock Plan"), which allows certain employees to defer
receipt of all or a portion of their annual cash bonus. Dura makes a matching
contribution of one-third of the employee's deferral. In accordance with the
terms of the plan, the employee's deferral and Dura's matching contribution have
been placed in a "Rabbi" trust, which invests solely in Dura's Class A common
stock. This trust arrangement offers the employee a degree of assurance for
ultimate payment of benefits without causing constructive receipt for income tax
purposes. The assets of the trust remain subject to the creditors of Dura and
are not the property of the employees; therefore, they are included as a
separate component of stockholders' investment under the caption Treasury Stock.
During the first nine months of 2000, Dura made net Class A common stock
repurchases of $1.6 million related to the Deferred Income Stock Plan.
QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY
Dura typically experiences decreased revenues and operating income during the
third calendar quarter of each year due to production shutdowns at OEMs for
model changeovers and vacations. Certain mobile products are seasonal in that
sales in the fourth quarter are normally at reduced levels.
EFFECTS OF INFLATION
Inflation potentially affects Dura in two principal ways. First, a significant
portion of Dura's debt is tied to prevailing short-term interest rates which may
change as a result of inflation rates, translating into changes in interest
expense. Second, general inflation can impact material purchases, labor and
other costs. In many cases, Dura has limited ability to pass through
inflation-related cost increases due to the competitive nature of the markets
that Dura serves. In the past few years, however, inflation has not been a
significant factor for Dura.
MARKET RISK
Dura is exposed to various market risks, including changes in foreign currency
exchange rates and interest rates. Market risk is the potential loss arising
from adverse changes in market rates and prices, such as foreign currency
exchange and interest rates. Dura does not enter into derivatives or other
financial instruments for trading or speculative purposes. Dura enters into
financial instruments to manage and reduce the impact of changes in foreign
currency exchange rates and interest rates. The counterparties are major
financial institutions.
-25-
26
Dura manages its interest rate risk by balancing the amount of fixed and
variable debt. For fixed rate debt, interest rate changes affect the fair market
value but do not impact earnings or cash flows. Conversely for variable rate
debt, interest rate changes generally do not affect the fair market value but do
impact future earnings and cash flows, assuming other factors are held constant.
ACCOUNTING POLICIES
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement requires the
recognition of derivative instruments as assets and liabilities, based on their
fair value, and specifies certain methods for the recognition of related gains
and losses. In June 2000, the FASB issued SFAS No. 138, which amends and
clarifies certain guidance in SFAS No. 133.
Dura is in the process of implementing processes and procedures to
quantify the impact of adopting these statements effective January 1, 2001. The
effect of adopting these statements on Dura's financial position and results of
operations during 2001 will depend in part on the fair value of derivatives held
as of January 1, 2001 and future derivative transactions entered into.
Currently, Dura does not anticipate the adoption to materially impact its
results of operations.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of Dura's revenues were derived from manufacturing
operations in Europe, Canada and Latin America. The results of operations and
financial position of Dura's operations in these countries are principally
measured in their respective currency and translated into U.S. dollars. The
effects of foreign currency fluctuations in such countries are somewhat
mitigated by the fact that expenses are generally incurred in the same
currencies in which revenues are generated. The reported income of these
subsidiaries will be higher or lower depending on a weakening or strengthening
of the U.S. dollar against the respective foreign currency.
A significant portion of Dura's assets are based in its foreign operations and
are translated into U.S. dollars at foreign currency exchange rates in effect as
of the end of each period, with the effect of such translation reflected as a
separate component of stockholders' investment. Accordingly, Dura's consolidated
stockholders' investment will fluctuate depending upon the weakening or
strengthening of the U.S. dollar against the respective foreign currency.
Dura's strategy for management of currency risk relies primarily upon conducting
its operations in such countries' respective currency and may, from time to
time, engage in hedging programs intended to reduce Dura exposure to currency
fluctuations.
-26-
27
FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this Form
10-Q, including without limitation the statements under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" are, or may be
deemed to be, forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. When used in this Form 10-Q, the words "anticipate," "believe,"
"estimate," "expect," "intends," and similar expressions, as they relate to
Dura, are intended to identify forward-looking statements. Such forward-looking
statements are based on the beliefs of Dura's management as well as on
assumptions made by and information currently available to Dura at the time such
statements were made. Various economic and competitive factors could cause
actual results to differ materially from those discussed in such forward-looking
statements, including factors which are outside the control of Dura, such as
risks relating to: (i) the degree to which Dura is leveraged; (ii) Dura's
reliance on major customers and selected models; (iii) the cyclicality and
seasonality of the automotive market; (iv) the failure to realize the benefits
of recent acquisitions and joint ventures; (v) obtaining new business on new and
redesigned models; (vi) Dura's ability to continue to implement its acquisition
strategy; and (vii) the highly competitive nature of the automotive supply
industry. All subsequent written and oral forward-looking statements
attributable to Dura or persons acting on behalf of Dura are expressly qualified
in their entirety by such cautionary statements.
-27-
28
PART II. OTHER INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
Other than as reported in Dura's 1999 Annual Report on Form 10-K under
the caption "Legal Proceedings," Dura is not currently a party to any
material pending legal proceedings, other than routine matters
incidental to the business.
In the second quarter of 2000, Dura settled two product recall issues
through a cost sharing agreement with a significant customer. As a
result of this agreement, Dura recorded a one-time pretax charge to
operations of $16.0 million to cover amounts not previously reserved.
These recalls were announced in the first half of 1999 and involved
concerns associated with Trident Automotive plc (Trident) speed control
cables and a secondary hood latch. Dura acquired Trident in April of
1998.
Item 2. Change in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
None
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29
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: November 14, 2000 By /s/ William Ohrt
----------------
William Ohrt
Vice President, Chief Financial Officer
(principal accounting and financial
officer)
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30
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule