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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2001
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
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
303,288 shares of the registrant's Common Stock
were outstanding as of July 31, 2001
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PART I. FINANCIAL INFORMATION
OXFORD AUTOMOTIVE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Three Months
Ended Ended
June 30, June 30,
2001 2000
Net sales $225,984 $206,158
Cost of sales 196,908 182,070
-------------------- --------------------
Gross profit 29,076 24,088
Selling, general and
administrative expenses 17,307 12,440
Restructuring charge 702
Gain on sale of equipment (12) (7)
-------------------- --------------------
Operating income 11,079 11,655
Other income (expense):
Interest expense, net (10,141) (8,230)
Other income 1,005 112
-------------------- --------------------
Income before income taxes 1,943 3,537
Income tax provision (841) (1,482)
-------------------- --------------------
Net income 1,102 2,055
Accrued dividends and accretion on
redeemable preferred stock 330 330
-------------------- --------------------
Net income applicable to
common stock $772 $1,725
==================== ====================
Net income per share
(basic and diluted) $2.50 $5.57
==================== ====================
Weighted average shares outstanding 308,969 309,750
==================== ====================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, March 31,
2001 2001
(unaudited)
Assets
Current assets
Cash and cash equivalents $39,591 $63,600
Trade receivables, net 110,718 115,764
Inventories, net 63,001 61,652
Refundable income taxes 11,953 12,100
Reimbursable tooling 46,558 58,307
Deferred income taxes 11,203 11,203
Prepaid expenses and other
current assets 40,342 41,021
--------------- --------------
Total current assets 323,366 363,647
Assets held for sale 32,557 32,428
Other noncurrent assets 61,940 60,038
Deferred income taxes 40,266 41,674
Property, plant and equipment, net 258,191 252,944
--------------- --------------
Total assets $716,320 $750,731
=============== ==============
Liabilities and shareholders' deficit
Current liabilities
Trade accounts payable $186,604 $207,522
Employee compensation 36,909 30,012
Restructuring reserve 26,261 29,165
Accrued expenses and other
current liabilities 37,345 53,776
Current portion of borrowings 15,729 15,052
--------------- --------------
Total current liabilities 302,848 335,527
Pension liability 11,409 11,958
Post retirement medical benefits liability 41,011 40,646
Deferred income taxes 11,327 9,645
Other noncurrent liabilities 6,443 6,763
Long-term borrowings
- less current portion 377,830 381,572
--------------- --------------
Total liabilities 750,868 786,111
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OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, March 31,
2001 2001
(unaudited)
Redeemable Series A $3.00
cumulative preferred stock,
$100 stated value - 457,541
shares authorized, 397,539 shares
issued and outstanding at
June 30, 2001 and
March 31, 2001 40,904 40,574
Shareholders' deficit
Common stock 1,042 1,050
Accumulated other
comprehensive loss (21,057) (20,795)
Retained deficit (55,437) (56,209)
-------------- --------------
(75,452) (75,954)
-------------- --------------
Total liabilities and
shareholders' deficit $716,320 $750,731
============== ==============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three For the Three
Months Ended Months Ended
June 30, June 30,
2001 2000
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net income $1,102 $2,055
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 8,509 9,104
Deferred income taxes 3,181 (782)
Gain on sale of equipment (46) (7)
Changes in operating assets and
liabilities affecting cash:
Trade receivables, net 4,458 22,055
Inventories (1,988) (2,659)
Reimbursable tooling 11,420 363
Prepaid expenses and other current assets 79 (1,039)
Other noncurrent assets (5,250) (2,088)
Accounts payable (18,228) (4,520)
Restructuring reserve (2,701) 209
Accrued expenses and other current liabilities (8,501) (11,429)
Accrued taxes payable (refundable) 394 (701)
Other noncurrent liabilities (117) 1,113
----------------- ------------------
Net cash provided by (used in) operating
activities (7,688) 11,674
----------------- ------------------
INVESTING ACTIVITIES
Purchase of business, net of cash acquired 1,992 (11,686)
Purchase of property, plant
and equipment (14,229) (12,299)
Proceeds from sale of equipment 662 12
----------------- ------------------
Net cash used in investing activities (11,575) (23,973)
----------------- ------------------
FINANCING ACTIVITIES
Principal advances (payments) on borrowings (3,041) 2,573
Debt financing costs (1,696) (378)
----------------- ------------------
Net cash provided by financing activities (4,737) 2,195
----------------- ------------------
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OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Three For the Three
Months Ended Months Ended
June 30, June 30,
2001 2000
(unaudited) (unaudited)
Effect of exchange rate
changes on cash (9) (123)
----------------- -----------------
Net decrease in cash
and cash equivalents (24,009) (10,227)
Cash and cash equivalents
at beginning of period 63,600 17,643
----------------- -----------------
Cash and cash equivalents
at end of period $39,591 $7,416
================= =================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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Oxford Automotive, Inc.
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Oxford
Automotive, Inc. (the "Company") have been prepared in accordance with Rule
10-01 of Regulation S-X and do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. All adjustments, which include only normal recurring adjustments
that are, in the opinion of management, necessary for a fair presentation of the
results of the interim periods have been made. The results of operations for
such interim periods are not necessarily indicative of results of operations for
a full year. The unaudited condensed financial statements should be read in
conjunction with the Company's consolidated audited financial statements and
notes thereto for the year ended March 31, 2001.
Recently Issued Accounting Pronouncements
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 deferred the effective
date of Statement No. 133 by one year to all fiscal quarters of all fiscal years
beginning after June 15, 2000. Accordingly, the Company has adopted Statement
No. 133 beginning with the Fiscal Year ended March 31, 2002. The adoption did
not have a material effect on the Company's financial statements.
In June 2001, the Financial Accounting Standards Board voted unanimously in
favor of Statement of Financial Accounting Standards No. 141, "Business
Combinations" and Statement No. 142, "Goodwill and Other Intangible Assets".
Statement No. 141 provides for the elimination of the pooling-of-interests
method of accounting for business combinations with an acquisition date of July
1, 2001, or later. Statement No. 142 prohibits the amortization of goodwill and
other intangible assets and requires reassessment of the underlying value of
such assets as a part of the audit process. Statement No. 142 is effective for
fiscal years beginning after December 15, 2001. An early adoption provision
exists for companies with fiscal years beginning after March 15, 2001. The
Company plans to adopt FASB 142 in its fiscal year beginning April 1, 2002.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
Inventories
Inventories are stated at the lower of cost or market. Cost is principally
determined by the first-in first-out (FIFO) method. During the prior fiscal
year, the Company elected to discontinue using the last-in first-out (LIFO)
method of costing for its United States operations.
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. For major tooling (in excess of
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
$5,000) projects, the Company recognizes profit at the point of completion and
testing at the vendor, less costs of installation in the stamping plant. The
Company has a legal claim for the full value of the tooling contract from its
customers at that point in time. For other tooling projects, the Company
recognizes profit at the time of final customer billing. Tooling activity is
included in cost of goods sold.
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
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.
Foreign currency translation
The foreign currency financial statements, 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.
3. INVENTORIES (Dollars in thousands)
June 30, March 31,
2001 2001
Raw materials $28,352 $27,492
Finished goods and work-in-process 41,612 41,307
-------------------- ------------------
69,964 68,799
Reserves (6,963) (7,147)
-------------------- ------------------
$63,001 $61,652
==================== ==================
The Company does not separately identify finished goods from work-in-process.
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4. SENIOR SUBORDINATED NOTES
On April 1, 1998, the Company issued $35.0 million of unsecured 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Series B Notes"). On December 8,
1998, the Company issued $40.0 million of unsecured 10 1/8% Senior Subordinated
Notes due 2007, Series C (the "Series C Notes"). The Series B Notes and Series C
Notes are substantially identical to and rank pari passu in right of payment
with the $125.0 million of unsecured 10 1/8% Senior Subordinated Notes due 2007
issued by the Company on June 24, 1997 (the "Series A Notes"). The Series A
Notes, the Series B Notes and the Series C Notes are collectively referred to as
the "Notes". The Notes pay interest semi-annually on June 15 and December 15.
The Notes provide for certain covenants, including limitations on: indebtedness,
restricted payments, distributions, sale of assets, affiliate transactions and
merger and acquisitions. The Company has optional redemption rights beginning
June 15, 2002. The Notes are limited to $250.0 million aggregate principal
amount.
On June 9, 1999, the Company 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.
5. ACQUISITIONS
On August 2, 2000 (the "AIMDF Closing Date"), pursuant to a share purchase and
sales agreement, dated August 2, 2000, among Oxford Automotive Mecanismes et
Decoupage Fin II SAS, a wholly-owned indirect subsidiary of the Company and
Aries Industries, S.A. (the "Seller"), the Company acquired all of the issued
and outstanding shares of Aries Industries Mecanismes et Decoupage Fin S.A.
("AIMDF") from the Seller. The purchase price was FF 430 million ($60.2 million
US), subject to possible downward adjustments for minimum net assets as of the
AIMDF Closing Date and minimum EBITDA for the twelve months after the AIMDF
Closing Date. On the AIMDF Closing Date, FF 350 million ($49.0 million US) less
approximately FF 60 million ($8.4 million US) in financial indebtedness assumed
or approximately FF 290 million ($40.6 million US), was paid to the Seller. The
remaining purchase price of FF 80 million ($11.2 million US), subject to any
applicable purchase price adjustment or indemnification claim, is payable in two
equal installments on the second and third anniversaries of the AIMDF Closing
Date, subject to the possible early payment of up to FF 10 million ($1.4 million
US) of the deferred payments if certain conditions relating to the minimum
EBITDA adjustment are met. Effective February 13, 2001, the final purchase price
negotiations resulted in the elimination of the deferred purchase price of FF 80
million ($11.2 million US). For the year ended December 31, 1999, AIMDF had net
sales of approximately $160.0 million US. AIMDF's integrated manufacturing
operations cover all functions of design, engineering, parts production and
assembly of door, hood and decklid hinges, latches, sliding door mechanisms,
parking brakes, jacks, fine blanking, hot rolled profiles and other metal formed
components.
6. SHAREHOLDERS' DEFICIT (In Thousands, Except Per Share Amounts)
Accumulated
Other
Common Comprehensive Retained
Stock Income Deficit Total
--------------------------------------- ----------
Balances at March 31, 2001 $1,050 ($20,795) ($56,209) ($75,954)
Net income 1,102 1,102
Foreign currency
translation adjustments (262) (262)
Accrued dividends and
accretion of redeemable
preferred stock (330) (330)
Retirement of common stock (8) (8)
--------------------------------------- ----------
Balances at June 30, 2001 $1,042 ($21,057) ($55,437) ($75,452)
======================================= ==========
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7. COMPREHENSIVE INCOME
The Company's total comprehensive income was as follows:
Three Months Three months
Ended Ended
June 30, June 30,
2001 2000
Net income $1,102 $2,055
---------------- ----------------
Other comprehensive
loss, net of tax:
Foreign currency translation adjustment (262) (1,305)
---------------- ----------------
Other comprehensive loss (262) (1,305)
---------------- ----------------
Total comprehensive income $840 $750
================ ================
8. CONDENSED CONSOLIDATING INFORMATION
The Notes were issued by Oxford Automotive, Inc. and as of June 30, 2001 were
guaranteed by certain of its 100% owned subsidiaries, including Lobdell Emery
Corporation, Howell Industries, Inc., RPI Holdings, Inc., Oxford Suspension,
Inc., CE Technologies, Inc., and Tool and Engineering Company (the "Guarantor
Subsidiaries"). As of June 30, 2001, the Notes were not guaranteed by other
consolidated subsidiaries, including Oxford Automotive Canada Ltd., Oxford
Automotriz de Mexico S.A. de C.V., Oxford Automotive Europe, Wackenhut GmbH,
Oxford Automotive France SAS, Oxford Automotive Italia and AIMDF (the
"Non-Guarantor Subsidiaries"). As of June 30, 2000, the Notes were guaranteed by
certain of our 100% owned subsidiaries, including Lobdell Emery Corporation,
Howell Industries, Inc., BMG Holdings Inc., RPI Holdings, Inc., Oxford
Suspension, Ltd., Oxford Suspension, Inc., CE Technologies, Inc., and Tool and
Engineering Company (the "Guarantor Subsidiaries"). As of June 30, 2000, the
Notes were not guaranteed by other consolidated subsidiaries, including Oxford
Automotriz de Mexico S.A. de C.V., Oxford Automotive Europe, Oxford Automotive
France, Wackenhut GmbH, and Oxford Automotive Italia. The guarantee of the Notes
by the Guarantor Subsidiaries is full and unconditional, joint and several. The
following unaudited 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.
Management does not believe that separate financial statements of the Guarantor
Subsidiaries are material to investors of the Notes.
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CONDENSED CONSOLIDATING BALANCE SHEETS
JUNE 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations/
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Assets
Current assets
Cash and cash equivalents $16,798 $22,748 $45 $ $39,591
Trade receivables, net 7,964 73,339 29,415 110,718
Inventories, net 47,080 15,921 63,001
Refundable income taxes 4,748 6,347 858 11,953
Reimbursable tooling 24,196 22,358 4 46,558
Deferred income taxes 970 10,233 11,203
Prepaid expenses and
other current assets 2,834 37,272 236 40,342
------------ ---------------- ------------ --------------- --------------
Total current assets 57,510 209,144 56,712 323,366
Assets held for sale 3,312 29,245 32,557
Other noncurrent assets 16,764 31,139 14,037 61,940
Deferred income taxes 2,195 34,283 3,788 40,266
Property, plant and
equipment, net 5,575 182,107 70,509 258,191
Investment in subsidiaries 80,000 75,759 55,182 (210,941)
------------ ---------------- ------------ --------------- --------------
Total assets $162,044 $535,744 $229,473 ($210,941) $716,320
============ ================ ============ =============== ==============
Liabilities and
shareholders' equity (deficit)
Current liabilities
Trade accounts payable $31,243 $117,444 $37,917 $186,604
Intercompany accounts (128,099) 77,153 50,946
Employee compensation 500 34,301 2,108 36,909
Restructuring reserve 981 10,398 14,882 26,261
Accrued expenses and
other current liabilities 9,122 30,320 (2,097) 37,345
Current portion
of borrowings 7,000 8,729 15,729
------------ ---------------- ------------ --------------- --------------
Total current liabilities (79,253) 278,345 103,756 302,848
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CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED)
JUNE 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations/
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Pension liability 3,708 7,701 11,409
Post retirement
medical benefits liability 5,844 35,167 41,011
Deferred income taxes 11,327 11,327
Other noncurrent liabilities 5,362 1,081 6,443
Long-term borrowings
less current portion 316,753 61,077 377,830
--------- ---------------- ------------- -------------- --------------
Total liabilities 237,500 365,663 147,705 750,868
Redeemable preferred stock 40,904 40,904
Shareholder's equity (deficit)
Common stock 1,042 195,072 88,582 (283,654) 1,042
Accumulated other
comprehensive loss (19,387) (1,670) (21,057)
Retained deficit (76,494) (5,604) (46,052) 72,713 (55,437)
--------- ---------------- ------------- -------------- --------------
Total shareholders' equity (deficit) (75,452) 170,081 40,860 (210,941) (75,452)
--------- ---------------- ------------- -------------- --------------
Total liabilities and
shareholder's equity (deficit) $162,048 $535,744 $229,469 ($210,941) $716,320
========= ================ ============= ============== ==============
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CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations/
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Assets
Current assets
Cash and cash
equivalents $19,270 $44,285 $45 $ $63,600
Trade receivables, net 959 78,040 36,765 115,764
Inventories, net 46,167 15,485 61,652
Refundable income taxes 5,300 6,100 700 12,100
Reimbursable tooling 42,678 15,629 58,307
Deferred income taxes 970 10,233 11,203
Prepaid expenses and
other current assets 2,972 27,135 10,914 41,021
--------------- ----------------- --------------- ---------------- --------------
Total current assets 72,149 217,356 74,142 363,647
Assets held for sale 3,183 29,245 32,428
Other noncurrent assets 15,381 30,729 13,928 60,038
Deferred income taxes 2,195 35,691 3,788 41,674
Property, plant and
equipment, net 5,856 175,080 72,008 252,944
Investment in subsidiaries 78,692 75,761 55,182 (209,635)
--------------- ----------------- --------------- ---------------- --------------
Total assets $174,273 $537,800 $248,293 ($209,635) $750,731
=============== ================= =============== ================ ==============
Liabilities and
shareholders' equity (deficit)
Current liabilities
Trade accounts payable $48,799 $129,904 $28,819 $ $207,522
Intercompany accounts (143,706) 67,856 75,850
Employee compensation 487 26,889 2,636 $30,012
Restructuring reserve 1,000 11,592 16,573 29,165
Accrued expenses and
other current liabilities 17,715 35,788 273 $53,776
Current portion of borrowings 6,000 9,052 $15,052
--------------- ----------------- --------------- ---------------- --------------
Total current liabilities (69,705) 281,081 124,151 335,527
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CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED)
MARCH 31, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations /
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Pension liability 3,570 8,388 11,958
Post retirement
medical benefits liability 5,395 35,251 40,646
Deferred income taxes 9,645 9,645
Other noncurrent liabilities 5,677 1,086 6,763
Long-term borrowings
less current portion 319,932 61,640 381,572
--------------- ------------- --------------- -------------- ---------------
Total liabilities 250,227 367,008 168,876 786,111
Redeemable preferred stock 40,574 40,574
Shareholder's equity
Common stock 1,050 197,064 88,582 (285,646) 1,050
Accumulated other
comprehensive loss (19,125) (1,670) (20,795)
Retained deficit (77,004) (7,147) (48,069) 76,011 (56,209)
--------------- ------------- --------------- -------------- ---------------
Total shareholders' equity (deficit) (75,954) 170,792 38,843 (209,635) (75,954)
--------------- ------------- --------------- -------------- ---------------
Total liabilities and
shareholder's equity (deficit) $174,273 $537,800 $248,293 ($209,635) $750,731
=============== ============= =============== ============== ===============
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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations /
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Net sales $ $155,071 $71,367 $(454) $225,984
Cost of sales 138,352 59,010 (454) 196,908
------------ ------------------ --------------- -------------- ----------------
Gross profit 16,719 12,357 29,076
Selling, general and
administrative expenses 399 10,426 6,482 17,307
Restructuring charge 69 633 702
Gain on sale of equipment (12) (12)
------------ ------------------ --------------- -------------- ----------------
Operating income (loss) (399) 6,224 5,254 11,079
Interest expense, net (4,310) (3,972) (1,859) (10,141)
Other income 206 406 393 1,005
------------ ------------------ --------------- -------------- ----------------
Income (loss) before
income taxes (4,503) 2,658 3,788 1,943
Income tax (provision) benefit 1,712 (1,116) (1,437) (841)
------------ ------------------ --------------- -------------- ----------------
Income (loss) before equity
in income of
consolidated subsidiaries (2,791) 1,542 2,351 1,102
Equity in income of
consolidated subsidiaries 3,893 (3,893)
------------ ------------------ --------------- -------------- ----------------
Net income $1,102 $1,542 $2,351 ($3,893) $1,102
============ ================== =============== ============== ================
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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations /
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Net sales $ $73,728 $132,430 $ $206,158
Cost of sales 62,603 119,467 182,070
--------- ----------------- ------------ ---------------- --------------
Gross profit 11,125 12,963 24,088
Selling, general and
administrative expenses (1,217) 3,735 9,922 12,440
Gain on sale of equipment (7) (7)
--------- ----------------- ------------ ---------------- --------------
Operating income 1,217 7,390 3,048 11,655
Interest expense, net (1,308) (1,432) (5,490) (8,230)
Other income 85 13 14 112
--------- ----------------- ------------ ---------------- --------------
Income (loss) before
income taxes (6) 5,971 (2,428) 3,537
Income tax (provision) benefit (152) (2,170) 840 (1,482)
--------- ----------------- ------------ ---------------- --------------
Income (loss) before equity
in income of
consolidated subsidiaries (158) 3,801 (1,588) 2,055
Equity in income of
consolidated subsidiaries 2,213 (2,213)
--------- ----------------- ------------ ---------------- --------------
Net income (loss) $2,055 $3,801 ($1,588) ($2,213) $2,055
========= ================= ============ ================ ==============
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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiaries Subsidiaries Consolidated
Net cash provided by
(used in)
operating activities $1,573 ($9,409) $148 ($7,688)
------------- ----------------- ----------------- -----------------
INVESTING ACTIVITIES
Purchase of businesses,
net of cash acquired 1,992 1,992
Purchase of property,
plant and equipment (170) (13,900) (159) (14,229)
Proceeds from sale
of equipment 651 11 662
------------- ----------------- ----------------- -----------------
Net cash used in
investing activities (170) (11,257) (148) (11,575)
------------- ----------------- ----------------- -----------------
FINANCING ACTIVITIES
Net payments
on borrowings (2,179) (862) (3,041)
Debt financing costs (1,696) (1,696)
------------- ----------------- ----------------- -----------------
Net cash used in
financing activities (3,875) (862) (4,737)
------------- ----------------- ----------------- -----------------
Effect of foreign
currency rate
fluctuation on cash (9) (9)
------------- ----------------- ----------------- -----------------
Net decrease in cash and cash equivalents (2,472) (21,537) (24,009)
Cash and cash equivalents at
beginning of period 19,270 44,285 45 63,600
------------- ----------------- ----------------- -----------------
Cash and cash equivalents at end of period $16,798 $22,748 $45 $39,591
============= ================= ================= =================
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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiaries Subsidiaries Consolidated
Net cash provided by
(used in)
operating activities $7,437 $4,724 ($487) $11,674
---------------- -------------------- -------------------- --------------------
INVESTING ACTIVITIES
Purchase of businesses,
net of cash acquired (6,111) (5,575) (11,686)
Purchase of property,
plant and equipment (379) (4,652) (7,268) (12,299)
Proceeds from sale of eqpment 12 12
---------------- -------------------- -------------------- --------------------
Net cash used in
investing activities (6,490) (10,227) (7,256) (23,973)
---------------- -------------------- -------------------- --------------------
FINANCING ACTIVITIES
Net proceeds (payments) on borrowings (8,469) 2,729 8,313 2,573
Debt financing costs (378) (378)
---------------- -------------------- -------------------- --------------------
Net cash provided by (used in)
financing activities (8,847) 2,729 8,313 2,195
---------------- -------------------- -------------------- --------------------
Effect of foreign
currency rate
fluctuation on cash (125) 2 (123)
---------------- -------------------- -------------------- --------------------
Net increase (decrease)
in cash and cash equivalents (7,900) (2,899) 572 (10,227)
Cash and cash equivalents at
beginning of period 8,565 8,837 241 17,643
---------------- -------------------- -------------------- --------------------
Cash and cash equivalents at end of period $665 $5,938 $813 $7,416
================ ==================== ==================== ====================
9. RECLASSIFICATIONS
Certain amounts in the prior periods' statements have been reclassified to
conform to the current periods' presentation.
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10. SEGMENT INFORMATION
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:
THREE MONTHS ENDED
JUNE 30
2001 2000
Net sales
United States $ 70,913 $ 81,337
Canada 32,910 51,093
Mexico 19,811 6,248
France 80,415 45,688
Germany 14,470 13,169
Other Europe 7,465 8,623
------------ -----------
$ 225,984 $ 206,158
============ ===========
June 30, March 31,
2001 2001
------------ -----------
Identifiable assets
United States $ 248,510 $ 285,106
Canada 104,339 104,353
Mexico 79,315 61,101
France 203,938 214,391
Germany 58,185 62,208
Other Europe 22,033 23,572
------------ -----------
$ 716,320 $ 750,731
============ ===========
11. RECENT EVENTS
As of April 5, 2001, the Company completed a corporate reorganization of its
operating Canadian subsidiaries (BMG Holdings, Inc., BMG North America Limited,
and Oxford Suspension Ltd.). Under the reorganization, these subsidiaries
combined to form "Oxford Automotive Canada Ltd.".
As of June 8, 2001, the Company amended and restated its Credit Agreement to
revise certain financial covenants and other conditions. These amendments revise
the existing financial covenants, which the Company expects will be through June
30, 2002, add a minimum EBITDA covenant, and institute restrictions on
investments, acquisitions, capital expenditures, asset dispositions and other
spending, generally until the attainment of certain financial performance
benchmarks which the Company expects to achieve no later than fiscal quarter
ending December 31, 2002. In addition, the amendments require the pledge of
certain Mexican assets in support of the Company's Canadian borrowings.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended June 30, 2001
as compared to the three months ended June 30, 2000
Results of Operations
The three months ended June 30, 2001, statement of operations for Oxford
Automotive, Inc. (the "Company") include the results of operations for
substantially all subsidiaries. The three month statement of operations for the
period ended June 30, 2000 does not include the operating results of Aries
Industries Mecanismes et Decoupage Fin S.A., which was acquired August 2, 2000
and was accounted for using the purchase method of accounting.
The following table sets forth, for the periods indicated, certain accounts from
the Company's statements of operations and should be read in conjunction with
the unaudited condensed consolidated financial statements and related notes
included elsewhere herein.
(Dollars in millions)
Three Months Three Months
Ended Ended
June 30, 2001 June 30, 2000
Net sales $226.0 100.0% $206.2 100.0%
Gross profit 29.1 12.9% 24.1 11.7%
Selling, general & administrative 17.3 7.7% 12.4 6.0%
Net interest expense 10.1 4.5% 8.2 4.0%
Net income 1.1 0.5% 2.1 1.0%
Memo: EBITDA 20.6 9.1% 20.8 10.1%
NET SALES -- Net sales for the three months ended June 30, 2001 were $226.0
million. This represents a increase of $19.8 million as compared to net sales
for the three months ended June 30, 2000 of $206.2 million. Excluding the impact
of acquisitions made since the prior year, the resulting decrease was due to
lower current year North American production volumes, the balance out of certain
General Motors' light truck and SUV platforms and the year over year impact of
foreign exchange. The decrease was partially offset by the launch of components
for the Pontiac Aztek/ Buick Rendezvous, GMT360 (Envoy/Trailblazer/Bravada) and
the Chrysler minivan. Exclusive of foreign exchange, European sales increased
slightly due to higher production volumes at DaimlerChrylser and PSA.
GROSS PROFIT -- For the three months ended June 30, 2001, gross profit increased
to $29.1 million or 12.9% of net sales as compared to $24.1 million or 11.7% of
net sales for the same period in the prior year. Excluding the impact of
acquisitions made since the prior year, the remaining increase in gross profit
and gross margin, was related to the successful launches of the Buick Rendezvous
and GMT360, recovery of European raw material costs and the reduction of fixed
costs under the North American rationalization plan. The overall increase was
offset by lost gross profit on the lower North American production volumes,
period expenses related to future program launches (GMT315, Saturn Vue and the
PSA T52) and the impact of foreign exchange.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") -- For the three months
ended June 30, 2001, SG&A expenses increased to $17.3 million or 7.7% of net
sales as compared to $12.4 million or 6.0% of net sales for the same period in
the prior year. The increase in spending can be directly associated with
acquisitions made since the prior year, continued development of our European
business and expanding opportunities in Mexico and support of new customer
program launches. In addition, the increase reflects our commitment to product
development and innovation.
INTEREST EXPENSE -- For the three months ended June 30, 2001, net interest
expense was $10.1 million, an increase of $1.9 million, as compared to $8.2
million for the same period last year. The increase can be attributed to
acquisitions made since the prior year and higher overall borrowings, partially
as a result of the interim financing of customer tooling. The increase was
mitigated by lower overall incremental borrowing rates on variable rate debt.
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NET INCOME - For the three months ended June 30, 2001, the Company reported net
income of $1.1 million, a decrease of $1.0 million as compared to net income of
$2.1 million for the same period in the prior year. The decrease is primarily a
result of incremental SG&A and interest expense as described above as well as
changes in the overall effective tax rate.
CAPACITY RATIONALIZATION PLAN
On March 27, 2001, the Company announced a capacity rationalization plan (the
"Rationalization"). The Rationalization includes the planned closure of several
plants, elimination of jobs and includes a one-time restructuring charge of
$71.3 million before taxes.
The charge was and is yet to be recorded in the following periods (dollars in
thousands):
Year ended March 31, 2001 $62,081
Year ended March 31, 2002 9,227
-------
Total Rationalization charge before taxes $71,308
=======
The Rationalization charge recorded at March 31, 2001 was reflected in the
balance sheet as follows:
<Table>
Property, plant and equipment - asset impairment $42,088
Restructuring accrual 20,835
Employee benefit liabilities (5,365)
Noncurrent assets 1,396
Accrued expenses and other current liabilities 2,527
Noncurrent liabilities - environmental reserve 600
-------
Total Rationalization charge $62,081
=======
</Table>
The expected charge to be recorded during fiscal year ended March 31, 2002 ($9.2
million) represents expenses such as production transfer, inventory movement and
other costs which must be recognized in the period incurred. For the period
ended June 30, 2001, the Company recorded $0.7 million of restructuring charges
related to these activities.
This Rationalization action anticipates the closure of four North American
plants over two years and will result in the elimination of up to 500 jobs of
the North American salaried and hourly workforce. As of June 30, 2001 the
Company had eliminated approximately 100 employees pursuant to the plan. These
actions will reduce excess capacity and result in the transfer of substantially
all of the products manufactured in the closed facilities to other of our
facilities. The Rationalization charge includes a $42.1 million write-down of
the net book value of excess, obsolete and non-core assets including costs
necessary to dispose of such assets. The carrying value of the long-lived assets
held for sale or disposal is approximately $32.6 million as of June 30, 2001.
Amounts related to activities that are part of the Rationalization are included
in restructuring reserves in the accompanying consolidated balance sheet as of
June 30, 2001. The balance sheet also includes reserves recorded as a part of
purchase accounting for acquisitions made in prior periods, which have been
excluded from the table below.
March 31, 2001 June 30, 2001 Impact of June 30, 2001
Restructuring Cash Exchange Restructuring
Reserve Payments Rates reserve
-----------------------------------------------------------------------
Loss Contracts $ 4,400 (599) 3,801
Employee Severance 5,913 (1,067) 91 4,937
Other exit costs 9,737 (657) 9,080
-----------------------------------------------------------------------
Total Capacity Rationalization Plan $20,050 $(2,323) $91 $17,818
=======================================================================
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Net income adjusted for non-cash charges (depreciation and amortization and
deferred taxes) generated approximately $12.8 million of cash for the three
months ended June 30, 2001. A net change in working capital items used $15.8
million of cash during the period. Cash also decreased based on changes in
accrued expenses, refundable income taxes, and other noncurrent liabilities of
$8.2 million and in prepaid and other assets of $5.2 million. The company also
used $2.7 million for restructuring activities. These decreases were offset by
cash received
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from reimbursable tooling of $11.4 million. During the period, the Company
received approximately $2.0 million for investing activities and used
approximately $13.6 million for net capital expenditures.
On August 1, 2000, in conjunction with the Aries Mecanismes acquisition, the
Company entered into an amended and restated credit agreement with Citicorp USA,
Inc. as Administrative Agent and Collateral Agent, providing for a $50.0 million
term loan and a $125.0 million revolving credit facility (the "Senior Credit
Facility"). The use of the proceeds was to consummate the acquisition of AIMDF
and for general corporate purposes which may include acquisitions. The
obligations under the Senior Credit Facility are secured by substantially all of
the Company's assets and the assets of certain of the Company's 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.
At June 30, 2001, the Company had approximately $17.7 million available under
the Senior Credit Facility, subject to its terms and conditions. At June 30,
2001, the Company had $47.5 million outstanding under its term loan, $104.4
million outstanding under the line of credit and $3.9 million in outstanding
letters of credit to support workers' compensation commitments. The Senior
Credit Facility expires on June 30, 2005.
As of June 8, 2001, the Company amended and restated its Senior Credit Facility
to revise certain financial covenants and other conditions. These amendments
revise the existing financial covenants, which the Company expects will be
through June 30, 2002, add a minimum EBITDA covenant, and institute restrictions
on investments, acquisitions, capital expenditures, asset dispositions, and
other spending, generally until the attainment of certain financial performance
benchmarks which the Company expect to achieve no later than fiscal quarter
ending December 31, 2002. In addition, the amendments require the pledge of
certain Mexican assets in support of the Company's Canadian borrowings.
The Company believes the application of the proceeds from its 10 1/8% Senior
Subordinated Notes due 2007 has enhanced its ability to meet its growth and
business objectives. However, interest payments on the notes represent a
significant liquidity requirement for the Company. The Company is 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.
Capital expenditures were $14.2 million, or 6.3% of net sales for the three
months ended June 30, 2001 as compared to $12.3 million, or 6.0% of net sales
for the three months ended June 30, 2000. The increase of $1.9 million was due
to acquisitions made since the prior year and included spending to support
customer programs and for cost reduction and productivity improvement projects.
Other capital expenditures included health and safety items, and computer and
network upgrades.
For fiscal 2002, the Company's capital expenditures for its restricted and
unrestricted subsidiaries are expected to be $78.3 million, consisting of $55.5
million to support new business and increase capacity, $18.3 million for
maintenance, rebuilds and improvements, and $4.5 million in other expenditures,
including health, safety and environmental.
The Company believes that cash generated from operations, along with the
successful completion of the rationalization plan, together with amounts
available under the Senior Credit Facility, will be adequate to meet its debt
service requirements, capital expenditures and working capital needs for the
foreseeable future, although no assurance can be given in this regard. The
Company's future operating performance and ability to service or refinance its
10 1/8% Senior Subordinated Notes due 2007 and to extend or refinance its other
indebtedness will be subject to future economic conditions and to financial,
business and other factors that are beyond the Company's control.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company is exposed to market risk
associated with fluctuations in foreign exchange rates and interest rates. The
Company conservatively manages these risks through the use of derivative
financial instruments in accordance with management's guidelines.
The Company enters into all hedging transactions for periods consistent with the
underlying exposures. The Company does not enter into derivative instruments for
trading purposes.
Foreign Exchange. The Company enters into foreign currency forward contracts to
protect itself from adverse currency rate fluctuations on foreign currency
commitments. These commitments are generally for terms of less than one year.
The foreign currency
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contracts are executed with banks that the Company believes 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. The Company believes that any gain or loss incurred on
foreign currency forward contracts is offset by the direct effects of currency
movements on the underlying transactions. There were no outstanding contracts at
June 30, 2001.
The Company has performed a quantitative analysis of our overall currency rate
exposure at June 30, 2001. Based on this analysis, a 10% change in currency
rates would not have a material effect on the Company's earnings.
Interest Rates. The Company generally manages risk associated with interest rate
movements through the use of or combination of variable and fixed rate debt. The
Company's 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.
The Company has performed a quantitative analysis of its overall interest rate
exposure at June 30, 2001. Based on this analysis, a 10% change in the average
cost of the Company's variable rate debt would not have a material effect on its
earnings.
FORWARD-LOOKING STATEMENTS
This report contains statements relating to such matters as anticipated
financial performance, business prospects and other matters, including
statements relating to volume growth, awarded sales contracts, or statements
expressing general optimism about future operating results that are
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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 9, 2001, Credit Lyonnais Chicago Branch filed an action in
the United States District Court, Southern District of New York against the
Company and Citicorp USA, Inc., seeking a declaratory judgment with respect to
various claims relating to the Amended and Restated Credit Agreement among the
Company, the borrowing subsidiary and the lenders identified therein and
Citicorp USA, Inc., as administrative agent, (the "Senior Credit Facility") and
its effect on the Asset Use Agreement between Automotive Business Trust 1999-A
(the "Trust") and Oxford Automotriz de Mexico S.A. de C.V., a subsidiary of the
Company, dated March 31, 1999 and the related Guaranty (the "Guaranty") of the
Company in favor of Automotive Business Trust 1999-A dated March 31, 1999.
Credit Lyonnais is one of several lenders to the Trust (the "Trust
Lenders"), in the amount of $8.6 million out of an aggregate of $75.0 million.
The premise of Credit Lyonnais' action is its allegation that the Intercreditor
Agreement which governs the relationship between the Trust Lenders and the
lenders under the Senior Credit Facility requires the consent of the Trust
Lenders to amend the Senior Credit Facility. Credit Lyonnais has requested a
declaratory judgment to the effect that, in the absence of such consent by the
Trust Lenders, the interim amendment of the Senior Credit Facility dated as of
March 31, 2001 and the Fourth Amended and Restated Credit Agreement, dated as of
June 8, 2001, both of which were approved by Citicorp and the requisite lenders
under the Senior Credit Facility, are ineffective to amend the covenants of the
Senior Credit Facility, thereby triggering an event of default under the
Guaranty. Credit Lyonnais is also seeking to obtain a pro rata share of any
payments received by Citicorp from the Company, pursuant to the terms of the
Intercreditor Agreement.
The Company believes the claims of Credit Lyonnais are without merit
and intends to defend itself vigorously against these claims, in cooperation
with Citicorp.
Item 6. Exhibits and Reports on Form 8-K.
(a) 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 by
reference.
(b) The following report on Form 8-K was filed by the registrant
during the three month period ended June 30, 2001:
1. A report on Form 8-K dated June 8, 2001, was filed by the
registrant; such report contained information under Item
5, Other Events, with respect to amendments to the
registrant's senior credit facility.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 8, 2001 OXFORD AUTOMOTIVE, INC.
By: /s/ AURELIAN BUKATKO
Aurelian Bukatko
Executive Vice President and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
25
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EXHIBIT INDEX
EXHIBIT NO DESCRIPTION
4.1 Fourth Amended and Restated Credit Agreement, dated as of June 8, 2001
among Oxford Automotive, Inc., the Borrowing Subsidiary and the Lenders
identified therein, Citicorp USA, Inc. as Administrative Agent and
Collateral Agent, Comerica Bank as Syndication Agent, and Credit Suisse
First Boston as Documentation Agent (previously filed as Exhibit 4.1 to
the Registrant's Current Report on Form 8-K dated June 8, 2001, and
incorporated herein by reference)
10.1 Employment and Noncompetition Agreement between the Company and John W.
Potter (previously filed as Exhibit 10.12 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31,2001,and
incorporated herein by reference)