FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 0-21139
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4508 IDS CENTER 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
(612) 342-2311
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No ___
--
The number of shares outstanding of the Registrant's Class A common stock, par
value $.01 per share, at May 1, 2002 was 15,600,917 shares. The number of shares
outstanding of the Registrant's Class B common stock, par value $.01 per share,
at May 1, 2002 was 2,451,540 shares.
DURA AUTOMOTIVE SYSTEMS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Income for the Three
Months Ended March 31, 2002 and 2001 (unaudited)
Condensed Consolidated Balance Sheets at March 31, 2002
(unaudited) and December 31, 2001
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2002 and 2001 (unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
- 2 -
ITEM 1 - FINANCIAL INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Three Months Ended March 31,
------------------------------------
2002 2001
-------------- ------------------
Revenues $ 616,181 $ 661,853
Cost of sales 539,833 569,946
-------------- ------------------
Gross profit 76,348 91,907
Selling, general and administrative expenses 34,267 37,633
Facility consolidation and other charges -- 2,629
Amortization expense 396 6,999
-------------- ------------------
Operating income 41,685 44,646
Interest expense, net 22,546 28,533
-------------- ------------------
Income before provision for income taxes and
minority interests 19,139 16,113
Provision for income taxes 7,273 6,284
Minority interest - dividends on trust preferred
securities, net 642 611
-------------- ------------------
Net income $ 11,224 $ 9,218
============== ==================
Basic earnings per common share $ 0.63 $ 0.52
Basic shares outstanding 17,814 17,715
Diluted earnings per common share $ 0.61 $ 0.52
Diluted shares outstanding 19,499 19,076
The accompanying notes are an integral part of these condensed consolidated
statements.
- 3 -
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
March 31, December 31,
Assets 2002 2001
- ------------------------------------------------------------------ ----------------- ----------------
(unaudited)
Current assets:
Cash and cash equivalents $ 40,988 $ 32,289
Accounts receivable, net 311,099 293,476
Inventories 109,417 116,508
Other current assets 130,511 126,367
----------------- ----------------
Total current assets 592,015 568,640
----------------- ----------------
Property, plant and equipment, net 483,129 516,517
Goodwill, net 948,089 962,467
Deferred income taxes and other assets, net 78,882 73,980
----------------- ----------------
$ 2,102,115 $ 2,121,604
================= ================
Liabilities and Stockholders' Investment
- ------------------------------------------------------------------
Current liabilities:
Accounts payable $ 269,020 $ 249,824
Accrued liabilities 209,710 177,327
Current maturities of long-term debt 67,901 60,847
----------------- ----------------
Total current liabilities 546,631 487,998
----------------- ----------------
Long-term debt, net of current maturities 933,898 1,015,579
Other noncurrent liabilities 118,169 120,380
Mandatorily redeemable convertible trust preferred securities 55,250 55,250
----------------- ----------------
Stockholders' investment:
Common stock - Class A 155 147
Common stock - Class B 25 31
Additional paid-in capital 343,627 342,694
Treasury stock (1,652) (1,891)
Retained earnings 172,492 161,268
Accumulated other comprehensive loss (66,480) (59,852)
----------------- ----------------
Total stockholders' investment 448,167 442,397
----------------- ----------------
$ 2,102,115 $ 2,121,604
================= ================
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
- 4 -
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS - UNAUDITED)
Three Months Ended March 31,
------------------------------------
2002 2001
---------------- ---------------
OPERATING ACTIVITIES:
Net income $ 11,224 $ 9,218
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 18,440 23,695
Deferred income taxes 6,892 90
Changes in other operating items 20,735 4,260
---------------- ---------------
Net cash provided by operating activities 57,291 37,263
---------------- ---------------
INVESTING ACTIVITIES:
Net proceeds from disposition of businesses 32,496 --
Capital expenditures, net (14,036) (15,176)
---------------- ---------------
Net cash provided by (used in) investing activities 18,460 (15,176)
---------------- ---------------
FINANCING ACTIVITIES:
Short-term borrowings (repayments), net 8,113 (4,421)
Long-term debt repayments, net (77,046) (38,560)
Proceeds from issuance of common stock and
exercise of stock options 934 109
Other, net 239 --
---------------- ---------------
Net cash used in financing activities (67,760) (42,872)
---------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 708 427
---------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
8,699 (20,358)
CASH AND CASH EQUIVALENTS:
Beginning of period 32,289 30,438
---------------- ---------------
End of period $ 40,988 $ 10,080
================ ===============
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ 8,941 $ 18,294
Cash paid (refunded) for income taxes $ 3,666 $ (2,038)
The accompanying notes are an integral part of these condensed consolidated
statements.
- 5 -
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
General - Dura Automotive Systems, Inc. (a Delaware Corporation) and
subsidiaries (Dura) designs and manufactures components and systems primarily
for the global automotive industry. Dura has over 70 manufacturing and product
development facilities located in the United States, Brazil, Canada, the Czech
Republic, France, Germany, Mexico, Portugal, Spain and the United Kingdom.
We have prepared the condensed consolidated financial statements of
Dura, without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments and reflects all
adjustments which are, in our opinion, necessary for a fair presentation of the
results of operations and statements of financial position for the interim
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations. We believe that the disclosures
are adequate to make the information presented not misleading when read in
conjunction with the financial statements and the notes thereto included in our
Annual Report on Form 10-K, as filed with the Securities and Exchange Commission
for the period ended December 31, 2001.
Revenues and operating results for the three months ended March 31, 2002
are not necessarily indicative of the results to be expected for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
March 31, 2002 December 31, 2001
------------------ ------------------
Raw materials $ 61,753 $ 65,228
Work-in-process 24,824 25,369
Finished goods 22,840 25,911
------------------ ------------------
$ 109,417 $ 116,508
================== ==================
3. EARNINGS PER SHARE
Basic earnings per share were computed by dividing net income by the
weighted average number of Class A and Class B common shares outstanding during
the period. Diluted earnings per share include (i) the effects of outstanding
stock options using the treasury stock method and (ii) the conversion of the
Preferred Securities, as follows (in thousands, except per share amounts):
- 6 -
Three Months
Ended March 31,
--------------------------
2002 2001
------------ ----------
Net income $ 11,224 $ 9,218
Interest expense on mandatorily redeemable
convertible preferred securities, net of tax 642 611
------------ ----------
Net income applicable to common
stockholders - diluted $ 11,866 $ 9,829
============ ==========
Weighted average number of Class A
common shares outstanding 14,770 14,403
Weighted average number of Class B
common shares outstanding 3,044 3,312
------------ ----------
17,814 17,715
Dilutive effect of outstanding stock options
after application of the treasury stock method 396 72
Dilutive effect of mandatorily redeemable
convertible preferred securities, assuming
conversion 1,289 1,289
------------ ----------
Diluted shares outstanding 19,499 19,076
============ ==========
Basic earnings per share $ 0.63 $ 0.52
============ ==========
Diluted earnings per share $ 0.61 $ 0.52
============ ==========
4. FACILITY CONSOLIDATION AND OTHER CHARGES
Divestitures
In November 2001, Dura entered into a definitive agreement to divest its
Plastic Products Business for gross proceeds of approximately $41.0 million. The
transaction closed in January 2002. The net cash proceeds of approximately $32.5
million were used to repay outstanding indebtedness. The Plastic Products
Business designs, engineers, and manufactures plastic components for a wide
variety of automotive vehicle applications, focusing on the metal to plastic
conversion and dual plastic applications markets. This business employs
approximately 750 people in three facilities located in Mishawaka, Indiana,
Bowling Green, Kentucky and Jonesville, Michigan and generates approximately
$80.0 million in annual revenue. Two members of Dura's board of directors are
members of management of an investor group which is general partner of the
controlling shareholder of the acquiring company. Dura recorded a noncash charge
of approximately $7.4 million in the fourth quarter of 2001 for the estimated
loss upon divestment. The effect of this divestiture on future operating results
will not be significant.
Restructuring
Throughout 2000 and 2001 Dura has evaluated manufacturing capacity
issues and opportunities for cost reduction given the reduced demand in the
North America automotive and
- 7 -
recreational vehicle markets and the available capacity within Dura's
operations. As a result, beginning in the fourth quarter of 2000, Dura began to
implement several actions including discontinuing operations in two North
American facilities, combining the Driver Control and Engineered Products
divisions into one, Control Systems, and reducing and consolidating certain
support activities to achieve an appropriate level of support personnel relative
to remaining operations and future business requirements. These actions resulted
in a fourth quarter 2000 restructuring charge of $6.8 million, including
severance related payments of $6.2 million and facility closure costs of
approximately $0.6 million. Additionally in 2000, Dura expensed as incurred
equipment relocation costs of $0.8 million. In continuation of the actions taken
in 2000, Dura recorded $2.4 million of additional restructuring charges in the
first quarter and $2.0 million in the fourth quarter of 2001 relating to
employee severance. Dura also expensed as incurred approximately $0.2 million of
equipment relocation costs incurred during the first quarter of 2001. The effect
of the costs expensed as incurred are reflected as facility consolidation and
other charges in the consolidated statements of operations.
Costs incurred and charged to the reserves as of March 31, 2002 amounted
to $9.5 million in severance related costs and $0.4 million facility closure
costs. During 2001 additional adjustments were made of $0.1 million to decrease
the reserve for employee severance, as the actual costs incurred were less than
originally estimated.
The decision to exit the two facilities will result in a reduction in
the work force of approximately 52 salaried and 408 hourly employees of which 49
salaried and 392 hourly employees have been severed as of March 31, 2002.
Additionally, the decision to consolidate two divisions into one and to reduce
support personnel to a level consistent with future business requirements
resulted in a reduction of approximately 217 salaried employees of which 176
have been severed as of March 31, 2002. These restructuring actions are
anticipated to be complete in mid 2002.
5. ACQUISITION INTEGRATIONS
Dura has developed and implemented the majority of the facility
consolidation plans designed to integrate the operations of past acquisitions.
As of March 31, 2002, purchase liabilities recorded in conjunction with the
acquisitions included approximately $20.3 million for costs associated with the
shutdown and consolidation of certain acquired facilities and $4.7 million for
severance and other related costs. Costs incurred and charged to these reserves
amounted to $3.4 million related to acquired facilities and $0.8 million in
severance and other related costs during the quarter ended March 31, 2002. The
remaining employee terminations and facility closures are expected to be
completed by the end of 2002 except for certain contractual obligations that
extend beyond that date.
- 8 -
6. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
March 31, December 31,
2002 2001
----------------- -----------------
Credit Agreement:
Tranche A and B term loans $ 439,054 $ 454,306
Revolving credit facility -- 62,584
Subordinated notes 538,104 539,700
Other 24,641 19,836
----------------- -----------------
1,001,799 1,076,426
Less - Current maturities (67,901) (60,847)
----------------- -----------------
Total long-term debt $ 933,898 $ 1,015,579
================= =================
In connection with the acquisitions of Adwest and Excel, Dura entered
into an amended and restated $1.15 billion credit agreement (Credit Agreement).
The Credit Agreement provides for revolving credit facilities of $400.0 million,
a $275.0 million tranche A term loan, a $275.0 million tranche B term loan and a
$200.0 million interim term loan facility. As of March 31, 2002, rates on
borrowings under the Credit Agreement are generally based on LIBOR and ranged
from 4.1 percent to 6.3 percent. Borrowings under the tranche A term loan are
due and payable in March 2005 and borrowings under the tranche B term loan are
due and payable in March 2006. The revolving credit facility is available until
March 2005. Borrowings under the interim loan were due and payable in September
2000, and, as further discussed below, were repaid in April 1999. The Credit
Agreement contains various restrictive covenants which limit indebtedness,
investments, rental obligations and cash dividends. The Credit Agreement also
requires Dura to maintain certain financial ratios including minimum liquidity
and interest coverage. Dura was in compliance with the covenants as of March 31,
2002. Borrowings under the Credit Agreement are collateralized by substantially
all assets of Dura (See Note 11).
The Credit Agreement provides Dura with the ability to denominate a
portion of its revolving credit borrowings in foreign currencies up to an amount
equal to $150.0 million. As of March 31, 2002, Dura had no borrowings
outstanding under the revolver.
Dura also utilizes uncommitted overdraft facilities to satisfy the
short-term working capital requirements of its foreign subsidiaries. At March
31, 2002, Dura had unsecured overdraft facilities outstanding of $6.6 million,
which is included in current maturities of long-term debt on the balance sheet.
At March 31, 2002, Dura had unsecured overdraft facilities available from banks
of approximately $26.1 million.
In April 1999, Dura completed the offering of $300.0 million and Euro
100.0 million of 9 percent senior subordinated notes (Subordinated Notes), due
May 2009. The interest on the Subordinated Notes is payable semi-annually. Net
proceeds from this offering of approximately $394.7 million were used to repay
the $200.0 million interim term loan, approximately $78.1 million to retire
other indebtedness and approximately $118.9 million was used for general
corporate purposes. In June 2001, Dura completed a similar offering of 9 percent
senior subordinated notes due May 2009 with a face amount of $158.5 million. The
interest on these
- 9 -
notes is also payable semi-annually. Unamortized discount and debt issuance
costs were approximately $8.5 million, yielding an imputed interest rate of 10
percent. Net proceeds of approximately $147.1 million were used to reduce the
borrowings outstanding under the revolving credit facility. These notes are
collateralized by guarantees of certain of Dura's subsidiaries.
7. BUSINESS COMBINATIONS, GOODWILL AND INTANGIBLE ASSETS
In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 requires all business combinations initiated after June
30, 2001 to be accounted for using the purchase method of accounting. Under SFAS
No. 142 goodwill and intangible assets with indefinite lives are no longer
amortized, but reviewed annually, or more frequently if impairment indicators
arise. Separable intangible assets that are not deemed to have indefinite lives
will continue to be amortized over their useful lives, but with no maximum life.
The amortization provisions of SFAS No. 142 apply to goodwill and intangible
assets acquired after June 30, 2001. With respect to goodwill and intangible
assets acquired prior to July 1, 2001, Dura is required to adopt SFAS No. 142
effective January 1, 2002. Dura has not determined the impact of adopting SFAS
No. 142 on its earnings and financial position, including whether it will be
required to recognize any transitional impairment losses as a cumulative effect
of a change in accounting principle. Had SFAS No. 141 and 142 been effective
January 1, 2001, net income and earnings per share would have been reported as
the following amounts (in thousands, except per share data):
Three months ended
March 31,
----------------------------------
2002 2001
---------------- --------------
Net income, as reported $ 11,224 $ 9,218
Add back goodwill amortization, net of
tax -- 6,036
---------------- --------------
Adjusted net income $ 11,224 $ 15,254
Basic earnings per share:
Net income, as reported $ 0.63 $ 0.52
Goodwill amortization -- 0.34
---------------- --------------
Adjusted net income $ 0.63 $ 0.86
Diluted earnings per share:
Net income, as reported $ 0.61 $ 0.52
Goodwill amortization -- 0.31
---------------- --------------
Adjusted net income $ 0.61 $ 0.83
- 10 -
8. DERIVATIVES AND HEDGING ACTIVITIES
Dura is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. Dura does not enter into derivatives or
other financial instruments for trading or speculative purposes. Dura enters
into financial instruments to manage and reduce the impact of changes in foreign
currency exchange rates and interest rates.
Dura uses forward exchange contracts to hedge its foreign currency
exposure related to the interest payments under its outstanding 100 million Euro
denominated Senior Subordinated Notes. Dura designated these contracts at their
inception as a cash flow hedge. At March 31, 2002, Dura had outstanding
contracts to purchase 9.0 million Euro (approximately $7.8 million),
representing the interest payments due during 2002. The estimated fair value of
these foreign exchange contracts based upon market quotes was approximately $7.8
million. The net realized gain of approximately $0.1 million is included in
accumulated other comprehensive income in the accompanying consolidated March
31, 2002 condensed consolidated balance sheet.
The counter parties to the above agreements are major financial
institutions. Dura does not enter into or hold derivatives for trading or
speculative purposes.
9. COMPREHENSIVE INCOME (LOSS)
Comprehensive income reflects the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For Dura, comprehensive income (loss) represents net
income adjusted for foreign currency translation adjustments and the deferred
gain/ loss on derivative instruments utilized to hedge Dura's interest and
foreign exchange exposures. Comprehensive income (loss) for the periods is as
follows (in thousands):
Three Months Ended
March 31,
------------------------------------
2002 2001
--------------- -----------------
Net income $ 11,224 $ 9,218
Other comprehensive income:
Foreign currency
translation adjustment (7,031) (20,980)
Derivative instruments 403 213
--------------- -----------------
Comprehensive income (loss) $ 4,596 $(11,549)
=============== =================
- 11 -
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION
The following condensed consolidating financial information presents
balance sheets, statements of income and cash flow information related to Dura's
business. Each Guarantor, as defined, is a direct or indirect wholly owned
subsidiary of Dura and has fully and unconditionally guaranteed the 9% senior
subordinated notes issued by Dura Operating Corp., on a joint and several basis.
Separate financial statements and other disclosures concerning the Guarantors
have not been presented because management believes that such information is not
material to investors.
- 12 -
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF MARCH 31, 2002
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
---------- --------- --------- ------------ ------------
Assets
- --------------------------------
Current assets:
Cash and cash equivalents $ 28,312 $ 1,395 $ 11,281 $ -- $ 40,988
Accounts receivable, net 103,048 35,889 172,162 -- 311,099
Inventories 29,078 19,690 60,649 -- 109,417
Other current assets 45,819 1,869 82,823 -- 130,511
Due from affiliates 86,587 66,717 24,304 (177,608) --
---------- --------- ----------- ------------ -------------
Total current assets 292,844 125,560 351,219 (177,608) 592,015
---------- --------- ----------- ------------ -------------
Property, plant and equipment,
net 149,310 53,778 280,041 -- 483,129
Investment in subsidiaries 687,120 20,949 68,334 (776,403) --
Notes receivable from
affiliates 336,529 169,629 70,713 (576,871) --
Goodwill, net 423,447 82,770 441,872 -- 948,089
Other assets, net 54,211 658 24,013 -- 78,882
---------- --------- ----------- ------------ -------------
$1,943,461 $ 453,344 $1,236,192 $(1,530,882) $ 2,102,115
========== ========= =========== ============ =============
Liabilities and Stockholders'
Investment
- --------------------------------
Current liabilities:
Accounts payable $ 106,787 $ 26,357 $ 135,876 -- $ 269,020
Accrued liabilities 95,767 16,346 97,597 -- 209,710
Current maturities of long-
term debt 43,162 50 24,689 -- 67,901
Due to affiliates 91,934 39,441 46,233 (177,608) --
---------- --------- ----------- ------------ -------------
Total current liabilities 337,650 82,194 304,395 (177,608) 546,631
---------- --------- ----------- ------------ -------------
Long-term debt, net of
current maturities 889,060 44 44,794 -- 933,898
Other noncurrent liabilities 61,185 14,111 42,873 -- 118,169
Notes payable to affiliates 90,386 11,931 474,554 (576,871) --
---------- --------- ----------- ------------ -------------
Total liabilities 1,378,281 108,280 866,616 (754,479) 1,598,698
---------- --------- ----------- ------------ -------------
Mandatorily redeemable
convertible trust preferred
securities 55,250 -- -- -- 55,250
Stockholders' investment: 509,930 345,064 369,576 (776,403) 448,167
---------- --------- ----------- ------------ -------------
$1,943,461 $ 453,344 $1,236,192 $(1,530,882) $ 2,102,115
========== ========= =========== ============ =============
- 13 -
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2002
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ---------- --------- ------------ ------------
Revenues $ 274,166 $ 92,937 $ 261,822 $ (12,744) $616,181
Cost of sales 242,065 72,556 237,956 (12,744) 539,833
----------- ---------- --------- ------------ ------------
Gross profit 32,101 20,381 23,866 -- 76,348
Selling, general and
administrative expenses 15,592 3,854 14,821 -- 34,267
Amortization expense 290 2 104 -- 396
----------- ---------- --------- ------------ ------------
Operating income 16,219 16,525 8,941 -- 41,685
Interest expense, net 14,105 (24) 8,465 -- 22,546
----------- ---------- --------- ------------ ------------
Income before provision for
income taxes, equity in
(earnings) of affiliates and
minority interest 2,114 16,549 476 -- 19,139
Provision for income taxes 1,142 5,735 396 -- 7,273
Equity in (earnings) of
affiliates, net (9,884) -- (1,142) 11,026 --
Minority interest-dividends on
trust preferred securities, net 642 -- -- -- 642
Dividends (to)/ from affiliates (1,010) -- -- 1,010 --
----------- ---------- --------- ------------ ------------
Net income $ 11,224 $ 10,814 $ 1,222 $ (12,036) $ 11,224
=========== ========== ========= ============ ===========
- 14 -
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2002
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ---------- --------- ------------ ------------
OPERATING ACTIVITIES:
Net income $ 11,224 $ 10,814 $ 1,222 $ (12,036) $ 11,224
Adjustments to reconcile net
income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 6,883 2,393 9,164 -- 18,440
Deferred income taxes 2,206 -- 4,686 -- 6,892
Equity in (earnings) of affiliates
and minority interest (9,884) -- (1,142) 11,026 --
Changes in other operating
items 42,001 (7,218) (14,048) -- 20,735
----------- ---------- --------- ------------ ------------
Net cash provided by (used
in) operating activities 52,430 5,989 (118) (1,010) 57,291
----------- ---------- --------- ------------ ------------
INVESTING ACTIVITIES:
Net proceeds from disposition of
businesses 32,496 -- -- -- 32,496
Capital expenditures, net (3,365) (1,275) (9,396) -- (14,036)
----------- ---------- --------- ------------ ------------
Net cash provided by (used in)
investing activities 29,131 (1,275) (9,396) -- 18,460
----------- ---------- --------- ------------ ------------
FINANCING ACTIVITIES:
Short-term borrowings
(repayments), net (33) -- 8,146 -- 8,113
Long-term repayments, net (71,410) (12) (5,624) -- (77,046)
Debt financing (to)/from
affiliates 10,155 (4,154) (6,001) -- --
Proceeds from issuance of
common stock and exercise
of stock options 934 -- -- -- 934
Other, net 239 -- -- -- 239
Dividends paid -- (1,010) -- 1,010 --
----------- ---------- --------- ------------ ------------
Net cash provided by (used in)
financing activities (60,115) (5,176) (3,479) 1,010 (67,760)
----------- ---------- --------- ------------ ------------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (3,827) -- 4,535 -- 708
----------- ---------- --------- ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 17,619 (462) (8,458) -- 8,699
CASH AND CASH EQUIVALENTS:
Beginning of period 10,693 1,857 19,739 -- 32,289
----------- ---------- --------- ------------ ------------
End of period $ 28,312 $ 1,395 $ 11,281 -- $ 40,988
=========== ========== ========= ============ ============
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10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 2001
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------- ------------
Assets
- ---------------------------------
Current assets:
Cash and cash equivalents $ 10,693 $ 1,857 $ 19,739 -- $ 32,289
Accounts receivable, net 113,655 25,205 154,616 -- 293,476
Inventories 34,425 17,591 64,492 -- 116,508
Other current assets 47,909 1,249 77,209 -- 126,367
Due from affiliates 149,969 63,358 2,241 $ (215,568) --
----------- ----------- ----------- ------------- ------------
Total current assets 356,651 109,260 318,297 (215,568) 568,640
----------- ----------- ----------- ------------- ------------
Property, plant and equipment,
net 184,461 48,554 283,502 -- 516,517
Investment in subsidiaries 648,053 3,489 66,926 (718,468) --
Notes receivable from
affiliates 278,213 146,409 70,711 (495,333) --
Goodwill, net 429,663 82,769 450,035 -- 962,467
Other assets, net 47,989 510 25,481 -- 73,980
----------- ----------- ----------- ------------- ------------
$ 1,945,030 $ 390,991 $ 1,214,952 $ (1,429,369) $ 2,121,604
=========== =========== =========== ============= ============
Liabilities and Stockholders'
Investment
- ---------------------------------
Current liabilities:
Accounts payable $ 105,430 $ 17,655 $ 126,739 $ $ 249,824
--
Accrued liabilities 71,248 12,522 93,557 -- 177,327
Current maturities of long-
term debt 42,122 50 18,675 -- 60,847
Due to affiliates 65,760 33,999 115,809 (215,568) --
----------- ----------- ----------- ------------- ------------
Total current liabilities 284,560 64,226 354,780 (215,568) 487,998
----------- ----------- ----------- ------------- ------------
Long-term debt, net of
current maturities 962,350 56 53,173 -- 1,015,579
Other noncurrent liabilities 61,117 12,606 46,657 -- 120,380
Notes payable to affiliates 84,625 23,851 386,857 (495,333) --
----------- ----------- ----------- ------------- ------------
Total liabilities 1,392,652 100,739 841,467 (710,901) 1,623,957
----------- ----------- ----------- ------------- ------------
Mandatorily redeemable
convertible trust preferred
securities 55,250 -- -- -- 55,250
Stockholders' investment: 497,128 290,252 373,485 (718,468) 442,397
----------- ----------- ----------- ------------- ------------
$ 1,945,030 $ 390,991 $ 1,214,952 $ (1,429,369) $ 2,121,604
=========== =========== =========== ============= ============
- 16 -
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2001
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
Revenues $ 301,749 $73,926 $ 302,112 $ (15,934) $ 661,853
Cost of sales 259,782 60,364 265,734 (15,934) 569,946
--------- -------- --------- ---------- ---------
Gross profit 41,967 13,562 36,378 -- 91,907
Selling, general and
Administrative expenses 20,298 3,660 13,675 -- 37,633
Facility Consolidation and other
charges 1,616 708 305 -- 2,629
Amortization expense 2,926 929 3,144 -- 6,999
--------- -------- --------- ---------- ---------
Operating income 17,127 8,265 19,254 -- 44,646
Interest expense, net 16,179 658 11,696 -- 28,533
--------- -------- --------- ---------- ---------
Income before provision for
income taxes, equity in
(earnings) losses of
affiliates and minority interest 948 7,607 7,558 -- 16,113
Provision for income taxes 975 2,368 2,941 -- 6,284
Minority interests and equity in
(earnings) losses of affiliates,
net (9,856) -- (715) 10,571 --
Minority interest-dividends on
trust preferred securities, net 611 -- -- -- 611
Dividends (to)/from affiliates -- (682) (683) 1,365 --
--------- -------- --------- ---------- ---------
Net income $ 9,218 $ 5,921 $ 6,015 $ (11,936) $ 9,218
========= ======== ========= ========== ==========
- 17 -
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR
FINANCIAL INFORMATION: (Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2001
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
OPERATING ACTIVITIES:
Net income $ 9,218 $ 5,921 $ 6,015 $ (11,936) $ 9,218
Adjustments to reconcile net
Income to net cash
Provided by operating
activities:
Depreciation and amortization 9,313 2,843 11,539 -- 23,695
Deferred income taxes (480) 346 224 -- 90
Equity in losses of affiliates
and minority interest (9,856) -- (715) 10,571 --
Changes in other operating
items 31,092 1,309 (28,141) -- 4,260
-------- -------- --------- --------- --------
Net cash provided by
operating activities 39,287 10,419 (11,078) (1,365) 37,263
-------- -------- --------- --------- --------
INVESTING ACTIVITIES:
Capital expenditures, net (2,559) (1,401) (11,216) -- (15,176)
-------- -------- --------- --------- --------
Net cash used in investing
activities (2,559) (1,401) (11,216) -- (15,176)
-------- -------- --------- --------- --------
FINANCING ACTIVITIES:
Short-term borrowings
(repayments), net (447) 53 (4,027) -- (4,421)
Long-term borrowings
(repayments), net (58,178) 90 19,528 -- (38,560)
Debt financing (to)/from
affiliates 14,103 (8,087) (6,016) -- --
Proceeds from issuance of
common stock and exercise
of stock options 109 -- -- -- 109
Dividends paid -- (682) (683) 1,365 --
-------- -------- --------- --------- --------
Net cash provided by (used in)
financing activities (44,413) (8,626) 8,802 1,365 (42,872)
-------- -------- --------- --------- --------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (5,920) -- 6,347 -- 427
-------- -------- --------- --------- --------
NET CHANGE IN CASH
AND CASH EQUIVALENTS (13,605) 392 (7,145) -- (20,358)
CASH AND CASH
EQUIVALENTS:
Beginning of period 18,154 1,060 11,224 -- 30,438
-------- -------- --------- --------- --------
End of period $ 4,549 $ 1,452 $ 4,079 $ -- $ 10,080
======== ======== ========= ========= ========
- 18 -
11. SUBSEQUENT EVENT
In April 2002, Dura completed the offering of $350.0 million 8 5/8
percent senior unsecured notes (Senior Notes), due April 2012. The interest on
the Senior Notes is payable semi-annually. Net proceeds from this offering of
approximately $341.0 million were used to repay the outstanding balance of the
$275.0 million tranche A term loan, and a portion of the $275.0 million tranche
B term loan. Dura then replaced the remaining tranche B term loan with a $150.0
million tranche C term loan. Borrowings under the tranche C term loan are based
on LIBOR and are due and payable in December 2008. In conjunction with these
transactions, Dura obtained an amendment to the Credit Agreement to allow for
the offering and to further relax certain financial covenants. Dura also entered
into a fixed to floating interest rate swap (notional amount of $325.0 million)
with various financial institutions that more closely mirrors the cost of its
bank debt to enhance the economics of the offering. In connection with the
repayment of borrowings outstanding under the Credit Agreement, Dura wrote-off
deferred financing costs of approximately $3.4 million, net of income taxes,
during the second quarter of 2002. This write-off will be reflected as an
extraordinary item in Dura's second quarter 2002 consolidated statement of
income.
In May 2002, Dura divested its Steering Gear Business. The Steering Gear
Business is a machining operation that utilized a technology that was determined
to be non-essential to Dura's capabilities. This business employs approximately
200 people at a facility located in Woodley, England and generates annual
revenue of approximately $20.0 million. The transaction will result in a
one-time charge of approximately $22.0 million in the second quarter of 2002
consisting of asset write-downs and contractual commitments.
- 19 -
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
North American automotive production volumes proved to be solid during the first
quarter of 2002 and the outlook remains promising. European automotive
production volumes, however, are down versus prior year and the outlook is less
certain. We anticipate that 2002 will continue to be a challenging environment
and we believe that our ability to reduce costs and deliver quality products has
prepared us for the conditions this uncertain market may present to us.
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations (MD&A) should be read in conjunction with the MD&A
included in our Annual Report on Form 10-K for the year ended December 31, 2001.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2002 TO THE THREE MONTHS ENDED
MARCH 31, 2001
Revenues - Revenues for the three months ended March 31, 2002 were $616.2
million, a decrease of $45.7 million, or 6.9%, from $661.9 million for the three
months ended March 31, 2001. Factors that unfavorably impacted revenue in 2002
included the divestiture of our Plastic Products, Australia and Thixotech
businesses, the weakness in the European automotive industry and the weakening
of the European currencies in relation to the US dollar.
Cost of Sales - Cost of sales for the three months ended March 31, 2002 were
$539.8 million, a decrease of $30.1 million, or 5.3%, from $569.9 million for
the three months ended March 31, 2001. Cost of sales as a percentage of revenues
for the first quarter of 2002 increased to 87.6% compared to 86.1% in the first
quarter of 2001. The corresponding reduction in gross margin is primarily the
result of the lingering effects of difficult program launches in Europe that
occurred during the later part of 2001.
Facility Consolidation and Other Charges - Throughout 2000 and 2001 Dura
evaluated manufacturing capacity issues and opportunities for cost reduction
given the reduced demand in the North America automotive and recreational
vehicle markets and the available capacity within Dura's operations. In
continuation of the actions taken in 2000, Dura recorded $2.4 million of
additional restructuring charges in the first quarter of 2001 and $2.0 million
relating to employee severance in the fourth quarter of 2001. Dura also expensed
as incurred approximately $0.2 million of equipment relocation costs incurred
during the first quarter of 2001. Dura funded these expenditures through cash
flow from operations.
Selling, General, and Administrative - Selling, general, and administrative
expenses for the three months ended March 31, 2002 were $34.3 million a decrease
of $3.4 million, or 8.9%, from $37.6 million for the three months ended March
31, 2001. As a percentage of revenue, selling, general and administrative
expenses decreased to 5.6% for 2002 compared to 5.7% in the first of 2001. The
decrease in cost is primarily the result of the salaried headcount reductions
that occurred during the first and fourth quarters of 2001.
- 20 -
Amortization Expense - Amortization expense for the three months ended March 31,
2002, was $0.4 million a decrease of $6.6 million, or 94.3%, from $7.0 million
for the three months ended March 31, 2001. The decrease is the result of Dura
adopting SFAS No. 142 "Goodwill and Other Intangible Assets". Under SFAS No. 142
goodwill and intangible assets with indefinite lives are no longer amortized,
but reviewed annually, or more frequently if impairment indicators arise (See
Adoption of SFAS No. 142 below).
Interest Expense - Interest expense for the three months ended March 31, 2002
was $22.5 million a decrease of $6.0 million, or 21.0%, from $28.5 million for
the three months ended March 31, 2001. The decrease in interest expense is due
to lower interest rates on LIBOR contracts and debt pay-down during 2001 and the
first three months of 2002. This decrease was slightly offset by the higher
interest cost related to the additional issuance of $158.5 million of Senior
Subordinated Notes (see below).
Income Taxes - The effective income tax rate was 38.0% for the three months
ended March 31, 2002 and 39.0% for the three months ended March 31, 2001. The
effective income tax rate decreased as a result of the impact of adopting SFAS
No. 142 offset by a change in the mix of income by tax jurisdiction. The overall
effective rates differed from the statutory rates as a result of lower combined
foreign tax rates and the effects of state taxes.
Minority Interest - Minority interest for the three months ended March 31, 2002
and March 31, 2001 represents dividends, net of income tax benefits, on the 7
1/2 percent Convertible Trust Preferred Securities ("Preferred Securities")
which were issued on March 20, 1998.
Adoption of SFAS No. 141 and 142 - In July 2001, the Financial Accounting
Standards Board issued SFAS No. 141, "Business Combinations," and SFAS No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 141 requires all business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method of accounting. Under SFAS No. 142 goodwill and intangible assets
with indefinite lives are no longer amortized, but reviewed annually, or more
frequently if impairment indicators arise. Separable intangible assets that are
not deemed to have indefinite lives will continue to be amortized over their
useful lives, but with no maximum life. The amortization provisions of SFAS No.
142 apply to goodwill and intangible assets acquired after June 30, 2001. With
respect to goodwill and intangible assets acquired prior to July 1, 2001, Dura
is required to adopt SFAS No. 142 effective January 1, 2002. Dura has not
determined the impact of adopting SFAS No. 142 on its earnings and financial
position, including whether it will be required to recognize any transitional
impairment losses as a cumulative effect of a change in accounting principle.
Had SFAS No. 141 and 142 been effective January 1, 2001, net income and earnings
per share would have been reported as the following amounts (in thousands,
except per share data):
- 21 -
Three months ended
March 31,
----------------------------------
2002 2001
---------------- --------------
Net income, as reported $ 11,224 $ 9,218
Add back goodwill amortization, net of
tax -- 6,036
---------------- --------------
Adjusted net income $ 11,224 $ 15,254
Basic earnings per share:
Net income, as reported $ 0.63 $ 0.52
Goodwill amortization -- 0.34
---------------- --------------
Adjusted net income $ 0.63 $ 0.86
Diluted earnings per share:
Net income, as reported $ 0.61 $ 0.52
Goodwill amortization -- 0.31
---------------- --------------
Adjusted net income $ 0.61 $ 0.83
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 2002, Dura provided cash from operations of
$57.3 million, compared to $37.3 million in 2001. Cash generated from operations
before changes in working capital items was $36.6 million for the first three
months of 2002 compared to $33.0 million for 2001. Working capital generated
cash of $20.7 million in the first three months of 2002 compared to requiring
$4.3 million in 2001. The improvement in working capital is primarily the result
of Dura's continued focus on reducing accounts receivable and inventory levels
during 2002.
Net cash provided by investing activities was $18.5 million for the first three
months of 2002 as compared to a use of $15.2 million in 2001. Net proceeds from
disposition of businesses provided $32.5 million and net capital expenditures
totaled $14.0 million for the first three months of 2002. The capital
expenditures were primarily for equipment and dedicated tooling purchases
related to new or replacement programs. This compares with net capital
expenditures of $15.2 million in 2001.
Net cash used in financing activities totaled $67.8 million for the first three
months of 2002 compared with $42.9 million in 2001, principally for the
repayment of outstanding indebtedness.
In connection with the acquisitions of Adwest and Excel, Dura entered into an
amended and restated $1.15 billion credit agreement ("Credit Agreement"). The
Credit Agreement provides for revolving credit facilities of $400.0 million, a
$275.0 million tranche A term loan, a $275.0 million tranche B term loan and a
$200.0 million interim term loan facility. As of March 31, 2002, rates on
borrowings under the Credit Agreement ranged from 4.1% to 6.3%. Borrowings under
the tranche A term loan are due and payable in March 2005 and borrowings under
the tranche B term loan are due and payable in March 2006. The revolving credit
facility is available until March 2005. Borrowings under the interim loan were
repaid in April 1999.
- 22-
The Credit Agreement contains various restrictive covenants that limit
indebtedness, investments, rental obligations and cash dividends. The Credit
Agreement also requires Dura to maintain certain financial ratios including
minimum liquidity and interest coverage. Dura was in compliance with the
covenants as of March 31, 2002. Borrowings under the Credit Agreement are
collateralized by substantially all assets of Dura.
The Credit Agreement provides Dura with the ability to denominate a portion of
its revolving credit borrowings in foreign currencies up to an amount equal to
$150.0 million. As of March 31, 2002, Dura had no borrowings outstanding under
the revolver.
At March 31, 2002, Dura had unused borrowing capacity of approximately $382.2
million of which $39.3 million was available under its most restrictive debt
covenant. Dura also utilizes uncommitted overdraft facilities to satisfy the
short-term working capital requirements of its foreign subsidiaries. At March
31, 2002, Dura had unsecured overdraft facilities outstanding of $6.6 million,
which is included in current maturities of long-term debt on the balance sheet.
At March 31, 2002, Dura had unsecured overdraft facilities available from banks
of approximately $26.1 million. The average interest rate on the outstanding
overdraft facilities at March 31, 2002 was approximately 5.0%. Dura believes the
borrowing availability under its credit agreement, uncommitted overdraft
facilities and funds generated by operations, should provide liquidity and
capital resources to pursue its business strategy for the foreseeable future,
with respect to working capital, capital expenditures, and other operating
needs. Dura estimates its 2002 capital expenditures will be approximately $80.0
million.
In April 1999, Dura completed the offering of $300 million and Euro 100 million
of senior subordinated notes ("Subordinated Notes"). The Subordinated Notes
mature in May 2009 and bear interest at 9% per year, which is payable
semi-annually. Net proceeds from this offering of approximately $394.7 million
were used to repay the $200.0 million interim term loan, approximately $78.1
million to retire other indebtedness and approximately $118.9 million will be
used for general corporate purposes. In June 2001, Dura completed a similar
offering of 9% senior subordinated notes due May 2009 with a face amount of
$158.5 million. The interest on these notes is also payable semi-annually.
Unamortized discount and debt issuance costs were $8.5 million, yielding an
imputed interest rate of 10%. Net proceeds of approximately $147.1 million were
used to reduce the borrowings outstanding under the revolving credit facility.
These notes are collateralized by guarantees of certain of Dura's subsidiaries.
Dura is limited as to its ability to declare or make certain dividend payments
or other distributions of assets under its Credit Agreement and Subordinated
Notes. Certain distributions relating to items such as; a company stock purchase
program, tax sharing arrangements and as required under Dura's Trust Preferred
Securities are permitted.
SUBSEQUENT EVENT
In April 2002, Dura completed the offering of $350.0 million 8 5/8 percent
senior unsecured notes (Senior Notes), due April 2012. The interest on the
Senior Notes is payable semi-annually. Net proceeds from this offering of
approximately $341.0 million were used to repay the outstanding balance of the
$275.0 million tranche A term loan, and a portion of the 275.0 million tranche B
term loan. Dura then replaced the remaining tranche B term loan with a $150.0
million tranche C term loan. Borrowings under the tranche C term loan are based
on LIBOR and are due
- 23 -
and payable in December 2008. In conjunction with these transactions, Dura
obtained an amendment to the Credit Agreement to allow for the offering and to
further relax certain financial covenants. Dura also entered into a fixed to
floating interest rate swap (notional amount of $325.0 million) with various
financial institutions that more closely mirrors the cost of its bank debt to
enhance the economics of the offering. In connection with the repayment of
borrowings outstanding under the Credit Agreement, Dura wrote-off deferred
financing costs of approximately $3.4 million, net of income taxes, during the
second quarter of 2002. This write-off will be reflected as an extraordinary
item in Dura's second quarter 2002 consolidated statement of income.
In May 2002, Dura divested its Steering Gear Business. The Steering Gear
Business is a machining operation that utilized a technology that was determined
to be non-essential to Dura's capabilities. This business employs approximately
200 people at a facility located in Woodley, England and generates annual
revenue of approximately $20.0 million. The transaction will result in a
one-time charge of approximately $22.0 million in the second quarter of 2002
consisting of asset write-downs and contractual commitments.
QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY
Dura typically experiences decreased revenues and operating income during the
third calendar quarter of each year due to production shutdowns at OEMs for
model changeovers and vacations. The recreational vehicle market is seasonal in
that sales in the fourth quarter are normally at reduced levels.
EFFECTS OF INFLATION
Inflation potentially affects Dura in two principal ways. First, a significant
portion of Dura's debt is tied to prevailing short-term interest rates which may
change as a result of inflation rates, translating into changes in interest
expense. Second, general inflation can impact material purchases, labor and
other costs. In many cases, Dura has limited ability to pass through
inflation-related cost increases due to the competitive nature of the markets
that Dura serves. In the past few years, however, inflation has not been a
significant factor.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of Dura's revenues during the three months ended March 31,
2002 was derived from manufacturing operations in Europe, Canada and Latin
America. The results of operations and the financial position of Dura's
operations in these countries are principally measured in their respective
currency and translated into U.S. dollars. The effects of foreign currency
fluctuations in such countries are somewhat mitigated by the fact that expenses
are generally incurred in the same currencies in which revenues are generated.
The reported income of these subsidiaries will be higher or lower depending on a
weakening or strengthening of the U.S. dollar against the respective foreign
currency.
A significant portion of Dura's assets at March 31, 2002 are based in its
foreign operations and are translated into U.S. dollars at foreign currency
exchange rates in effect as of the end of each period, with the effect of such
translation reflected as a separate component of stockholders' investment.
Accordingly, Dura's consolidated stockholders' investment will fluctuate
depending upon the weakening or strengthening of the U.S. dollar against the
respective foreign currency.
- 24 -
Dura's strategy for management of currency risk relies primarily upon conducting
its operations in such countries' respective currency and Dura may, from time to
time, engage in hedging programs intended to reduce Dura's exposure to currency
fluctuations.
NEW ACCOUNTING PRONOUNCEMENT
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement requires recognition of a liability for any legal
obligations associated with the retirement of a tangible long-lived asset. Any
such liability will be recorded at fair value when incurred and generally
results in an increase to the carrying amount of the related long-lived asset.
This statement will be effective for Dura for the year ending December 31, 2003.
The adoption of this statement will not have a material effect on our results of
operations or financial position.
FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this Form
10-Q, including without limitation the statements under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" are, or may be
deemed to be, forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. When used in this Form 10-Q, the words "anticipate," "believe,"
"estimate," "expect," "intends," and similar expressions, as they relate to
Dura, are intended to identify forward-looking statements. Such forward-looking
statements are based on the beliefs of Dura's management as well as on
assumptions made by and information currently available to Dura at the time such
statements were made. Various economic and competitive factors could cause
actual results to differ materially from those discussed in such forward-looking
statements, including factors which are outside the control of Dura, such as
risks relating to: (i) the degree to which Dura is leveraged; (ii) Dura's
reliance on major customers and selected models; (iii) the cyclicality and
seasonality of the automotive market; (iv) the failure to realize the benefits
of recent acquisitions and joint ventures; (v) obtaining new business on new and
redesigned models; (vi) Dura's ability to continue to implement its acquisition
strategy; and (vii) the highly competitive nature of the automotive supply
industry. All subsequent written and oral forward-looking statements
attributable to Dura or persons acting on behalf of Dura are expressly qualified
in their entirety by such cautionary statements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to our exposures to market risk since
December 31, 2001.
- 25 -
PART II. OTHER INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
Other than as reported in Dura's 2001 Annual Report on Form 10-K under
the caption "Legal Proceedings," Dura is not currently a party to any
material pending legal proceedings, other than routine matters
incidental to the business of Dura.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
10.1 Second Amendment to Amended and Restated Credit Agreement dated
as of June 15, 2001 among Dura Automotive Systems, Inc., as
Parent Guarantor, Dura Operating Corp., Dura Holding Germany
GmbH, Dura Asia-Pacific Pty Limited ACN 004 884 539, Dura
Automotive Systems (Canada), Ltd., Trident Automotive Limited,
Dura Automotive Systems Limited, Spicebright Limited, Dura
Automotive Systems Cable Operations Inc., Moblan Investments
B.V., Dura Automotive Acquisition Limited, Dura Automotive
Holding GmbH & Co. KG, and Adwest France, S.A.; Bank of America
National Trust and Savings Association, as Agent, BA Australia
Limited, as Australian Lender, Bank of America Canada, as
Canadian Lender, Bank of America National Trust and Savings
Association, as Swing Line Lender and Issuing Lender, and the
other financial institutions party hereto; NationsBanc Montgomery
Securities LLC, as Lead Arranger and Book Manager.
10.2 Third Amendment to Amended and Restated Credit Agreement dated as
of August 24, 2001 among Dura Automotive Systems, Inc., as Parent
Guarantor, Dura Operating Corp., Dura Holding Germany GmbH, Dura
Automotive Systems (Canada), Ltd., Trident Automotive Limited,
Dura Automotive Systems Limited, Spicebright Limited, Dura
Automotive Systems Cable Operations Inc., Moblan Investments
B.V., Dura Automotive Acquisition Limited, Dura Automotive
Holding GmbH & Co. KG, and Adwest France, S.A.; Bank of America
National Trust and Savings Association, as Agent, BA Australia
Limited, as Australian Lender, Bank of America Canada, as
Canadian Lender, Bank of America National Trust and Savings
Association, as Swing Line Lender and Issuing Lender, and the
other financial institutions party hereto; NationsBanc Montgomery
Securities LLC, as Lead Arranger and Book Manager.
10.3 Fourth Amendment to Amended and Restated Credit Agreement dated
as of April 17, 2002 among Dura Automotive Systems, Inc., as
Parent Guarantor, Dura Operating Corp., Dura Holding Germany
GmbH, Dura Automotive Systems (Canada), Ltd., Trident Automotive
Limited, Dura Automotive Systems Limited, Spicebright Limited,
Dura Automotive Systems Cable Operations Inc., Moblan Investments
B.V., Dura Automotive Acquisition Limited, Dura Automotive
Holding GmbH & Co. KG, and Adwest France, S.A.; Bank of America
National Trust and Savings Association, as Agent, BA Australia
Limited, as Australian Lender, Bank of America Canada, as
Canadian Lender, Bank of America National Trust and
- 26 -
Savings Association, as Swing Line Lender and Issuing Lender, and
the other financial institutions party hereto; NationsBanc
Montgomery Securities LLC, as Lead Arranger and Book Manager.
10.4 Supplemental Indenture, dated as of February 21, 2002, by and
among Dura G.P., a Delaware general partnership, Dura Operating
Corp., a Delaware corporation, Dura Automotive Systems, Inc., a
Delaware corporation, Dura Automotive Systems Cable Operations,
Inc., a Delaware corporation, Universal Tool & Stamping Company
Inc., an Indiana corporation, Adwest Electronics, Inc., a
Delaware corporation, Dura Automotive Systems of Indiana, Inc. an
Indiana corporation, Atwood Automotive Inc., a Michigan
corporation and Mark I Molded Plastics of Tennessee, Inc. a
Tennessee corporation, Atwood Mobile Products, Inc., an Illinois
corporation, and U.S. Bank Trust National Association, as trustee
under the Indentures.
10.5 Tranche C term loan supplement to amended and restated credit
agreement dated as of April 18, 2002 is entered into among
Dura Operating Corp., the financial institutions listed on the
signature pages hereof, and Bank of America, N.A., as agent
for the Lenders under the Agreement.
10.6 Master Assignment and Acceptance Agreement (Tranche C Term
Loan) dated as of April 24, 2002 is made between Bank of America,
N.A. and each of the parties listed on Annex I hereto.
(b) Reports on Form 8-K
During the quarter for which this report is filed, Dura filed the
following Form 8-K Current Report with the Securities and Exchange
Commission:
1. Dura's current report on Form 8-K dated January 29,
2002, under Item 5 (Commission File No. 0-21139).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: May 15, 2002 By /s/ David Bovee
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David Bovee
Vice President, Chief Financial Officer
(principal accounting and financial
officer)
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EXHIBIT INDEX
Exhibit Number Exhibit Description
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10.1 Second Amendment to Amended and Restated Credit Agreement
dated as of June 15, 2001 among Dura Automotive Systems,
Inc., as Parent Guarantor, Dura Operating Corp., Dura Holding
Germany GmbH, Dura Asia-Pacific Pty Limited ACN 004 884 539,
Dura Automotive Systems (Canada), Ltd., Trident
Automotive Limited, Dura Automotive Systems Limited,
Spicebright Limited, Dura Automotive Systems Cable Operations
Inc., Moblan Investments B.V., Dura Automotive Acquisition
Limited, Dura Automotive Holding GmbH & Co. KG, and Adwest
France, S.A.; Bank of America National Trust and Savings
Association, as Agent, BA Australia Limited, as Australian
Lender, Bank of America Canada, as Canadian Lender, Bank of
America National Trust and Savings Association, as Swing Line
Lender and Issuing Lender, and the other financial
institutions party hereto; NationsBanc Montgomery Securities
LLC, as Lead Arranger and Book Manager.
10.2 Third Amendment to Amended and Restated Credit Agreement
dated as of August 24, 2001 among Dura Automotive Systems,
Inc., as Parent Guarantor, Dura Operating Corp., Dura Holding
Germany GmbH, Dura Automotive Systems (Canada), Ltd., Trident
Automotive Limited, Dura Automotive Systems Limited,
Spicebright Limited, Dura Automotive Systems Cable Operations
Inc., Moblan Investments B.V., Dura Automotive Acquisition
Limited, Dura Automotive Holding GmbH & Co. KG, and Adwest
France, S.A.; Bank of America National Trust and Savings
Association, as Agent, BA Australia Limited, as Australian
Lender, Bank of America Canada, as Canadian Lender, Bank of
America National Trust and Savings Association, as Swing Line
Lender and Issuing Lender, and the other financial
institutions party hereto; NationsBanc Montgomery Securities
LLC, as Lead Arranger and Book Manager.
10.3 Fourth Amendment to Amended and Restated Credit Agreement
dated as of April 17, 2002 among Dura Automotive Systems,
Inc., as Parent Guarantor, Dura Operating Corp., Dura Holding
Germany GmbH, Dura Automotive Systems (Canada), Ltd., Trident
Automotive Limited, Dura Automotive Systems Limited,
Spicebright Limited, Dura Automotive Systems Cable Operations
Inc., Moblan Investments B.V., Dura Automotive Acquisition
Limited, Dura Automotive Holding GmbH & Co. KG, and Adwest
France, S.A.; Bank of America National Trust and Savings
Association, as Agent, BA Australia Limited, as Australian
Lender, Bank of America Canada, as Canadian Lender, Bank of
America National Trust and Savings Association, as Swing Line
Lender and Issuing Lender, and the other financial
institutions party hereto; NationsBanc Montgomery Securities
LLC, as Lead Arranger and Book Manager.
10.4 Supplemental Indenture, dated as of February 21, 2002, by and
among Dura G.P., a Delaware general partnership, Dura
Operating Corp., a Delaware corporation, Dura Automotive
Systems, Inc., a Delaware corporation, Dura Automotive Systems
Cable Operations, Inc., a Delaware corporation, Universal Tool
& Stamping Company Inc., an Indiana corporation, Adwest
Electronics, Inc., a Delaware corporation, Dura Automotive
Systems of Indiana, Inc. an Indiana corporation, Atwood
Automotive Inc., a Michigan corporation and Mark I Molded
Plastics of Tennessee, Inc. a Tennessee corporation, Atwood
Mobile Products, Inc., an Illinois corporation, and U.S. Bank
Trust National Association, as trustee under the Indentures.
10.5 Tranche C term loan supplement to amended and restated credit
agreement dated as of April 18, 2002 is entered into among
Dura Operating Corp., the financial institutions listed on the
signature pages hereof, and Bank of America, N.A., as agent
for the Lenders under the Agreement.
10.6 Master Assignment and Acceptance Agreement (Tranche C Term
Loan) dated as of April 24, 2002 is made between Bank of
America, N.A. and each of the parties listed on Annex I
hereto.