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 September 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) (ZipCode)
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 October 31, 2001
1
PART I. FINANCIAL INFORMATION
OXFORD AUTOMOTIVE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
Net sales $ 193,536 $ 198,236 $ 419,520 $ 404,394
Cost of sales 185,575 177,384 382,483 359,455
--------- --------- --------- ---------
Gross profit 7,961 20,852 37,037 44,939
Selling, general and
administrative expenses 16,082 13,619 33,389 26,059
Restructuring charge 29 731
Gain on sale of equipment (122) (782) (134) (789)
--------- --------- --------- ---------
Operating income (loss) (8,028) 8,015 3,051 19,669
Other income (expense):
Interest expense, net (10,657) (9,419) (20,798) (17,649)
Other (219) (50) 786 62
--------- --------- --------- ---------
Income (loss) before income taxes (18,904) (1,454) (16,961) 2,082
Income tax (provision) benefit 6,764 624 5,923 (858)
--------- --------- --------- ---------
Net income (loss) (12,140) (830) (11,038) 1,224
Accrued dividends and accretion on
redeemable preferred stock 330 330 660 660
--------- --------- --------- ---------
Net income (loss) applicable to
common stock ($ 12,470) ($ 1,160) ($ 11,698) $ 564
========= ========= ========= =========
Net income (loss) per share
(basic and diluted) ($ 41.12) ($ 3.74) ($ 38.21) $ 1.82
========= ========= ========= =========
Weighted average shares outstanding 303,288 309,750 306,113 309,750
========= ========= ========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, March 31,
2001 2001
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 31,620 $ 63,600
Trade receivables, net 125,482 115,764
Inventories, net 64,522 61,652
Refundable income taxes 1,931 12,100
Reimbursable tooling 47,929 58,307
Deferred income taxes 11,203 11,203
Prepaid expenses and other
current assets 44,180 41,021
-------- --------
Total current assets 326,867 363,647
Assets held for sale 32,398 32,428
Other noncurrent assets 52,006 60,038
Deferred income taxes 43,769 41,674
Property, plant and equipment, net 271,983 252,944
-------- --------
Total assets $727,023 $750,731
======== ========
Liabilities and shareholders' deficit
Current liabilities
Trade accounts payable $196,086 $207,522
Employee compensation 35,179 30,012
Restructuring reserve 20,447 29,165
Accrued expenses and other
current liabilities 37,776 53,776
Current portion of borrowings 16,987 15,052
-------- --------
Total current liabilities 306,475 335,527
Pension liability 11,068 11,958
Post retirement medical benefits liability 41,108 40,646
Deferred income taxes 9,963 9,645
Other noncurrent liabilities 6,694 6,763
Long-term borrowings
- less current portion 396,017 381,572
-------- --------
Total liabilities 771,325 786,111
3
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 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
September 30, 2001 and
March 31, 2001 40,638 40,574
--------- ---------
Shareholders' deficit
Common stock 1,042 1,050
Accumulated other comprehensive loss (18,075) (20,795)
Retained deficit (67,907) (56,209)
--------- ---------
Total shareholders' deficit (84,940) (75,954)
--------- ---------
Total liabilities and shareholders' deficit $ 727,023 $ 750,731
========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Six For the Six
Months Ended Months Ended
September 30, September 30,
2001 2000
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net income (loss) ($11,038) $ 1,224
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 21,302 18,980
Deferred income taxes (1,313) 676
Gain on sale of equipment (139) (789)
Changes in operating assets and
liabilities affecting cash
Accounts receivable, trade (7,144) 34,128
Inventories (1,435) (3,010)
Reimbursable tooling 11,295 (19,814)
Prepaid expenses and other current assets (1,980) 2,567
Other noncurrent assets 3,084 (10,056)
Accounts payable (15,584) (28,462)
Restructuring reserve (8,857) (1,865)
Accrued expenses and other liabilities (13,233) (25,286)
Income taxes payable/refundable 10,262 (2,277)
Other noncurrent liabilities (1,093) 14,809
-------- --------
Net cash used in operating
activities (15,873) (19,175)
-------- --------
INVESTING ACTIVITIES
Purchase of business, net of cash acquired 1,992 (29,241)
Purchase of property, plant
and equipment (33,415) (35,910)
Proceeds from sale of equipment 715 676
-------- --------
Net cash used in investing activities (30,708) (64,475)
-------- --------
FINANCING ACTIVITIES
Principal advances on borrowing arrangements 14,802 74,645
Debt financing costs (2,049) (1,622)
Payment of preferred dividends (596) (596)
-------- --------
Net cash provided by financing activities 12,157 72,427
-------- --------
5
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Six For the Six
Months Ended Months Ended
September 30, September 30,
2001 2000
(unaudited) (unaudited)
Effect of exchange rate
changes on cash 2,444 (1,134)
-------- --------
Net decrease in cash
and cash equivalents (31,980) (12,357)
Cash and cash equivalents
at beginning of period 63,600 18,661
-------- --------
Cash and cash equivalents
at end of period $ 31,620 $ 6,304
======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
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
7
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)
September 30, March 31,
2001 2001
Raw materials $ 26,612 $ 27,492
Finished goods and work-in-process 45,898 41,307
-------- --------
72,510 68,799
Reserves (7,988) (7,147)
-------- --------
$ 64,522 $ 61,652
======== ========
The Company does not separately identify finished goods from work-in-process.
8
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 Earnings Total
----------------------------------------------- --------------
Balances at March 31, 2001 $ 1,050 ($20,795) ($56,209) ($75,954)
Net income (11,038) (11,038)
Foreign currency
translation adjustments 2,720 2,720
Accrued dividends and
accretion of redeemable
preferred stock (660) (660)
Retirement of common stock (8) (8)
-------- -------- -------- --------
Balances at September 30, 2001 $ 1,042 ($18,075) ($67,907) ($84,940)
======== ======== ======== ========
9
7. COMPREHENSIVE INCOME
The Company's total comprehensive income was as follows:
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2001 2000 2001 2000
Net income (loss) ($ 1,240) ($ 830) ($11,038) $ 1,224
-------- -------- -------- --------
Other comprehensive income
(loss), net of tax:
Foreign currency translation adjustment 2,982 (5,265) 2,720 (6,570)
-------- -------- -------- --------
Other comprehensive
income (loss) 2,982 (5,265) 2,720 (6,570)
-------- -------- -------- --------
Total comprehensive income (loss) $ 1,742 ($ 6,095) ($ 8,318) ($ 5,346)
======== ======== ======== ========
8. CONDENSED CONSOLIDATING INFORMATION
The Notes were issued by Oxford Automotive, Inc. and as of September 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 September 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 September 30, 2000, the Notes were
guaranteed by the Guarantor Subsidiaries. As of September 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, Oxford Automotive Italia and BMG Holdings Inc. and
Oxford Suspension Ltd. (which were combined with BMG North American Limited to
form Oxford Automotive Canada Ltd., as of April 5, 2001). 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.
10
CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations/
Parent Subsidiaries Subsidiaries Adjustments Consolidated
ASSETS
Current assets
Cash and cash
equivalents $ 15,205 $ 16,370 $ 45 $ $ 31,620
Trade receivables, net 4,989 98,070 22,423 125,482
Inventories, net 48,605 15,917 64,522
Refundable income taxes 393 1,539 (1) 1,931
Reimbursable tooling 23,604 24,325 47,929
Deferred income taxes 970 10,233 11,203
Prepaid expenses and
other current assets 2,887 40,903 390 44,180
--------- --------- --------- ------------- ---------
Total current assets 48,048 229,812 49,007 326,867
Assets held for sale 3,176 29,222 32,398
Other noncurrent assets 16,704 21,189 14,113 52,006
Deferred income taxes 3,318 33,355 7,096 43,769
Property, plant and
equipment, net 5,369 198,763 67,851 271,983
Investment in subsidiaries 72,541 75,758 55,182 (203,481)
--------- --------- --------- ------------- ---------
Total assets $ 145,980 $ 562,053 $ 222,471 ($ 203,481) $ 727,023
========= ========= ========= ============= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Trade accounts payable $ 32,006 $ 129,974 $ 34,106 $ $ 196,086
Intercompany accounts (156,946) 101,774 55,172
Employee compensation 1,090 31,513 2,576 35,179
Restructuring reserve 935 5,620 13,892 20,447
Accrued expenses and
other current liabilities 14,784 25,485 (2,493) 37,776
Current portion
of borrowings 8,000 8,987 16,987
--------- --------- --------- ------------- ---------
Total current liabilities (100,131) 303,353 103,253 306,475
11
CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations/
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Pension liability (108) 3,859 7,317 11,068
Post retirement
medical benefits liability 5,825 35,283 41,108
Deferred income taxes 9,963 9,963
Other noncurrent liabilities 5,617 1,077 6,694
Long-term borrowings
less current portion 331,159 64,858 396,017
--------- --------- --------- --------- ---------
Total liabilities 230,920 393,475 146,930 771,325
Redeemable preferred
stock 40,638 40,638
Shareholder's equity
Common stock 1,042 195,070 88,582 (283,652) 1,042
Accumulated other
comprehensive loss (16,405) (1,670) (18,075)
Retained earnings (deficit) (85,982) (10,087) (52,009) 80,171 (67,907)
--------- --------- --------- --------- ---------
Total shareholders' equity
(deficit) (84,940) 168,578 34,903 (203,481) (84,940)
--------- --------- --------- --------- ---------
Total liabilities and
shareholder's equity $ 145,980 $ 562,053 $ 222,471 ($203,481) $ 727,023
========= ========= ========= ========= =========
12
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
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
13
CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED)
MARCH 31, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
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
=========== =========== =========== ============= ===========
14
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations /
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Net sales $ $138,497 $ 55,732 ($693) $ 193,536
Cost of sales 131,223 55,045 (693) 185,575
----------- ----------- ----------- ----------- -----------
Gross profit 7,274 687 7,961
Selling, general and
administrative expenses (1,376) 9,293 8,165 16,082
Restructuring charge 5 24 29
Gain on sale of equipment (3) (116) (3) (122)
----------- ----------- ----------- ----------- -----------
Operating income 1,379 (1,908) (7,499) (8,028)
Interest expense, net (4,635) (4,461) (1,561) (10,657)
Other income (expense) 172 (617) 226 (219)
----------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes (3,084) (6,986) (8,834) (18,904)
Income tax (provision) benefit 1,056 2,503 3,205 6,764
----------- ----------- ----------- ----------- -----------
Income (loss) before equity
in income of
consolidated subsidiaries (2,028) (4,483) (5,629) (12,140)
Equity in income of
consolidated subsidiaries (10,112) 10,112
----------- ----------- ----------- ----------- -----------
Net income (loss) ($12,140) ($4,483) ($5,629) $10,112 ($12,140)
=========== =========== =========== ============= ===========
15
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations/
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Sales $ $293,568 $127,099 ($1,147) $ 419,520
Cost of sales 269,575 114,055 (1,147) 382,483
------------- ---------------- ------------- -------------- ------------
Gross profit 23,993 13,044 37,037
Selling, general and
administrative expenses (977) 19,719 14,647 33,389
Restructuring charge 74 657 731
Gain on sale of equipment (3) (116) (15) (134)
------------- ---------------- ------------- -------------- ------------
Operating income 980 4,316 (2,245) 3,051
Interest expense, net (8,945) (8,433) (3,420) (20,798)
Other income (expense) 378 (211) 619 786
------------- ---------------- ------------- -------------- ------------
Income (loss) before
income taxes (7,587) (4,328) (5,046) (16,961)
Income tax (provision) benefit 2,768 1,387 1,768 5,923
------------- ---------------- ------------- -------------- ------------
Income (loss) before equity
in income of
consolidated subsidiaries (4,819) (2,941) (3,278) (11,038)
Equity in income of
consolidated subsidiaries (6,219) 6,219
------------- ---------------- ------------- -------------- ------------
Net income (loss) ($11,038) ($2,941) ($3,278) $ 6,219 ($11,038)
============= ================ ============= ============== ============
16
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations/
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Net sales $ $ 101,150 $ 97,086 $ $ 198,236
Cost of sales 85,903 91,481 177,384
--------- --------- --------- --------- ---------
Gross profit 15,247 5,605 20,852
Selling, general and
administrative
expenses (1,937) 5,459 10,097 13,619
Gain on sale of equipment (10) (755) (17) (782)
--------- --------- --------- --------- ---------
Operating income 1,947 10,543 (4,475) 8,015
Interest expense, net (1,296) (1,461) (6,662) (9,419)
Other income (expense) (1) (66) 17 (50)
--------- --------- --------- --------- ---------
Income (loss) before
income taxes 650 9,016 (11,120) (1,454)
Income tax (provision) benefit (207) (3,257) 4,088 624
--------- --------- --------- --------- ---------
Income (loss) before equity
in income of
consolidated
subsidiaries 443 5,759 (7,032) (830)
Equity in income of
consolidated
subsidiaries (1,273) 1,273
--------- --------- --------- --------- ---------
Net income (loss) ($ 830) $ 5,759 ($ 7,032) $ 1,273 ($ 830)
========= ========= ========= ========= =========
17
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor Eliminations/
Parent Subsidiaries Subsidiaries Adjustments Consolidated
Sales $ $ 174,878 $ 229,516 $ $ 404,394
Cost of sales 148,507 210,948 359,455
--------- --------- --------- --------- ---------
Gross profit 26,371 18,568 44,939
Selling, general and
administrative
expenses (3,146) 9,194 20,011 26,059
Gain on sale of equipment (10) (755) (24) (789)
--------- --------- --------- --------- ---------
Operating income 3,156 17,932 (1,419) 19,669
Interest expense, net (2,604) (2,893) (12,152) (17,649)
Other income (expense) 84 (53) 31 62
--------- --------- --------- --------- ---------
Income (loss) before
income taxes 636 14,986 (13,540) 2,082
Income tax (provision) benefit (359) (5,427) 4,928 (858)
--------- --------- --------- --------- ---------
Income (loss) before equity
in income of
consolidated
subsidiaries 277 9,559 (8,612) 1,224
Equity in income of
consolidated
subsidiaries 947 (947)
--------- --------- --------- --------- ---------
Net income (loss) $ 1,224 $ 9,559 ($ 8,612) ($ 947) $ 1,224
========= ========= ========= ========= =========
18
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiaries Subsidiaries Consolidated
Net cash provided by
(used in) operating activities ($14,952) ($ 4,654) $ 3,733 ($15,873)
-------- -------- -------- --------
INVESTING ACTIVITIES
Purchase of businesses,
net of cash acquired 1,992 1,992
Purchase of property,
plant and equipment (291) (29,953) (3,171) (33,415)
Proceeds from sale
of equipment 704 11 715
-------- -------- -------- --------
Net cash used in
investing activities (291) (27,257) (3,160) (30,708)
-------- -------- -------- --------
FINANCING ACTIVITIES
Principal advanced on borrowing arrangements 13,227 1,575 14,802
Payment of preferred stock dividends (596) (596)
Debt financing costs (2,049) (2,049)
-------- -------- -------- --------
Net cash provided by
financing activities 11,178 1,575 (596) 12,157
-------- -------- -------- --------
Effect of foreign
currency rate
fluctuation on cash 2,421 23 2,444
-------- -------- -------- --------
Net decrease in cash
and cash equivalents (4,065) (27,915) 0 (31,980)
Cash and cash equivalents at
beginning of period 19,270 44,285 45 63,600
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 15,205 $ 16,370 $ 45 $ 31,620
======== ======== ======== ========
19
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiaries Subsidiaries Consolidated
Net cash provided by
(used in)
operating activities ($57,547) $ 34,865 $ 3,507 ($19,175)
-------- -------- -------- --------
INVESTING ACTIVITIES
Purchase of businesses,
net of cash acquired (11,379) (17,862) (29,241)
Purchase of property,
plant and equipment 1,869 (24,947) (12,832) (35,910)
Proceeds from sale
of equipment 22 625 29 676
-------- -------- -------- --------
Net cash used in
investing activities (9,488) (42,184) (12,803) (64,475)
-------- -------- -------- --------
FINANCING ACTIVITIES
Net proceeds on borrowings 61,311 3,850 9,484 74,645
Payment of preferred stock dividends (596) (596)
Debt financing costs (1,622) (1,622)
-------- -------- -------- --------
Net cash provided by
financing activities 59,689 3,850 8,888 72,427
-------- -------- -------- --------
Effect of foreign
currency rate
fluctuation on cash (1,103) (31) (1,134)
-------- -------- -------- --------
Net decrease in cash
and cash equivalents (7,346) (4,572) (439) (12,357)
Cash and cash equivalents at
beginning of period 8,565 9,855 241 18,661
-------- -------- -------- --------
Cash and cash equivalents at end of period $ 1,219 $ 5,283 ($ 198) $ 6,304
======== ======== ======== ========
9. RECLASSIFICATIONS
Certain amounts in the prior periods' statements have been reclassified
to conform to the current periods' presentation.
20
10. SEGMENT INFORMATION
The Company has one reportable segment in the global automotive original
equipment supply industry. Net sales are attributed to geographic regions
based upon their location of origin. Net sales and identifiable assets by
geographic area are as follows:
Three Months Ended Six Months Ended
September 30, September 30,
2001 2000 2001 2000
----------------------------- ----------------------------
Net Sales
United States $ 55,039 59,376 $125,952 $140,713
Canada 25,314 37,711 58,224 88,804
Mexico 25,130 17,920 44,941 24,168
France 63,868 56,976 144,283 102,664
Germany 18,819 20,196 33,289 33,365
Other Europe 5,366 6,057 12,831 14,680
-------- -------- -------- --------
$193,536 $198,236 $419,520 $404,394
======== ======== ======== ========
September 30, March 31,
2001 2001
-----------------------------
Identifiable assets
United States $234,215 $285,106
Canada 101,045 104,353
Mexico 93,336 61,101
France 211,697 214,391
Germany 68,564 62,208
Other Europe 18,166 23,572
------------ -----------
$727,023 $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.".
On September 27, 2001, the Company amended its Senior Credit Facility to
restructure and amend certain covenants. The amendment, which expires November
15, 2001 eliminated the September 30, 2001 financial covenants and amended
other provisions of the Senior Credit Facility. The Company is currently
negotiating with its bank group and management expects to reach agreement to
extend the September 27th amendment, by November 15, 2001, to a date no earlier
than December 7, 2001. Management also believes that a permanent amendment
to allow for the original Rationalization and the Plan, and restate applicable
financial covenants will be secured prior to December 31, 2001.
The Company was notified during the quarter ended September 30, 2001 by a
customer that as a result of the failure of a front suspension part made by a
third party and supplied to the Company it was requesting the Company to help
pay for the associated costs of recalling 6,000 vehicles using the part. The
Company has denied any responsibility. The Company did not manufacture the part
which failed and the customer was responsible for the design and validation of
such part prior to using it in production. The customer has since redesigned the
part. Management does not currently believe that this issue will result in any
material adverse impact on the financial results of the Company.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three and six months ended September 30, 2001
As compared to the three and six months ended September 30, 2000
Results of Operations
The three and six months ended September 30, 2001, statements of operations for
Oxford Automotive, Inc. (the "Company") include the results of operations for
substantially all subsidiaries. Aries Industries Mecanismes et Decoupage Fin
S.A. ("AIMDF"), was acquired August 2, 2000 and was accounted for using the
purchase method of accounting. Accordingly, the three and six months statements
of operations for the period ended September 30, 2000, only include the
operations of AIMDF from its acquisition date to September 30, 2000.
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 Six Months Six Months
Ended Ended Ended Ended
September 30, 2001 September 30, 2000 September 30, 2001 September 30, 2000
Net sales $ 193.5 100.0% $ 198.2 100.0% $ 419.5 100.0% $ 404.4 100.0%
Gross profit 8.0 4.1% 20.9 10.5% 37.0 8.8% 44.9 11.1%
Selling, general and
adminsitrative 16.1 8.3% 13.6 6.9% 33.4 8.0% 26.1 6.5%
Operating income (loss) (8.0) -4.1% 8.0 4.0% 3.1 0.7% 19.7 4.9%
Net interest expense 10.7 5.5% 9.4 4.7% 20.8 5.0% 17.6 4.4%
Net income (loss) (12.1) -6.3% (0.8) -0.4% (11.0) -2.6% 1.2 0.3%
Memo: EBITDA 4.5 2.3% 17.9 9.0% 25.1 6.0% 38.7 9.6%
NET SALES -- Net sales for the three months ended September 30, 2001 were $193.5
million. This represents a decrease of $4.7 million as compared to net sales for
the three months ended September 30, 2000 of $198.2 million. Excluding the
impact of acquisitions made since the prior year, the further decrease was due
to the continued decline in the North American production volumes, specifically
the North American OEM's, the balance out of the Ford and DaimlerChrysler light
truck programs, and the year over year impact of foreign exchange. The decrease
was partially offset by the launch of components for the Buick Rendezvous and
the GMT360 (Envoy/Trailblazer/Bravada). European sales decreased slightly due to
lower production volumes at Renault, PSA and Fiat.
For the year to date period, net sales were $419.5 million, an increase of $15.1
million as compared to $404.4 million for the same period last year. Excluding
$45.3 million of additional net sales due to acquisitions made since the prior
year, the resulting decrease is primarily due to the continued decline in the
North American OEM production volumes, production volume decreases on certain
22
European platforms and the balance out of certain light truck and SUV platforms.
The balance out of programs was partially offset by the launch of the new
programs during the period.
GROSS PROFIT -- For the three months ended September 30, 2001, gross profit
decreased to $8.0 million or 4.1% of net sales as compared to $20.9 million or
10.5% of net sales for the same period in the prior year. Excluding the impact
of acquisitions made since the prior year, the remaining decrease in gross
profit and gross margin, was related to lost gross profit on lower North
American and European production volumes, period expenses related to future
program launches (GMT315 -- Saturn Vue and the PSA T52), the year over year
impact of customer tooling programs and lower than expected savings achieved
under the North America rationalization plan (see "Capacity Rationalization
Plan" below). The decrease was offset by the successful launches of the Buick
Rendezvous and GMT360 and the recovery of European raw material costs.
For the year to date period, gross profit was $37.0 million, a decrease of $7.9
million as compared to $44.9 million for the same period last year. Excluding
the impact of acquisitions made since the prior year, the remaining decrease was
related to similar factors as were encountered in the three months ended
September 30, 2001 as well as the impact of foreign exchange.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") -- For the three months
ended September 30, 2001, SG&A expenses increased to $16.1 million or 8.3% of
net sales as compared to $13.6 million or 6.9% of net sales for the same period
in the prior year. Excluding the incremental costs associated with prior year
acquisitions, the increase can be attributed to additional debt issue cost
associated with recent Senior Credit Facility amendments, higher depreciation,
increased training costs for employee development and to a higher level of
spending for program launches, engineering changes and recently awarded programs
both in North America and Europe.
For the year to date period, SG&A expenses increased to $33.4 million or 8.0% of
net sales as compared to $26.1 million or 6.5% of net sales for the same period
in the prior year. Excluding the incremental costs associated with prior year
acquisitions, the increase can again be attributed to factors similar to the
three month period ended September 30, 2001. The Company believes it has taken
necessary steps to reduce these costs, and obtain a more optimal cost structure
to better address continued fluctuations in volume.
INTEREST EXPENSE - For the three months ended September 30, 2001, net interest
expense was $10.7 million, an increase of $1.3 million, as compared to $9.4
million for the same period last year. The increase can be primarily attributed
to higher overall borrowings, partially as a result of the interim financing of
customer tooling, offset by the impact of overall lower incremental borrowing
rates on variable rate debt.
For the year to date period, net interest expense was $20.8 million, an increase
of $3.2 million as compared to $17.6 million for the same period last year. In
addition to the impact of acquisitions since the prior year, the increase is a
result of factors similar to the three months ended September 30, 2001 (higher
overall borrowings, partially as a result of the interim financing of customer
tooling, offset by the impact of overall lower incremental borrowing rates).
NET INCOME - For the three months ended September 30, 2001, the Company reported
a net loss of $12.1 million, as compared to a net loss of $0.8 million for the
same period in the prior year. For the year to date period, the Company reported
a net loss of $11.0 million, as compared to the prior year net income of $1.2
million. The decrease in earnings was primarily the result of gross margin
impacts attributable to decreased North American OEM production, new program
launch costs, the negative impact of foreign exchange, and overall higher
interest expense.
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
=======
23
The Rationalization charge recorded at March 31, 2001 was reflected in the
balance sheet as follows:
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
=======
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 six months
ended September 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 September 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 $32.4 million as of September 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
September 30, 2001. The balance sheet also includes reserves recorded as a part
of purchasing accounting for acquisitions made in prior periods, which have been
excluded from the table below.
March 31, 2001 Year to Date Impact of September 30, 2001
Restructuring Cash Exchange Restructuring
Reserve Payments Rates Reserve
--------------------------------------------------------------------------------------
Loss Contracts $4,400 ($1,102) $ $3,298
Employee Severance 5,913 (1,119) 6 4,800
Other exit costs 9,737 (1,203) 8,534
--------------------------------------------------------------------------------------
Total Capacity Rationalization Plan $20,050 ($3,424) $6 $16,632
======================================================================================
On November 5, 2001, the Board of Directors approved an additional
rationalization plan ("Plan"). The Plan was approved in response to continued
reduction in the North American production schedules and the corresponding
reactions of the North American OEMs. These actions required that the Company
review its capacity analysis and adjust its costs structure accordingly. As a
part of the Plan, the Company will record an incremental pre-tax restructuring
charge of approximately $21.0 million to $24.0 million over the originally
announced Rationalization of $71.3 million. While the Plan includes an
incremental charge to the income statement, it actually reduces cash outflow by
approximately $10.7 million in the first year of execution, versus the original
Rationalization. The Plan includes an additional write down of fixed assets of
$17.6 million ($52.0 million total fixed asset write down under the original
Rationalization and the Plan). As a result of the original Rationalization and
the Plan, the Company anticipates the recovery of the net realizable value of
assets to be sold by the end of fiscal year 2004 of approximately $29.5 million
or $13.1 million less than the original Rationalization ($42.6 million). In
addition to the pre-tax charge, the Company will record an $11.9 million
valuation allowance against deferred tax assets arising from previously recorded
net operating losses. It is anticipated that the amounts associated with the
Plan will be recorded as restructuring charges in the Company's quarter ended
December 31, 2001.
The original Rationalization and the Plan together anticipate the closure of
five North American plants and will result in an overall reduction of
approximately 800 jobs of the North American salaried and hourly workforce.
The original Rationalization and the Plan together will result in a full year
pre-tax fixed costs saving of approximately $15.9 million and will better align
Company capacity with both customer requirements and future available platforms.
24
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Net income adjusted for non-cash charges (depreciation and amortization and
deferred taxes) generated approximately $9.0 million of cash for the six months
ended September 30, 2001. A net change in working capital items used $24.2
million of cash during the period. Cash also decreased based on changes in
accrued expenses and other noncurrent liabilities of $14.3 million. The Company
used $8.9 million for restructuring activities. These decreases were offset by
cash received from reimbursable tooling, refundable income taxes and prepaid
expenses and other assets of $22.5 million. During the period, the Company
received approximately $2.0 million from investing activities and used
approximately $32.7 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 September 30, 2001, the Company had no amounts available under the Senior
Credit Facility, but had $31.6 million of cash on hand to meet current liquidity
needs. At September 30, 2001, the Company had $47.0 million outstanding under
its term loan, $119.2 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
revised the existing financial covenants, added a minimum EBITDA covenant, and
instituted restrictions on investments, acquisitions, capital expenditures,
asset dispositions, and other spending, generally until the attainment of
certain financial performance benchmarks. In addition, the amendments required
the pledge of certain Mexican assets in support of the Company's Canadian
borrowings.
On September 27, 2001, the Company amended its Senior Credit Facility to
restructure and amend certain covenants. The amendment, which expires November
15, 2001 eliminated the September 30, 2001 financial covenants and amended other
provisions of the Senior Credit Facility. The Company is currently negotiating
with its bank group and management expects to reach agreement to extend the
September 27th amendment, by November 15, 2001, to a date no earlier than
December 7, 2001. Management also believes that a permanent amendment to allow
for the original Rationalization and the Plan, and restate applicable financial
covenants will be secured prior to December 31, 2001.
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.
The Company was notified during the quarter ended September 30, 2001 by a
customer that as a result of the failure of a front suspension part made by a
third party and supplied to the Company it was requesting the Company to help
pay for the associated costs of recalling 6,000 vehicles using the part. The
Company has denied any responsibility. The Company did not manufacture the part
which failed and the customer was responsible for the design and validation of
such part prior to using it in production. The customer has since redesigned
the part. Management does not currently believe that this issue will result in
any material adverse impact on the financial results of the Company.
Capital expenditures were $33.4 million, or 8.0% of net sales for the six months
ended September 30, 2001 as compared to $35.9 million, or 8.9% of net sales for
the six months ended September 30, 2000. The decrease of $2.5 million was due
mainly to the timing of customer program launches and associated spending.
For fiscal 2002, the Company's capital expenditures for its restricted and
unrestricted subsidiaries are expected to be $71.8 million, consisting of $55.5
million to support new business and increase capacity and $16.3 million for
maintenance, rebuilds and other expenditures, including health, safety and
environmental.
The Company believes that it's current cash position, along with cash generated
from operations, along with the successful completion of the original
Rationalization and the Plan, together with amounts which become 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
25
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 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 September 30, 2001.
The Company has performed a quantitative analysis of our overall currency rate
exposure at September 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 September 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.
26
PART II. OTHER INFORMATION
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) No reports on Form 8-K were filed by the registrant during the
three months ended September 30, 2001.
27
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: November 14, 2001 OXFORD AUTOMOTIVE, INC.
By: /s/ AURELIAN BUKATKO
Aurelian Bukatko
Executive Vice President and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
28
EXHIBIT INDEX
EXHIBIT NO DESCRIPTION
4.1 Amendment No. 1, dated as of September 27, 2001 among Oxford Automotive,
Inc., the Borrowing Subsidiary, the Lenders identified therein and
Citicorp USA, Inc. as Administrative Agent.