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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
___ THE SECURITIES EXCHANGE ACT OF 1934.
For the fiscal year ended March 31, 1998
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 333-32975
OXFORD AUTOMOTIVE, INC.
(Exact name of Registrant as specified in its charter)
MICHIGAN 38-3262809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 STEPHENSON HIGHWAY, TROY MICHIGAN 48083
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 577-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant has been required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant, computed by reference to the book value of
the Registrant's common stock as of March 31, 1998 (because there is no market
for the Registrant's common stock) was $3,076,977.
At June 1, 1998, there were outstanding 309,750 shares of the Registrant's
common stock.
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PART I
ITEM 1. BUSINESS.
GENERAL
Oxford Automotive, Inc., a Michigan corporation ("Oxford Automotive"
and together with its consolidated subsidiaries the "Company") is a leading
Tier 1 or direct supplier of high-quality, engineered metal components,
assemblies and modules used by original equipment automotive manufacturers
("OEMs"). The Company's core products are complex, high value-added products,
primarily assemblies containing multiple stamped parts, forgings and various
welded, hemmed or fastened components. These products which include large
structural stampings and assemblies, including exposed ("Class A") surfaces,
leaf springs and smaller complex welded assemblies, are used in manufacturing a
variety of sport utility vehicles ("SUVs"), light and medium trucks, mini-vans,
vans and passenger cars. The Company is the sole source supplier of these
products to its customers. The Company had net sales of $410.3 million for the
fiscal year ended March 31, 1998. Based on net sales, management believes the
Company is one of the ten largest suppliers of stampings to the North American
automotive market.
The Company's five largest customers, General Motors Corporation
("GM"), Ford Motor Company ("Ford"), Chrysler Corporation ("Chrysler"), CAMI (a
joint venture of GM and Suzuki Motor Corporation ("Suzuki")) and The Saturn
Corporation ("Saturn"), accounted for approximately 54%, 31%, 9%, 2%, and 2%,
respectively of the Company's net sales for the fiscal year ended March 31,
1998. The Company has been providing products directly to GM and Ford for more
than 50 years and has earned outstanding commercial ratings for its
high-quality standards, including GM's Supplier of the Year and Mark of
Excellence Awards, Ford's Q1 Award and CAMI's President's Award. The Company
also sells its products to other Tier 1 suppliers. For the fiscal year ended
March 31, 1998, approximately 77% of the Company's net sales were derived from
sales of its products manufactured for SUVs, mini-vans, vans and light trucks.
In recent years, SUVs, mini-vans, vans and light trucks have experienced
stronger growth in vehicle production as compared to the passenger car sector.
This sector includes those platforms and models which have strong consumer
demand, such as GM's popular C/K platform (full-size pickups and the
Yukon/Tahoe/Suburban models), Ford's Ranger, Explorer and Windstar and
Chrysler's Ram pickup and Mini-van. See Note 16 of Notes to Consolidated
Financial Statements included in this Report for a description of the
Company's domestic and export sales.
Prior to August 1997, the Company conducted its business through two
principal operations, BMG North America Limited ("BMG") and Lobdell Emery
Corporation ("Lobdell"). The Company's recent acquisitions significantly
strengthen the Company's position as a leading Tier 1 supplier of assemblies
and modules to the OEMs. These strategic combinations provide the Company with
the critical mass and capabilities in the areas of design and engineering,
sales and marketing, and product expertise which provide the basis for the
Company's strategy of becoming a fully-integrated, global systems supplier. The
Company has already implemented a successful, focused sales and marketing
initiative, which commenced concurrently with the operational improvements at
BMG. As a result, the Company has been awarded the door assemblies and the
side panel package for the new Saturn LS Program (the "LS Program"), the new
vehicle which Saturn is launching in 1999 based upon the current Opel Vectra.
Management believes these awards from Saturn will generate approximately $65.0
million of annual net sales beginning with the 1999 model year. In addition,
the Company was recently awarded the door, hood, and underbody assemblies for
the GMT 250 Program (Pontiac Recon, Buick Signia) (the "GMT 250 Program").
This program, a new GM platform, will be produced solely in Mexico and
management believes will generate approximately $85.0 million of annual net
sales beginning in 1999.
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The Company currently operates 17 manufacturing facilities (including
three facilities acquired in connection with the Suspension Division, described
below), which offer the latest technologies in metal stamping, forging,
welding and assembly production equipment, including fully-automated hydraulic
and wide-bed press lines (up to 180 inches), robotic welding cells, robotic
hemming, autophoretic corrosion resistant coating, and a patented eye forming
process. The Company also has the world-wide exclusive rights (outside the
CIS-formerly Soviet Union) to the "MAZ" tapering process for its suspension
applications. Since 1992, the Company has invested in excess of $110 million in
capital investments to support sales growth, expand production capabilities and
improve efficiency and flexibility. The Company's diverse line of over 380
presses that range up to 2,600 tons and both include conventional and transfer
technology and state-of-the-art robotic weld assembly and hemming equipment are
capable of manufacturing a broad assortment of parts and assemblies ranging
from simple stampings to full-size, Class A door and closure panels. The
Company is one of a few independent suppliers that has the ability to produce
large, complex stampings, as well as the technical expertise and automated
assembly capabilities to provide high value-added modules such as door
apertures and assemblies, A-pillars, Class A surface products, control arms,
and multiple leaf and parabolic leaf springs. The Company is currently planning
the addition of a new 300,000 sq. ft. facility in Ramos Arizpe, Mexico to
support the GMT 250 Program and other opportunities in the Mexican market.
BUSINESS STRATEGY
The principal objective of the Company is to be a leading,
full-service, global Tier 1 supplier of integrated systems based on metal
forming and related manufacturing technologies. Management believes that the
Company is well positioned to benefit from two significant trends in the
stamping and metal forming segments of the automotive industry: outsourcing and
consolidation. Outsourcing of metal stamping has increased in response to
competitive pressures on OEMs to improve quality and reduce capital
requirements, labor costs, overhead and inventory. Consolidation among
automotive industry suppliers has occurred as OEMs have more frequently awarded
long-term sole source contracts to the most capable global suppliers. In
addition, OEMs are increasingly seeking systems suppliers who can provide a
complete package of design, engineering, manufacturing and project management
support for an integrated system (such as a front-end system). The Company
intends to capitalize on these trends through internal development and
strategic acquisitions. The key elements of the Company's strategy include the
following:
Provide Full-Service Program Capability. The Company is focused on
developing full-service program capabilities. The Company works with OEMs
throughout the product development process from concept and prototype
development through the design and implementation of manufacturing processes.
The Company believes that its ability to provide the package of design,
engineering, prototyping, tooling, blanking, stamping, forging, assembly, and
corrosion resistant coating to its customers creates a unique capability
present in only a limited number of suppliers. The Company believes this
capability will enable it to manage large programs, assist it in reducing
customer program launch time, lower customer costs and increase its margins.
Supply Complex, High Value-Added Systems. As a result of the Company's
technical design and engineering capabilities and its reputation for
highly-efficient manufacturing operations, the Company is able to secure supply
relationships for complex, high value-added products, primarily assemblies and
modules that contain multiple stamped parts and various welded, hemmed or
fastened components. For example, the Company produces the rear door for GM's
Yukon/Tahoe/Suburban vehicles, the lower control arm for GM's four wheel drive
C/K vehicles, the control arm assemblies for Ford's F-Series pickups and
Chrysler's T-300, the radiator support assembly for GM's W-car (Grand Prix,
Century, Lumina, Monte Carlo and Intrigue), complex A-pillar assemblies for the
Ford Mustang and the Ford Ranger pickup, and multiple leaf, parabolic (long
taper) multiple leaf, and single leaf long taper suspension systems for
products ranging from Ford's F-Series pickups to Chrysler's mini- vans. These
complex products typically generate higher dollar content per vehicle as well
as higher margins for the Company as compared to simple, individual stampings.
The Company plans to capitalize on its ability to develop and provide
integrated modules and assemblies to deliver to the OEMs an integrated product
such as a complete
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door or front-end system. In addition to doors, radiator supports and Class A
surface components, the Company believes it has unique expertise with respect
to control arms and leaf springs, which it will further develop as a fully
integrated suspension system.
Focus on High Growth Vehicle Categories. The Company's sales and
marketing efforts have been, and will continue to be, directed toward sectors
of the automotive market that have experienced strong consumer demand. For the
fiscal year ended March 31, 1998, approximately 77% of the Company's net sales
were derived from sales of products manufactured for SUVs, mini-vans, vans and
light trucks. Similarly, the Company's sales to the passenger car market have
been, and will continue to be, directed to the segments with stronger sales
growth, including Saturn cars.
Establish a Global Presence. The Company is actively pursuing
strategic acquisitions and joint-venture opportunities in Europe and intends to
pursue opportunities which will allow the Company to increase its presence in
South America, and to establish a presence in Asia and other markets in order to
serve its customers on a global basis. Several OEMs have announced certain
models designed for the world automobile market ("World Car"). As a result, the
OEMs have encouraged their existing suppliers to establish foreign production
support for World Car programs. This globalization provides access to new
customers and technology, as well as economic cycle diversification. The
Company has established a presence in Mexico and Venezuela and currently
provides components for OEMs doing business in Mexico and South America.
Pursue Strategic Acquisitions. In response to the trend in the OEM
market toward "systems suppliers," the Company is focused on making strategic
acquisitions that will enhance the Company's ability to provide integrated
systems (such as a door or front end systems) or otherwise leverage its
existing business by providing additional product, manufacturing and service
capabilities. The Company also intends to pursue acquisitions which will expand
its customer base by providing an entree to new customers, including the North
American operations of Asian and European based OEMs. The Company believes that
the continuing supplier consolidation in the stamping and metal forming
segments may also provide attractive opportunities to acquire high-quality
companies at favorable prices, including businesses which can be improved
financially through overhead elimination, organizational restructuring, plant
reconfiguration, labor contract negotiations and management changes. The
Company will also pursue acquisitions that enable it to achieve a global
presence.
RECENT DEVELOPMENTS
On August 13, 1997, the Company acquired Howell Industries, Inc.
("Howell"). Howell is a Tier 1 manufacturer of high-quality welded
subassemblies and detailed stampings used primarily in suspension system
applications in the production of SUVs, light trucks, mini-vans, vans and
passenger cars. Howell has developed a niche in designing, engineering and
manufacturing suspension control arms in a variety of configurations and
variations depending on drive-train and suspension application.
Howell's expertise has complemented and enhanced the Company's ability
to develop key suspension system components. Further, Howell's sales were
principally in the high-growth vehicle categories of SUVs, light trucks,
mini-vans and vans, the same market targeted by the Company. For its fiscal
year ended July 31, 1997, Howell had net sales of $95.2 million.
On November 25, 1997, the Company acquired all of the outstanding
shares of common stock of RPI Holdings, Inc. ("RPIH"). RPIH, through its
wholly owned subsidiary RPI, Inc., provides the Company
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production of roll-formed pieces, metal stampings, service parts, and welded
assemblies of functional and decorative trim for the OEM market. Net sales
for the nine month period from July 1, 1996 to March 31, 1997 for RPIH were
$8.8 million.
On April 1, 1998, the Company acquired the suspension division (the
"Suspension Division") of Eaton Corporation. The Suspension Division is a
leading Tier 1 North American supplier of leaf spring suspension systems for
automotive applications. Products of the Suspension Division include multiple
leaf, parabolic (long taper) multiple leaf, and single leaf long taper
suspension systems.
The Suspension Division is a major supplier to the traditional North
American light truck vehicle manufacturers, and also one Japanese automotive
transplant, one Japanese heavy truck manufacturer, and one European vehicle
program. The Suspension Division designs, manufactures and markets leaf
springs for original equipment vehicle markets with product applications in
light truck rear suspensions. The Suspension Division is focused on the light
truck market, where full-size pick-ups and vans, mini pick-ups and vans, and
sport utility vehicles are the major users of leaf springs, primarily for rear
suspension applications. The Suspension Division includes a 49% interest in
Metalurgica Carabobo, S.A. ("Metalcar"), a Venezuelan manufacturer of
conventional leaf springs and coil springs for both light and heavy trucks.
For its fiscal year ended December 31, 1997, the Suspension Division had net
sales of $125.8 million.
In January 1998, the Company announced the closure of its Winchester
Indiana facility. The decision to close this facility was based on the
Company's rationalization of its current capacity and will result in fixed cost
reductions and improved productivity through reallocation of production to
other facilities during fiscal 1999. The costs associated with the closure had
been previously reserved for and will therefore have no adverse impact on the
financial results of the Company. The Company is currently redeploying
production assets to support recently awarded programs (e.g. GMT 250 Program).
In addition, during the year the Company consolidated the financial and
administrative operations of its acquisitions, thereby allowing for the closure
of the Alma and Southfield administrative offices.
On April 1, 1998, the Company issued $35.0 million aggregate principal
amount of 10 1/8% Senior Subordinated Notes Due 2007, Series B (the "Series B
Notes"). The Series B Notes are substantially identical to, and rank pari
passu in right of payment with the $125.0 million aggregate principal amount of
10 1/8% Senior Subordinated Notes Due 2007 issued by the Company on June 24,
1997. The Series B Notes were issued at 105.84% of par, thereby generating a
yield of approximately 9.0%, based on the earliest redemption date at par.
INDUSTRY TRENDS
The OEM market to which the Company sells its products consists of the
design, engineering, development, production and sale of parts, components,
assemblies and modules or systems (several components assembled together) for
use in the manufacture of new motor vehicles. The Company's performance, growth
and strategic plan are directly related to certain trends within the OEM
market. Since the 1980s, Chrysler, Ford and GM have each been substantially
reducing the number of suppliers that may bid for awards and outsourcing an
increasing percentage of their production requirements. As a result of these
trends, the OEMs are focusing on the development of long-term, sole source
relationships with suppliers who can provide more complex parts, as well as
complete subassemblies and modules on a just-in-time basis while at the same
time meeting strict quality requirements. These requirements are accelerating
the trend toward consolidation of the OEM's supplier base as those suppliers who
lack the capital and production expertise to meet the OEM's needs, either cease
to operate or are merged with larger suppliers. OEMs benefit from outsourcing
because outside suppliers generally have significantly lower cost structures
and, as described below, suppliers can assist in shortening development periods
for new products.
In addition to consolidation and outsourcing, suppliers are
participating earlier in the design and engineering process, providing
research, as well as product development, product testing/validation,
prototyping
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and tooling. OEMs generally expect Tier 1 suppliers to (i) participate in the
design and engineering of complex assemblies, (ii) develop the required
manufacturing process to deliver these assemblies on a just-in-time basis, and
(iii) assume responsibility for quality control. This results in shorter
development times for new products, as well as higher quality and lower parts
costs.
While the focus today by the OEMs is on quality, cost and service, the
Company believes that the focus for the future will be on global capabilities,
innovation and ability to provide value-added products and systems. The OEMs
have been very successful in making high-quality and low cost a minimum
requirement to remain in the industry, as opposed to a competitive advantage
for certain suppliers.
These evolving requirements can best be addressed by suppliers with
sufficient resources to meet such demands. For full-service suppliers such as
the Company, this environment provides an opportunity to grow by obtaining
business previously provided by other suppliers who can no longer meet the
current or future requirements and expectations of the OEMs and by acquisitions
that further enhance product manufacturing and service capabilities. Although
the requirements of the OEMs have already resulted in significant consolidation
of component suppliers in many product segments, the Company believes that many
opportunities exist for further consolidation within the Company's stamping and
metal forming industry.
PRODUCTS
The Company generates the majority of its net sales from large, complex,
high value-added products, primarily assemblies that generally consist of
multiple parts, which the Company stamps and forges and combines with various
welded or fastened components. The Company is the sole source supplier of
these complex modules and assemblies. These products include unexposed
components and assemblies that are intrinsic to the structural integrity of the
vehicle such as A-pillars, radiator supports, floor pans, toe-to-dash panels,
leaf springs, frame and suspension components and reinforcements. In addition
to unexposed components and assemblies, the Company has the capability and
expertise to produce Class A surfaces such as door assemblies, door apertures,
rocker panels, fuel filler doors, and box side outers, which require virtually
flawless finishes and more stringent customer requirements than unexposed
assemblies. These products require superior engineering and automated
manufacturing and assembly capabilities due to their complexity and high volume
requirements.
While the Company has the capability to produce small stampings, such
as brackets and braces, it focuses on more complex and larger components and
assemblies which typically generate higher dollar content per vehicle as well
as higher margins for the Company. These assemblies, such as the A, B and C
pillars, control arms, leaf springs, door assemblies, door apertures, deck lids
and radiator supports require larger, high tonnage, wide-bed, fully-automated
press capabilities, complex automated weld and hemming assembly, autophoretic
corrosion resistant coating, machining, and automated assembly of purchased
components.
The chart below details by major customer the Company's major
products, the type of vehicle and the model/platform for which they are
produced:
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(INCLUDES NEW BUSINESS AWARDS THRU 6/25/98)
CUSTOMER TYPE MODEL/PLATFORM COMPONENTS SUPPLIED
- -------- ---- -------------- -------------------
General Motors Sport Utility Suburban/Tahoe/Yukon Door Assemblies, Door Apertures, Rocker
Panels,
Lower Control Arms, Wheel Moldings
Sport Utility Blazer/Jimmy Leaf Springs, Seat Supports/Rails
Sport Utility Pontiac Recon/Buick Signia (2000 Launch) Door Assemblies, Tailgate Assemblies,
Hoods,
Floor Assemblies, Rocker Panels, Rail
Assemblies
Light Truck S10/Sonoma Pickup Leaf Springs
Light Truck C/K Crew Cab Pickup Door Apertures, Wheel Moldings
Light Truck C/K Pick Up Lower Control Arms (4 Wheel Drive), Rocker
Panels,
Wheel Moldings
Light Truck C/K Pick Up (Mexico) Class A Blanks
Mini-Van Astro/Safari Struts, Lower Control Arms (All Wheel
Drive), A Pillars,
Leaf Springs
Vans Savanna/Express Leaf Springs, Pillar Reinforcements,
Latches, Supports
Medium Duty Commercial Chassis Leaf Springs, Toe-to-Dash Panel
Medium Duty Kodiak Floor Assembly, Fuel Tank Straps, Raised
Roof Panel
Passenger Car Saturn SC Deck Lid, Pillar Reinforcement, Inner
Doors,
Window Frame Reinforcement
Passenger Car Saturn SC/SL/SW (1999 Launch) Underbody Rails
Passenger Car Saturn LS (1999 Launch) Body Side Inners, Door Assemblies, Shelf
Panel,
Wheel House Inners, Radiator Support, Heat
Shield, Gas Tank Shield
Passenger Car Grand Prix, Regal, Intrigue, Monte Radiator Supports
Carlo, Lumina
Passenger Car Corvette Floor Panels
Passenger Car EV1 Floor Panels, Wheel Houses
Passenger Car Malibu, Cutlass Sun Roof Assembly
Passenger Car Grand Am, Alero Door Beams
Passenger Car Park Avenue, Riviera, Aurora, Seville, Rocker Panels
Deville
Passenger Car Joy, Swing, Monza (Mexico) Class A Blanks, Floor Pan Assemblies
Passenger Car Cavalier/Sunfire (Mexico) Floor Pan Assemblies
Ford Sport Utility Explorer, Mountaineer Rear Floor Reinforcement, Center Body
Pillar,
B-Pillar Assembly, Leaf Springs
Sport Utility Expedition, Navigator Control Arms
Light Truck F Series Pickup Control Arms, Load Floor, Leaf Springs
Light Truck Ranger, Mazda Pickup A Pillar, Upper/Lower Back Panel, Roof
Panel,
Windshield Header, Box Side Outer, Leaf
Springs
Van Windstar Rear Floor Assembly, Dash Panel, Rear
Crossmembers,
Cowl Sides, Radiator Support
Van Econoline Roof Rails, A-Pillar, Floor Pan, Shock
Tower,
Fuel Filler Doors, Leaf Springs,
Brackets, Latches
Passenger Car Contour/Mystique/Mondeo (Europe) Front & Rear Control Arms,
Rear Suspension Bar Assembly, Brackets
Passenger Car Cougar Front & Rear Control Arms,
Rear Suspension Bar Assembly, Brackets
Ford/Nissan Mini-Van Villager, Quest Leaf Springs
Chrysler Sport Utility Cherokee Control Arms
Light Truck Dakota Leaf Springs, Control Arms (1999 Launch)
Sport Utility Durango Skid Plates, Brackets, Control Arms (1999
Launch)
Light Truck Ram Pickup Control Arms
Minivan Extended Voyager/Caravan, AWD Eurostar Leaf Springs
(Europe)
Isuzu Medium Duty NPR/W4 Truck Leaf Springs
CAMI Sport Utility Tracker/Sidekick Rear Bumper, Side Frame Member,
Door Inner Reinforcement, Floor Bar,
Underbody Components
Passenger Car Metro/Swift Rear Cross Members, Side Sill, Dash Panel
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The Company has received purchase orders for production commencing
after the current model year, which production typically continues through the
product's life cycle and is subject to the volume requirements of customers,
for the following major products: (i) the new Saturn LS Program, which
management believes will generate approximately $65.0 million of annual net
sales beginning with the 1999 model year, (ii) the 1999 Ford Windstar-radiator
support, which management believes will generate approximately $7.2 million of
annual net sales, (iii) the GMT 250 Program, which management believes will
generate approximately $85.0 million of annual net sales beginning in 1999,
(iv) the 2001 Chrysler Durango/Dakota control arms, which management belives
will generate approximatley $8.5 million of annual sales beginning in 2000 and
(v) the 1999 CAMI J2, which management believes will generate approximately $4.0
million of annual net sales beginning in 1998.
DESIGN AND ADVANCED ENGINEERING
The Company strives to maintain a technological advantage through
investment in product development and advanced engineering capabilities that
utilize structured program management techniques in an effort to exceed the
customer's expectations for value and service. The Company's engineering staff
encompasses such disciplines as program management, computer aided design
("CAD"), virtual prototyping, draw die and process simulation, advanced
engineering, manufacturing feasibility, and tooling and process development.
Responsibilities of the Company's engineers include (i) design, (ii) initial
prototype development, (iii) design and implementation of manufacturing
processes, (iv) production feasibility and improvement, and (v) data
management.
As the Company's customers continue to outsource larger assembled
systems which must be designed at earlier stages of vehicle development rather
than the smaller parts which are attached to them, the Company is increasingly
required to utilize advanced engineering resources early in the planning
process. Advanced engineering resources create improved engineering design, CAD
feasibility studies, working prototypes and testing programs to meet customer
specifications. Given this increased demand for early involvement in the design
and engineering aspects of production development, the Company established a
new technical center which houses its engineering and design group. The
Company utilizes structured program management based on the Automotive Industry
Action Group sanctioned Advanced Part Quality Planning principles to ensure
part quality in all phases of design and manufacturing. The Company has
established a data management and CAD department which is able to support all
major customer systems. The Company provides "gray box" engineering
capabilities in which the customer has
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principal design responsibility while the Company's engineers work closely with
the customer in designing the specifications of the product material, the part
to be produced and the tooling required to produce the finished product. The
Company is also on-line with all major customers which accelerates the process
of design changes.
The Company's design and advanced engineering expertise is an
important differentiating factor in maintaining its relationships with and
obtaining new business from Ford, GM, and Chrysler and, in management's
judgment, was an essential factor in winning the LS Program business.
CUSTOMERS AND MARKETING
The Company supplies its products on a long-term preferred and sole
source basis, primarily to GM (54%), Ford (31%), Chrysler (9%), CAMI (2%), and
Saturn (2%) (percentages are approximates of net sales for the fiscal year
ended as of March 31, 1998) with the remaining net sales comprised of sales
primarily to other automotive suppliers. The Company has been providing
products directly to GM and Ford for more than 50 years and directly to
Chrysler for more than 20 years. The Company currently has locations in Mexico
and Venezuela and provides components for OEMs doing business in Mexico and
South America. The Company believes its presence in Mexico is strategically
important and has led to several significant new opportunities (e.g. GMT 250
Program) with OEMs doing business in Mexico. The Company also believes the
Venezuelan joint venture provides further entree into Latin and South American
markets. Metalcar's production capabilities and strong management team will
provide the Company the means to further penetrate these markets not only for
springs, but also metal stamping and other Company products. The Company
maintains very strong relationships with its customers and continually strives
to exceed customer expectations and anticipate customer needs. This approach
has enabled the Company to maintain its status as a long-term supplier with
each of its major customers and as part of a limited group of preferred
suppliers invited to bid for platform work.
With the efforts by the OEMs to reduce the product development cycle
time, top suppliers are increasingly included in the early design and
development stages. For example, the Company obtains many of its new orders
through a presourcing process by which the customer invites one or a few
preferred suppliers to manufacture and design a component, assembly or module
that meets certain price, timing and functional parameters. Upon selection at
the development stage, the Company and the customer typically agree to
cooperate in developing the product to meet the specified parameters. Upon
completion of the development stage and the award of the manufacturing
business, the Company receives a blanket purchase order for those components,
assemblies or modules for the life of a vehicle model or platform, which
typically range from five to seven years. Consequently, the key success factors
for OEM suppliers now include total program management that encompasses
state-of-the-art design, reduced launch cycle times, manufacture and delivery
of high quality products at competitive prices.
The Company believes that the advanced engineering and sales
organization at the Company's technical center offers services few other
suppliers have available for their customers. The group's primary activities
are: (i) Quoting/Cost Estimating; (ii) Assembly/Automation; (iii) CAD Design
and Data Control; (iv) Virtual prototyping; (v) Draw die simulation (vi) Tool
Process/Design; and (vii) Program Management. The sales group is divided into
customer oriented business units, each with a business unit manager
responsible for all facets of customer needs, as well as strategies for growing
their particular customer base. The entire group is dedicated to advanced
technical development and servicing a multitude of customers' needs as one
team.
RAW MATERIALS
The cost of raw materials represented approximately 54.7% of net sales
of the Company for the fiscal year ended March 31, 1998 and steel represented
approximately 69% of total raw materials purchases for the fiscal year ended
March 31, 1998. The Company expects to purchase nearly 360,000 tons of steel
in fiscal 1999 for use in its
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production. The remaining 31% of raw materials purchases for fiscal 1998
represents various purchased parts such as forgings, bushings, ball joints,
isolators, corrosion resistant coating, and various fasteners.
The Company participates with respect to the majority of its platforms
in steel purchase programs through Ford, GM and Chrysler wherein the steel is
purchased by the OEM from the steel mill and sold to the Company at a
negotiated price. These purchase programs effectively neutralize the exposure
to steel price increases, as any price increases from the steel mills are
either absorbed by the OEM prior to the Company's purchase of the steel or such
increases are reflected in the Company's purchase of the steel and passed back
to the OEM in the product pricing.
COMPETITION
The market for the Company's products is characterized by strong
competition from both captive OEM suppliers and external, non-captive
suppliers. The Company competes with a limited number of competitors that have
the physical assets and technical resources to produce large bed stampings,
complex parts and subassemblies of multiple parts. The Company's largest
competitors include The Budd Company, a subsidiary of Thyssen AG; Magna
International Inc.; Tower Automotive, Inc.; Aetna Industries, Inc.; Ogihara
America Corp., a subsidiary of Marubeni Corp.; Midway Products Corporation;
Active Tool & Manufacturing Co., Inc.; A.G. Simpson Automotive, Inc.; Mayflower
Vehicle Systems Inc.; L&W Engineering; National Automotive Radiator
Manufacturing Company; and divisions of OEMs with internal stamping and
assembly operations.
The Company competes for business at the beginning of the development
for new model platforms, as well as the redesign of current models. This
process can begin from two to five years prior to the introduction of the new
model. After the customer awards a program, that supplier is generally
designated as the sole source supplier for the life of that program, which
typically lasts 4 to 5 years for passenger cars and up to 10 years for trucks
(particularly for unexposed structural components and assemblies).
EMPLOYEES
At June 1, 1998, the Company employed approximately 3,800 persons in
the United States, Canada and Mexico, approximately 700 of whom are employed on
a salaried basis and the balance of whom are hourly employees. Substantially
all of the Company's hourly employees are represented by various local unions
through collective bargaining agreements. These individual agreements which
are from three to five years in length expire over the period February 1999
through March 2003.
In 1994, the Company, through the recently acquired Suspension Division,
experienced a 2-week work stoppage at the Chatham, Ontario facility. Other than
this, the Company has not experienced any organized work stoppages at any
time during the past ten years. At the present time, the Company believes that
its relations with its employees are good.
REGULATORY MATTERS
The Company's facilities and operations are subject to a wide variety
of federal, state, local, and foreign environmental laws, regulations, and
ordinances, including those related to air emissions, wastewater discharges,
and chemical and hazardous waste management and disposal ("Environmental
Laws"). The Company's operations also are governed by laws relating to
workplace safety and worker health, primarily the Occupational Safety and
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Health Act, and foreign counterparts to such laws. In many jurisdictions, these
laws are complex and change frequently. The nature of the Company's operations
exposes it to risks of liabilities or claims with respect to environmental and
worker health and safety matters. At March 31, 1998, the Company has a
liability of approximately $1.7 million recorded for estimated costs of known
environmental matters. There can be no assurance that material costs will not
be incurred in connection with such liabilities or claims. See Note 14 of
Notes to Consolidated Financial Statements included in this Report.
Based on the Company's experience to date, the Company believes that
the future cost of compliance with existing Environmental Laws (or liability
for known environmental claims) will not have a material adverse effect on the
Company's business, financial condition or results of operations. However,
future events, such as changes in existing Environmental Laws or their
interpretation, may give rise to additional compliance costs or liabilities
that could have a material adverse effect on the Company's business, financial
condition or results of operations. Compliance with more stringent
Environmental Laws, as well as more vigorous enforcement policies of regulatory
agencies or stricter or different interpretations of existing Environmental
Laws, may require additional expenditures by the Company that may be material.
Certain Environmental Laws hold current owners or operators of land or
businesses liable for their own and for previous owners' or operators' releases
of hazardous or toxic substances, materials or wastes, pollutants or
contaminants, including petroleum and petroleum products ("Hazardous
Substances"). Certain laws, including but not limited to CERCLA, may impose
joint and several liability on responsible parties. Because of the Company's
operations, the long history of industrial uses at some of its facilities, the
operations of predecessor owners or operators of certain of the businesses, and
the use, production, and releases of Hazardous Substances at these sites, the
Company is affected by such liability provisions of the Environmental Laws.
Several of the Company's facilities have experienced some level of regulatory
scrutiny in the past and are or may be subject to further regulatory
inspections, future requests for investigation or liability for past disposal
practices.
The Company's Alma, Michigan plant is listed on the Michigan
Department of Environmental Quality ("MDEQ") list of Michigan Sites of
Environmental Contamination. Based on filings with the MDEQ by the current
owner of the petroleum refinery which adjoins the Alma Plant property, the
refinery has been determined by the MDEQ to be the source of certain
contamination existing in the eastern area of the Alma plant property. While
the Company is currently conducting certain remedial activity at its Alma plant
in connection with this contamination, the Company may have claims against the
refinery owner relating to this contamination. While the Company does not
expect to incur significant future costs in connection with this matter, the
Company cannot guarantee that such future costs will not be material.
The Resource Conservation and Recovery Act and the regulations
thereunder ("RCRA") regulates the generation, treatment and disposal of
hazardous wastes. In the mid-1980s, the Company, through Lobdell, entered into
a Consent Agreement and Final Order with the United States Environmental
Protection Agency (the "EPA") relating to the final closure of a surface water
impoundment area at the Alma plant under RCRA. The Company has remediated the
impoundment soils and sediments and is now implementing a groundwater
monitoring program with EPA approval under RCRA. In addition, the Company is
conducting groundwater monitoring in a separate section of the Alma plant at
which contaminants have been detected by the Company's consultants. Both of
these programs may be affected by the suspected contamination from the
petroleum refinery described above. While future groundwater remediation costs,
if any, are not expected to be material, the Company cannot predict such costs
with certainty and no guarantee can be made that these costs will not be
material.
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The Company has been named as a potentially responsible party, along
with several other companies, in connection with a former disposal facility
located in the St. Louis, Michigan area. The Company and certain other named
parties, in cooperation with the State of Michigan, currently are undertaking a
remedy for which they are sharing costs. Groundwater at the site is currently
being monitored and while the costs of groundwater remediation, if any, are not
expected to be material, the Company cannot accurately estimate such costs at
this time.
On April 1, 1998, the Company acquired the Suspension Division and is
in the process of addressing certain environmental concerns. Eaton Corporation
has agreed to retain and reimburse the Company for all known environmental
liabilities for which claims are made prior to April 1, 2008 arising from the
operation of the acquired facilities prior to the acquisition of the Suspension
Division, including the present remediation efforts. Eaton Corporation has
also agreed to retain and reimburse the Company for all unknown environmental
liabilities arising from the operation of the acquired facilities prior to the
acquisition of the Suspension Division, for which claims are made prior to
April 1, 2000, up to a $1.5 million aggregate cap. While there can be no
assurance that all costs associated with such matters will ultimately be
reimbursed by Eaton Corporation, the Company does not currently believe that
any liability associated with such matters will be material to the Company.
FORWARD LOOKING STATEMENTS
This report contains statements relating to such matters as
anticipated financial performance, business prospects and other matters that
may be construed as forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. In addition, the
Company may from time to time publish or communicate other statements that
could also be construed to be forward-looking statements. These statements are
or will be based on the Company's estimates, assumptions and projections, and
are subject to risks and uncertainties, including those specifically listed
below, that could cause actual results to differ materially from those included
in the forward-looking statements.
The risks and uncertainties that may affect the operations,
performance, development and results of operations of the Company include the
following: (1) the OEM supplier industry is highly cyclical and, in large
part, impacted by the strength of the economy generally, by prevailing interest
rates and by other factors which may have an effect on the level of sales of
automotive vehicles; (2) future price reductions, increased quality standards
or additional engineering capabilities may be required by the OEMs, which are
able to exert considerable pressure on their suppliers; (3) the OEMs may decide
to in-source some of the work currently performed by the Company; (4) work
stoppages and slowdowns may be experienced by OEMs and their Tier 1 suppliers,
as a result of labor disputes; (5) there may be a significant decrease in
sales of vehicles using the Company's products or the loss by the Company of
the right to supply any of such products to its major customers; (6)increased
competition could arise in the OEM supplier industry; and (7) changing federal,
state, local and foreign laws, regulations and ordinances relating to
environmental matters could affect the Company's operations.
ITEM 2. PROPERTIES.
The Company's corporate headquarters, engineering, technical center
and sales offices are currently located in Troy, a suburb of Detroit, Michigan,
close to its core of automotive customers. The Company's manufacturing plants
are strategically located near OEM manufacturing sites.
The Company currently operates over 380 presses ranging from under 100
ton to 2,500 ton capabilities. The Company is capable of producing components
and assemblies from the smallest brackets to full-size, Class
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A door and closure panels with its unique wide-bed (180 inch), automated press
lines. Production systems include oil feeders, welding robots, pick and place
robots and other state-of-the-art automation, as well as autophoretic corrosion
resistant coating systems.
As OEMs have increased quality standards and implemented just-in-time
and sequenced delivery/inventory management methods, the consistency of
quality, as well as the timeliness and reliability of shipments by OEM
suppliers, have become crucial in meeting logistical demands of the OEMs and
reducing operating costs of the supplier. The Company has responded by
developing and adopting manufacturing practices that seek to maximize quality
and eliminate waste and inefficiency in its own operations and in those of its
customers. The Company's manufacturing and engineering capabilities enable it
to design and build high-quality, efficient manufacturing systems, processes
and equipment. The Company has invested heavily in its commitment to quality
through education of employees and implementation of cost management and
control systems from the plant floor up.
All suppliers are required to meet numerous quality standards in order
to qualify as a preferred and long-term supplier to the OEMs. The QS-9000
standards were developed by international and domestic automobile and truck
manufacturers to ensure that their suppliers meet consistent quality standards
that can be independently audited. The QS-9000 standards provided for the
standardization and documentation of a supplier's policies and procedures to
improve suppliers' efficiencies. The Company is scheduled to meet the current
qualification requirements of its customers.
In addition to the QS-9000 standard, each OEM maintains its own
certification or award system for preferred suppliers based on the supplier's
demonstrated quality, delivery and certain commercial considerations. Ford
requires that all suppliers receive its Q1 rating in order to quote for new
production business. GM's Supplier of the Year Award provides certain
competitive advantages to the recipients but is not a requirement for current
GM suppliers to bid on new business. Chrysler allows suppliers who have
received its Gold Pentastar Award to retain any current business when it is
replaced by a new model without competitive bidding. Other OEMs maintain
various award programs for their suppliers that recognize outstanding
performance by the supplier. The Company has received Chrysler's Gold Pentastar
Award for each of its facilities that have Chrysler as a customer. The Company
has the Q1 rating from Ford at 9 of the 10 plants that are required to have the
Q1 rating. The Company has initiated steps necessary to obtain the Q1 rating at
this plant. The Company believes that this plant has met the minimum
standards, is in the final phase for approval, and will be awarded the Q1
rating by September 1998. If this plant does not obtain the Q1 rating, it
would be precluded from quoting on new Ford business and the Company would
likely consolidate its Ford production in its other Q1 rated plants.
A summary of the Company's major facilities, including the facilities
of the Company's less than majority owned affiliates is set forth below:
SIZE
FACILITY (SQ. FT.)
-------- -------
Alma, Michigan 389,000
Argos, Indiana 386,000
Corydon, Indiana 200,000
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Greencastle, 214,000
Indiana
Cambridge, Ontario 290,000
Delhi, Ontario 115,000
Athens, Tennessee 100,000
Masury, Ohio 150,000
Lapeer, Michigan 85,000
Prudenville, 76,000
Michigan
Oscoda, Michigan 57,000
Hamilton, Indiana 85,000
Chatham, Ontario 190,000
Wallaceburg, 240,000
Ontario
Saltillo, 20,000
Mexico(1)
Silao, Mexico(1) 42,000
Troy, Michigan(1) 34,000
Valencia, 122,000
Venezuela(2)
- -----------------
(1) All properties above are owned, with the exception of the Silao
and Saltillo facilities and the Troy office. These properties are leased with
lease expiration dates ranging from December 1999 to June 2005.
(2) Owned by Metalurgica Carabobo, S.A., a Venezuelan joint venture
of which the Company has a 49% interest.
The Company is in the planning stage of a new facility in Ramos Arizpe,
Mexico. The 300,000 sq.ft. facility will support the GMT 250 Program as well
as other customer opportunities.
ITEM 3. LEGAL PROCEEDINGS.
The Company is subject to various claims, lawsuits and administrative
proceedings related to matters arising in the normal course of business. In the
opinion of management, after reviewing the information which is currently
available with respect to such matters and consulting with legal counsel, any
liability which may ultimately be incurred with respect to these matters will
not materially affect the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the Company's security
holders during the fourth quarter ended March 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
There is no established trading market for any class of common equity
of the Company. As of June 1, 1998, there were 21 shareholders of record of
the Company's common stock.
The Company has not paid cash dividends during the past two fiscal
years and does not plan to pay cash dividends in the near term. The Company is
restricted in its ability to pay dividends under the terms of the Indenture
governing its 10-1/8% Senior Subordinated Notes due 2007 (the "Indenture") and
the terms of its Credit Agreement (the "Senior Credit Facility") dated June 24,
1997, with NBD Bank, on behalf of itself and as agent for a syndicate of other
lenders.
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The Company did not sell any equity securities during the year ended
March 31, 1998 that were not registered under the Securities Act of 1933, as
amended.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth (i) the selected consolidated
historical financial data of BMG (the "Predecessor") for the years ended March
31, 1994 and 1995 which was derived from the audited consolidated financial
statements of the Predecessor, (ii) selected consolidated historical financial
data of the Predecessor for the period from April 1, 1995 through October 27,
1995, and (iii) selected consolidated historical financial data of the Company
from October 28, 1995 through March 31, 1996 and the years ended March 31, 1997
and 1998. The selected consolidated historical financial data for the period
April 1, 1995 through October 27, 1995; and the period October 28, 1995 through
March 31, 1996 was derived from the audited consolidated financial statements
of the Predecessor and the Company, which are included elsewhere in this
Report, together with the report of Deloitte & Touche, independent accountants.
The selected consolidated historical financial data for the years ended March
31, 1997 and 1998 was derived from the audited consolidated financial
statements of the Company, which are included elsewhere in this Report,
together with the report of Price Waterhouse LLP, independent accountants. The
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the
Consolidated Financial Statements of the Company and the related notes and
other financial information presented elsewhere in this Report.
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HISTORICAL
------------------------------------------------------------------------------
PREDECESSOR COMPANY
---------------------------------------- ------------------------------------------
APRIL 1, OCTOBER 28,
1995 - 1995 -
MARCH 31, MARCH 31, OCTOBER 27, MARCH 31, MARCH 31, MARCH 31,
1994(a) 1995 1995 1996 1997 1998
----------- ------------ ----------- ----------- ------------- -------------
(dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Net sales . . . . . . . . . . . . $65,182 $75,097 $49,043 $35,572 $136,861 $410,321
Gross profit . . . . . . . . . . 5,955 4,206 2,148 3,948 11,773 41,901
Selling, general and
administrative . . . . . . . . 2,164 4,554 3,922 2,235 7,685 21,839
Restructuring provision . . . . . -- -- -- -- -- 1,610
Gain on sale of equipment . . . . -- -- -- -- -- (1,602)
Equipment impairment and non-
recurring charges(b) . . . . . -- -- -- -- 287 --
------- ------- ------- ------- -------- --------
Operating income (loss) . . . . . 3,791 (348) (1,774) 1,713 3,801 20,054
Interest expense . . . . . . . . 1,658 1,267 1,048 1,096 3,388 10,710
Other income (expense) . . . . . -- -- -- -- 2,201 321
Income (loss) before income
taxes . . . . . . . . . . . . . 2,133 (1,615) (2,822) 617 2,614 9,665
Provision (benefit) for income
taxes . . . . . . . . . . . . . 706 (349) (938) 202 1,065 4,074
------- ------- ------- ------- -------- --------
Net income (loss) . . . . . . . . $ 1,427 $(1,266) $(1,884) $ 415 $ 1,549 $ 5,591
======= ======= ======= ======= ======== ========
Net income (loss) per share . . . $ -- $ -- $ -- $ 9.10 $ 9.37 $ 13.74
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents . . . . $ 4,261 $ -- $ -- $ -- $ 9,671 $ 18,321
Accounts receivable . . . . . . . 7,936 9,835 13,312 8,338 47,626 65,273
Inventories . . . . . . . . . . . 3,542 4,170 4,429 3,719 13,411 21,305
Total assets . . . . . . . . . . 36,127 41,523 59,770 49,200 243,694 320,032
Total debt . . . . . . . . . . . 13,396 12,907 23,233 26,758 99,829 139,448
Redeemable preferred stock . . . -- -- -- -- 39,300 40,192
Total shareholders equity . . . . 12,406 10,833 9,329 935(c) 2,341 6,118
OTHER DATA:
Depreciation and amortization . . $ 1,747 $ 1,413 $ 919 $ 687 $ 5,041 $ 20,279
Capital expenditures . . . . . . 920 4,384 5,111 3,466 3,326 16,723
EBITDA(d) . . . . . . . . . . . . $ 5,538 $ 1,065 $ (855) $ 2,400 $ 11,330 $ 40,654
Gross margin(e) . . . . . . . . . 9.14% 5.60% 4.38% 11.10% 8.60% 10.21%
See Notes to Selected Consolidated Historical Financial Data included with this
Report.
(a)Reflects the audited financial statements of the Predecessor prepared in
accordance with Canadian generally accepted accounting principals, with
Canadian dollars being converted to a U.S. dollar equivalent using an
average Canadian to U.S. foreign currency exchange rate of 1.3810 for the
period ended March 31, 1994.
(b)This provision includes income before taxes for the discontinuance of
Laserweld International, L.L.C. and Parallel Group International, Inc.
Management does not anticipate that these costs will be a part of future
operations.
(c)The reduction in equity of $8.4 million from October 27, 1995 to March 31,
1996, is primarily a result of the elimination of the Predecessor's equity
as a part of the purchase accounting adjustments made upon the acquisition
of the Predecessor on October 27, 1995.
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(d)EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization and equipment impairment and non-recurring
charges. EBITDA should not be construed as a substitute for income from
operations, net income or cash flow from operating activities for the
purpose of analyzing the Company's operating performance, financial position
and cash flows.
(e)Gross margin is defined as gross profit as a percent of net sales for each
of the applicable periods.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements of the Company and notes thereto included elsewhere in
this Report. The historical information for the fiscal year ended March 31,
1997 includes the Lobdell results of operations for the period subsequent to
its acquisition. For comparative purposes, the financial information for the
fiscal year ended March 31, 1996 represents the combination of the results of
operations for the Predecessor for the period from April 1, 1995 to October 27,
1995 together with the results of operations of the Company from October 28,
1995 through March 31, 1996 (the period subsequent to the acquisition of the
Predecessor by the Company). The financial statements of the Predecessor and
the Company in the two combined periods are not comparable in certain respects
due to differences between the cost basis of certain assets held by the Company
versus that of the Predecessor, resulting in reduced depreciation and
amortization charges subsequent to October 27, 1995, changes in accounting
policies and the recording of certain liabilities at the date of acquisition in
connection with the purchase of the Predecessor by the Company. Accordingly,
the combination of these two periods does not purport to represent what the
results of operations of the Company would have been on a pro forma basis had
it acquired the Predecessor on April 1, 1995.
Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997
Net Sales -- Net sales for the year ended March 31, 1998 were $410.3
million. This represents an increase of $273.4 million as compared to net sales
for the fiscal year ended March 31, 1997 of $136.9 million. Net sales for the
fiscal year ended March 31, 1997 included net sales of Lobdell only from the
acquisition date of January 10, 1997 through March 31, 1997. The increase for
the year was due principally from the Lobdell, Howell and RPIH acquisitions
($269.8 million). The balance of the increase related primarily to the
strength of light truck and sport utility vehicle production partially offset
by the discontinuance of certain customer platforms. On a pro forma basis, had
the net sales from all acquisitions been included for the entire fiscal 1998,
net sales would have been $453.7 million.
Gross Profit -- Gross profit was $41.9 million or 10.2% of net sales for
the year ended March 31, 1998 as compared to $11.8 million or 8.6% of net sales
for the year ended March 31, 1997. This represents an increase of $30.1
million as compared to the prior year. The gross profit increase is related
to the incremental sales resulting from the acquisitions, combined with
operating improvements made throughout the year on existing as well as acquired
sales. The increase in gross margin is a result of operating improvements
through employment and cost reductions, productivity improvements, increased
capacity utilization, quality improvements and production schedule attainment.
The increased gross profit was partially offset by costs associated with the
conversion of Canadian operations to transfer and robotic technology, startup
of the Mexican operations and costs associated with the launch of future
platforms (Saturn LS, Windstar and Ford Heavy duty pickup (PN 131)).
Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses
were $21.8 million or 5.3% of net sales as compared to $7.7 million or $5.6%
for the year ended March 31, 1997. The decrease as a percentage
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\
of net sales was a result of the efficiencies derived through acquisition
integration and cost reduction programs. The financial and administrative
functions were consolidated into the Troy office, thereby allowing for the
closure of the Alma and Southfield administrative offices. The increase in
expenditures is primarily due to the overall growth of the organization during
the year and the need to provide the necessary resources to support customer
engineering support, global program management and the continued growth
initiatives of the organization.
Operating Income -- Income from operations was $20.1 million or 4.9% of
net sales for the year ended March 31, 1998 as compared to $3.8 million or 2.8%
of net sales for the year ended March 31, 1997. For fiscal 1998, operating
income benefited from the growth in the light truck and SUV programs as well
acquisitions during the year. The increase in operating margin reflects the
continued improvement of operations, implementation of cost saving programs and
the gain on the sale of equipment of the laser welding operations. Partially
offsetting the increase was the recording of restructuring charges as a part of
the Company's overall plant rationalization initiatives.
Other Income - Other income for the year ended March 31, 1998 was $0.3
million or .07% of net sales as compared to $2.2 million or 1.6% of net sales
for the year ended March 31, 1997. The decrease was due primarily to foreign
currency exchange transactions gains recorded in Fiscal 1997 which were not
present in fiscal 1998.
Interest Expense - Interest expense for the year ended March 31, 1998 was
$10.7 million or 2.6% of net sales as compared to $3.4 million or 2.5% of net
sales for the year ended March 31, 1997. While interest as a percentage of net
sales remained relatively flat, the overall increase in expense was due
primarily to the issuance of $125.0 million of 10 1/8% Senior Subordinated
Notes on June 24, 1997. The Notes represent both incremental borrowing as well
as increased interest rate as compared to outstanding debt of the prior period.
Proceeds of the Notes were used to payoff existing debt and support the
acquisition activities of the Company. The increase in interest expense was
partially offset by interest income derived over the year on unused bond
proceeds available for short term investment.
Income Tax -- Income tax expense was $4.1 million or 1.0% of net sales for
the period ended March 31, 1998 as compared to $1.1 million or 0.8% of net sales
for the year ended March 31, 1997. The increased income tax of $3.0 million is
a result of the $7.1 million increase in income before taxes for the year ended
March 31, 1998 as compared to the previous year and an increase in the overall
effective tax rate of the Company.
Net Income - Net income was $5.6 million or 1.4% of net sales for the year
ended March 31, 1998 as compared to $1.5 million or 1.1% of net sales for the
year ended March 31, 1997. The improvement of $4.1 million was a result of
increased operating and other income of $14.4 million, offset by the increase
in interest expense of $7.3 million and income taxes of $3.0 million,
respectively.
Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31,
1996
Net Sales -- Net sales for the year ended March 31, 1997 were $136.9
million, including the net sales of Lobdell from January 10, 1997 (the
"Acquisition Date") through March 31, 1997. This was an increase of $52.2
million or 61.7% as compared to net sales for the fiscal year ended March 31,
1996 of $84.6 million. The increase was due principally to the acquisition of
Lobdell and was partially offset by lower sales volume due to model
changeovers. On a pro forma basis, if Lobdell net sales were included with that
of the Company for the entire fiscal year ended March 31, 1997, net sales would
have been $330.2 million, an increase of $245.6 million as compared to the
prior year, and if Howell and RPIH net sales were also included for fiscal
1997, net sales would have been $433.4 million, an increase of $348.8 million
as compared to the prior year.
Gross Profit -- Gross profit was $11.8 million or 8.6% of net sales for
the year ended March 31, 1997 as compared to $6.1 million or 7.2% of net sales
for the year ended March 31, 1996. This represents an increase of
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$5.7 million, or 93.4% as compared to the prior year. The increase was
primarily a result of higher margins on Lobdell sales for the eighty day period
from the Acquisition Date through March 31, 1997. Gross profit also increased
due to (i) workforce reductions, (ii) improved materials cost management which
resulted in lower raw material costs and (iii) strong sales in the light truck
and SUV markets, the Company's largest sales segments and those which produce
its highest margins. The increased gross profit was partially offset by costs
associated with the production launch of the Saturn Coupe stampings.
Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses
were $7.7 million or 5.6% of net sales for the year ended March 31, 1997 as
compared to $6.2 million or 7.3% of net sales for the year ended March 31,
1996. The decrease as a percentage of net sales was a result of efficiencies
and cost reduction programs undertaken by Company management. Specifically, the
reduction in SG&A expenses as a percentage of net sales resulted from a
restructuring of the sales and product engineering functions into customer
focused business units.
Operating Income -- Income from operations was $3.8 million or 2.8% of net
sales for the year ended March 31, 1997 as compared to a deficit of $0.1
million for the year ended March 31, 1996. The improvement of $3.9 million was
a result of improved gross profit of $5.7 million, partially offset by
increased SG&A expenses of $1.5 million.
Other Income -- Other income for the year ended March 31, 1997 was $2.2
million or 1.6% of net sales due primarily to foreign currency exchange
transactions. No significant other income was earned for the year ended March
31, 1996.
Interest Expense -- Interest expense for the year ended March 31, 1997 was
$3.4 million or 2.5% of net sales, an increase of $1.3 million over the
interest expense for the year ended March 31, 1996. While interest expense for
both periods remained constant at 2.5% of net sales, the increase of $1.3
million was a result of variations in base lending rates and additional
borrowings resulting from the acquisition of Lobdell.
Income Tax -- Income tax expense was $1.1 million or 0.8% of net sales for
the period ended March 31, 1997 as compared to a benefit of $0.7 million or
0.8% of net sales for the year ended March 31, 1996. The increased income tax
expense of $1.8 million is a result of the $4.8 million increase in income
before taxes for the year ended March 31, 1997 as compared to the previous
year.
Net Income -- Net income was $1.5 million or 1.1% of net sales for the
year ended March 31, 1997 as compared to a loss of $1.5 million or 1.8% of net
sales for the year ended March 31, 1996. The improvement of $3.0 million was a
result of improved operating income of $3.9 million and increased other income
of $2.2 million. The increase in net income was partially offset by increased
interest expense and income taxes of $1.3 million and $1.8 million,
respectively.
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LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Net income adjusted for non-cash charges generated approximately $24.2
million of cash for the year ended March 31, 1998. Cash also increased during
the period based on overall increases in trade accounts payable of $11.4
million and refundable income taxes of $2.9 million. Offsetting the increase
in cash for fiscal 1998 was a net increase in accounts receivable, customer
tooling, and other working capital requirements of $13.0 million. The increase
in customer tooling is primarily a result of progress payments made to tooling
vendors to support scheduled program launches set for fiscal 1999 (Saturn LS,
Ford Windstar and CAMI J2). During the year, the Company used approximately
$43.2 million for investing activities, including the acquisitions of Howell
and RPIH, as well as the purchase of an equity interest in a publicly traded
automotive supplier. The overall cash requirements were funded by approximately
$26.3 million of incremental borrowings.
The Company has $ 98.7 million available under the Senior Credit Facility.
At March 31, 1998, the Company had $1.8 million outstanding under the line of
credit and $9.5 million in outstanding letters of credit to support certain
Industrial Development Revenue Bonds and workers compensation commitments.
During fiscal 1998, the Company received net proceeds of $37.6 million
from its offering of $125.0 million of its 10 1/8% Senior Subordinated Notes
due 2007 (the "Series A Notes"), after payment of approximately $83.1 million
to refinance existing indebtedness and approximately $4.3 million in issuance
costs. The Company used approximately $23.2 million and $2.5 million
respectively toward the acquisitions of Howell and RPIH and related expenses.
The remainder of the proceeds were used for general corporate purposes and in
part to fund the acquisition of the Suspension Division.
The balance of the Suspension Division acquisition was funded by the
issuance of an additional $35.0 million of 10 1/8% Senior Subordinated Notes Due
2007, Series B ("Series B Notes"). The Series B Notes were issued April 1, 1998
and are substantially identical to, and rank pari passu in right of payment
with the Series A Notes.
The Company believes the proceeds of the Series A and Series B Notes have
enhanced its ability to meet its growth and business objectives. However,
interest payments on the Notes will represent a significant liquidity
requirement for the Company. The Company will be required to make scheduled
semi-annual interest payments on the Notes of approximately $8.1 million on
June 15 and December 15 each year until their maturity on June 15, 2007 or
until the Notes are redeemed.
Cash outlays for capital expenditures were $16.7 million, or 4.1% of
net sales for the year ending March 31, 1998 as compared to $3.3 million, or
2.4% of net sales for the year ended March 31, 1998. The increase of $13.4
million was due primarily to the inclusion of acquisitions, the start up of two
Mexican operations ($3.7 million) and the development of a corporate Technical
and Administrative center ($1.3 million). Other capital expenditures included
investments to support new business (primarily the 1999 model year Saturn LS
(previously designated Innovate), and Ford's Windstar and CAMI's J2, each due
to launch during the summer of 1998), press equipment and rebuilds, safety and
maintenance equipment, automation and other productivity improvement
expenditures, and other items including computers and welding equipment.
For fiscal 1999, the Company's capital expenditures are expected to be
$34.7 million; consisting of a $15.8 million investment to support new
business and increase capacity; $4.2 million for tooling and quality projects;
$5.3 million for press automation, rebuilds and improvements; $3.7 million in
productivity and cost improvements; and $5.7 million in other expenditures,
including health, safety, environmental and maintenance items.
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The Company believes that the operations of the Suspension Division will
enhance the Company's ability to develop key suspension components. The
Company believes that the acquisition of the Suspension Division will have a
positive impact on the Company's results of operations for the fiscal year
ending March 31, 1999 and thereafter.
The Company believes that cash generated from operations, together with
amounts available under the Senior Credit Facility will be adequate to meet its
debt service requirements, capital expenditures and working capital needs for
the foreseeable future, although no assurance can be given in this regard. The
Company's future operating performance and ability to service or refinance the
Series A and Series B Notes and to extend or refinance its other indebtedness
will be subject to future economic conditions and to financial, business and
other factors that are beyond the Company's control.
IMPACT OF GENERAL MOTORS STRIKE
A substantial portion of General Motors vehicle production has been shut
down due to two local strikes in Flint, Michigan. GM is a significant customer
of the Company and any prolonged shutdown would have a material adverse effect
on the Company's results of operations for the fiscal year ended March 31,
1999. While the Company is unable to predict the duration and ultimate impact
of these strikes, it is currently taking necessary actions to minimize the
adverse impact.
YEAR 2000
The Company is currently working to resolve any potential impact of the
Year 2000 on the processing of information by the Company's information
systems. The Year 2000 problem is a result of a date problem , where computer
hardware and/or computer programs rely on a two-digit year for processing.
Incorrect calculations, system failures, or misrepresentations resulting from
the change in century are being addressed by following a process defined by the
Auto Industry Action Group (AIAG). This process includes creating an inventory
of all computer-related equipment and software programs, determining their
compliance to proper Year 2000 processing capabilities, remediating any
identifiable problems, and testing each item for compliance. The Company is
utilizing both internal employees and external contractors for inventory,
remediation, and testing activities. Having completed the inventory, the
Company believes that the Year 2000 remediation and testing activities will not
have a material impact on the Company's financial position, results of
operations, or cash flows in future periods. Software and hardware upgrades
and updates will be expensed, while any major replacements will be leased or
capitalized and amortized over the useful life of the equipment. Most of these
potential hardware upgrades occur regularly as a normal part of business
through technology changes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and schedules filed herewith are set forth on the
Index to Financial Statements and Financial Statement Schedules on page F-1 of
the separate financial section of this Report and are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The information relating to changes in accountants was previously filed by
the Company in its Registration Statement on Form S-4, Registration No.
333-32975.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of the
directors and executive officers of Oxford Automotive. Each director of Oxford
Automotive will hold office until the next annual meeting of shareholders or
until his successor has been elected and qualified. Officers of Oxford
Automotive serve at the discretion of the Board of Directors.
NAME AGE POSITIONS
- ---- --- ---------
Selwyn Isakow........... 46 Chairman of the Board of Directors
Rex E. Schlaybaugh, Jr.. 49 Vice Chairman of the Board of Directors and
Secretary
Steven M. Abelman....... 47 Director, President and Chief Executive Officer
Manfred J. Walt......... 45 Director
Donald C. Campion....... 49 Senior Vice President-Chief Financial Officer
Larry C. Cornwall....... 51 Senior Vice President-Sales and Engineering
John H. Ferguson........ 50 Vice President-Financial Operations and
Assistant Secretary
Selwyn Isakow, Chairman of the Board of Directors. Mr. Isakow has been and a
director of Oxford Automotive since its inception in 1995, was the President of
Oxford Automotive from 1995 to May 1997, and was appointed Chairman of the
Board in May 1997. Since 1985, Mr. Isakow has been the President of The Oxford
Investment Group, Inc. ("Oxford Investment"), a private investment and
corporate development company that acquires majority equity positions on behalf
of its principals in industrial products manufacturing, financial services,
niche distribution and other selected companies. Mr. Isakow generally serves as
Chairman of the Board and a director of all such portfolio companies. Mr.
Isakow is also a director of Champion Enterprises, Inc. and Ramco Gershenson
Properties Trust, and serves on the boards of numerous community organizations.
From 1982 to 1985, Mr. Isakow was the Executive Vice President of Comerica
Incorporated, a regional bank holding company, and from 1978 to 1982, was a
principal at Booz, Allen and Hamilton, management consultants.
Rex E. Schlaybaugh, Jr., Vice Chairman of the Board of Directors and Secretary.
Mr. Schlaybaugh has been the Secretary and a director of Oxford Automotive
since its inception in 1995 and was appointed Vice Chairman of the Board in May
1997. Mr. Schlaybaugh was appointed the Vice Chairman of Oxford Investment in
May 1997. Mr. Schlaybaugh has been a member of the firm of Dykema Gossett PLLC
since 1985. Mr. Schlaybaugh is also a director of certain other portfolio
companies of Oxford Investment. Mr. Schlaybaugh is currently the Chairman of
the Board of Trustees of Oakland University.
Steven M. Abelman, Director, President and Chief Executive Officer. Mr. Abelman
was appointed President and Chief Executive Officer of Oxford Automotive in May
1997. Prior to joining Oxford Automotive, Mr. Abelman was Deputy Chief
Executive Officer of Bundy North America ("Bundy"), an automotive supplier of
brake and fuel
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delivery systems, from February 1996 until May 1997 and prior to that he was
President of Bundy from September 1995 until February 1996. From December 1991
to September 1995, Mr. Abelman was Vice President and General Manager of Augat
Wiring Systems, a manufacturer of automotive wiring systems and components.
Manfred J. Walt, Director. Mr. Walt has been a director of Oxford Automotive
since May 1997. Mr. Walt has been the Executive Vice President and Chief
Financial Officer of Central Park Lodges Ltd., a Canadian assisted living
company located in Toronto, Canada, since May 1998. From October 1997 to May
1998, Mr. Walt was the Sr. Vice President of Gentra, Inc., a Real Estate
Company based in Toronto, Canada. From 1989 to September 1997, Mr. Walt was
the Managing Partner-Financial Services of Edper Brascan Corporation ("Edper"),
a diversified natural resources, energy and property development company.
Gentra, Inc. is an affiliate of Edper. From 1980 to 1989, Mr. Walt served in
various capacities with Edper.
Donald C. Campion, Senior Vice President-Chief Financial Officer. Mr. Campion
was appointed Senior Vice President-Chief Financial Officer of Oxford
Automotive in July 1997. From June 1996 to March 1997, Mr. Campion was the
Senior Vice President and Chief Financial Officer at Delco Electronics
Corporation. From November 1993 to May 1996, Mr. Campion was the Chief
Financial Officer for the services parts division of GM, and from August 1992
to October 1993 was the Financial Director of Performance Analysis for the
North American Operations of GM.
Larry C. Cornwall, Senior Vice President-Sales and Engineering. Mr. Cornwall
was appointed Vice President-Sales and Engineering of Oxford Automotive in May
1997. From October 1995 to May 1997, Mr. Cornwall was the Senior Vice
President-Sales and Engineering at BMG. From 1991 to 1995, Mr. Cornwall was
Vice President of Sales and Engineering at Veltri International, an automotive
stamper.
John H. Ferguson, Vice President-Financial Operations and Assistant Secretary.
Mr. Ferguson was appointed as a Vice President-Financial Operations and
Assistant Secretary of Oxford Automotive in May 1997. Mr. Ferguson is also the
Chief Financial Officer of BMG, a position he has held since April 1996. Prior
to that time, Mr. Ferguson was with Bundy, where he acted as Group Plant
Manager from 1994 to 1996 and as Corporate Controller from 1992 to 1994. From
1984 to 1992, Mr. Ferguson held several positions with GenCorp. Inc., an
automotive tire supplier, including Controller of the Automotive Products
Group.
Certain of the officers and directors of Oxford Automotive are also directors
or officers of Oxford Automotive subsidiaries.
BOARD COMMITTEES
In the past, the Company has not maintained any committees of the
Board of Directors. On August 4, 1997, the Board of Directors established an
Audit Committee and a Compensation Committee.
The Audit Committee will be responsible for reviewing with management
the financial controls and accounting and reporting activities of the Company.
The Audit Committee will review the qualifications of the Company's independent
auditors, make recommendations to the Board of Directors regarding the
selection of independent auditors, review the scope, fees and results of any
audit and review non-audit services and related fees. The Audit Committee
consists of Messrs. Schlaybaugh and Walt.
The Compensation Committee will be responsible for the administration
of all salary and incentive compensation plans for the officers and key
employees of the Company, including bonuses. Salaries and bonuses will be
reviewed by the Compensation Committee and will be adjusted in light of
performance of the Company, the responsibilities of each of the Company's
officers in meeting corporate performance objectives and other
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factors, such as length of service and subjective assessments. The
Compensation Committee consists of Messrs. Isakow and Walt.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth certain information as to the
compensation earned by the Company's Chief Executive Officer and the Company's
four other most highly paid officers (the "Named Executive Officers") for the
last three fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (1)
--------------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND TITLE YEAR SALARY BONUS COMPENSATION COMPENSATION
-------------- ---- ------ ----- ------------ ------------
Selwyn Isakow, Chairman(2) 1998 $ 95,577 $101,250 $ -- $ --
1997 -- -- -- --
Steven M. Abelman, President and 1998 $230,769 $150,000 $ -- $ --
Chief Executive Officer(3)
Donald C. Campion, Senior Vice 1998 $147,808 $52,500 $ -- $ --
President-Chief Financial Officer(4) 1997 -- -- -- --
Larry C. Cornwall, Senior Vice 1998 $161,846 $68,000 $ --
President-Sales and Engineering(5) 1997 124,196 36,000 -- --
1996 31,504 24,200 -- --
John H. Ferguson, Vice President- 1998 $131,500 $39,000 $ -- $ --
Financial Operations and Assistant 1997 101,250 -- -- --
Secretary (6)
Rex E. Schlaybaugh, Jr., 1998 $138,462 $101,250 $ -- $ --
Vice Chairman (7) 1997 -- -- -- --
- ----------------
(1) The Company was formed in October 1995 and executive officers
of the Company did not receive any compensation prior to 1997.
(2) Mr. Isakow was the President of the Company from its inception
until May 1997, for which he did not receive any compensation from the Company.
Steven M. Abelman was appointed President and Chief Executive Officer in May
1997. Mr. Isakow received compensation during the last fiscal year in
connection with his position as Chairman of the Board of the Company.
(3) Mr. Abelman was appointed President and Chief Executive Officer
in May 1997. See "-Employment Agreements."
(4) Mr. Campion was appointed Senior Vice President-Chief Financial
Officer of Oxford Automotive in July 1997. See "--Employment Agreements."
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(5) Mr. Cornwall joined the Company in October 1995 and only
received compensation from the Company for a full fiscal year in 1997 and 1998.
(6) Mr. Ferguson joined the Company in April 1996 and only received
compensation from the Company for a full fiscal year in 1998.
(7) Mr. Schlaybaugh did not receive any compensation from the Company
prior to the last fiscal year.
EMPLOYMENT AGREEMENTS
As of May 1, 1997, Oxford Automotive and Steven M. Abelman entered
into an Employment and Noncompetition Agreement. The agreement provides that
Mr. Abelman will serve as President and Chief Executive Officer of Oxford
Automotive on an "at-will" basis. The agreement provides that Mr. Abelman will
receive an annual base salary, will be eligible to receive a bonus of up to 60%
of his salary as determined by the Board of Directors of Oxford Automotive, and
will be entitled to certain fringe benefits. Mr. Abelman has also agreed not to
compete with the Company during the period of his employment and for two years
following the termination of his employment. Upon the termination of his
employment without cause, Mr. Abelman is entitled to severance payments equal
to (a) his annual base salary, if such termination is prior to May 1, 1999 or
(b) 1.5 times his annual base salary, if such termination is after May 1, 1999.
On November 24, 1995, BMG and Larry C. Cornwall entered into an
Employment Agreement. The agreement provides that Mr. Cornwall will serve as
Senior Vice President-Sales and Marketing of BMG on an "at-will" basis. Mr.
Cornwall has subsequently been appointed as Senior Vice President-Sales and
Engineering of Oxford Automotive. The agreement provides that Mr. Cornwall will
receive an annual base salary, will be eligible to receive a bonus of up to 50%
of his salary as determined by the Board of Directors of BMG, will be eligible
to participate in the Company's profit sharing plan, and will be entitled to
certain fringe benefits. Upon the termination of the agreement, Mr. Cornwall
will be entitled to continue to receive his base salary for the longer of three
months or the Canadian statutory requirement.
As of July 21, 1997, Oxford Automotive and Donald C. Campion entered
into an Employment and Noncompetition Agreement. The agreement provides that
Mr. Campion will serve as Senior Vice President-Chief Financial Officer of
Oxford Automotive on an "at-will" basis. The agreement provides that Mr.
Campion will receive an annual base salary, will be eligible to receive a bonus
of up to 50% of his salary as determined by the Board of Directors of Oxford
Automotive, and will be entitled to certain fringe benefits. Mr. Campion has
also agreed not to compete with the Company during the period of his employment
and for two years following the termination of his employment. Upon
termination of his employment without cause, Mr. Campion is entitled to a
severance payment of 50% of his annual base salary, payable over six months,
plus the continuation of certain benefits during this six-month period.
See also "Certain Relationships and Related Transactions."
DIRECTOR COMPENSATION AND ARRANGEMENTS
The Company pays fees to its non-employee directors of $1,000 for each
meeting and reimburses the out-of-pocket expenses related to directors'
attendance at each Board and committee meeting. In addition, the Company may
elect to adopt a non-employee director option plan or other similar plan to
provide for grants of stock options or other benefits as a means of attracting
and retaining highly qualified independent directors for the Company. Members
of the Board of Directors are elected pursuant to certain shareholder
agreements by and among the Company and certain of its shareholders. See
"Security Ownership of Certain Beneficial Owners and Management -- Shareholder
Agreements."
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee prior to August 4,
1997. Accordingly, all determinations with respect to executive compensation
were made by the Board of Directors. Prior to August 4, 1997, Messrs. Isakow
and Schlaybaugh participated in deliberations of the Company's Board of
Directors concerning executive officers compensation. On August 4, 1997 a
Compensation Committee, whose members are Selwyn Isakow and Manfred Walt, was
appointed by the Board of Directors. Mr. Isakow is the Chairman of the Company
and was the President of the Company from its inception in 1995 to May 1997.
Mr. Isakow controls Oxford Investment, a private investment and
corporate development company and Mr. Schlaybaugh is the Vice Chairman of
Oxford Investment. At the time the Company acquired Lobdell (January 10, 1997),
Oxford Investment entered into a management agreement with Lobdell (the
"Lobdell Agreement"). At the time the Company acquired BMG (October 25, 1995),
Oxford Investment entered into a management agreement with BMG (the "BMG
Agreement"). The Lobdell Agreement and the BMG Agreement were terminated on
June 24, 1997. The Company entered into a new management agreement with Oxford
Investment upon the termination of the Lobdell Agreement and the BMG Agreement.
Pursuant to the terms of this management agreement, Oxford Investment will
perform various consulting, management and financial advisory services on
behalf of the Company. The Company will pay Oxford Investment a monthly
management fee of $83,334 and will pay an investment banking fee, for
acquisitions of $2.5 million or more, of 1.0% or 1.25% (for acquisitions
outside of North America) of the aggregate acquisition cost for advice and
assistance in connection with such acquisition, with a minimum fee of $200,000.
No investment banking fee will be paid to Oxford Investment in connection with
acquisitions for aggregate consideration of less than $2.5 million. The initial
term of the agreement will end on December 31, 2001, but will automatically
extend for additional one-year periods thereafter unless either party
terminates the agreement. In addition, pursuant to the management agreement,
Oxford Investment will license to the Company the name "Oxford Automotive"
which is owned by Oxford Investment.
During the fiscal year ended March 31, 1998, the Company paid Oxford
Investment management fees of approximately $1.0 million and investment banking
fees of approximately $230,000. In connection with the acquisition of the
Suspension Division, the Company paid Oxford Investment an investment banking
fee of approximately $550,000 during the first quarter of fiscal 1999.
On November 25, 1997, the Company acquired all of the issued and
outstanding shares of the common stock of RPIH, the parent of RPI for
approximately $2.5 million. The shareholders of RPIH received approximately
$2.5 million in the aggregate for all outstanding RPIH shares. In addition,
the shareholders of RPIH received approximately $402,788 as payment of the
principal and accrued interest on certain outstanding loans to RPIH. Certain
officers, directors, and shareholders of the Company were also officers,
directors, or shareholders of RPIH prior to the transaction. Messrs. Isakow
and Schlaybaugh were officers, directors and shareholders of RPIH. Robert H.
Orley was also an officer, director and shareholder of RPIH and is a
shareholder of the Company. Mr. Isakow, directly and indirectly, received
$753,150, which included the payment of $117,971 for the principal and accrued
interest on certain outstanding loans to RPIH. Mr. Schlaybaugh received
$91,296, which included the payment of $13,120 for the principal and accrued
interest on an outstanding loan to RPIH. Messrs. Robert H. and Gregg L. Orley,
each beneficial owners of more than 5% of the Company's outstanding Common
Stock, each received $252,248, which included the payment of $50,293 to each
for the principal and accrued interest on an outstanding loan to RPIH.
RPIH's wholly owned subsidiary, RPI, Inc. ("RPI"), a Michigan
corporation, issued various demand notes to Lobdell in the aggregate principal
amount of $1.4 million during the year ended March 31, 1998, each bearing
interest at the prime rate plus 1.0% per annum. The notes were issued in
connection with ongoing discussions between RPIH and the Company regarding a
possible merger or other similar transaction in consideration for
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which RPIH had agreed to deal exclusively with the Company and its affiliates
until December 31, 1997. This agreement to deal exclusively with the Company
allowed the Company to negotiate a transaction with RPIH without undue
interference from a third party.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of June 1, 1998, there were 309,750 issued and outstanding shares
of the Common Stock of the Company (the "Common Stock"). The following table
sets forth information as of June 1, 1998 with respect to the Common Stock
beneficially owned by each director of the Company, the Named Executive
Officers, all directors and executive officers of the Company as a group, and
by other holders known to the Company as having beneficial ownership of more
than 5% of the Common Stock. Selwyn Isakow and the Company's other shareholders
have entered into certain agreements, each of which contain substantially
identical terms, the result of which gives Mr. Isakow voting control of 100% of
the Company's Common Stock, except under certain circumstances. See "--
Shareholder Agreements." Unless otherwise specified, the address for each
person is 1250 Stephenson Highway, Troy, Michigan 48083.
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
- ------------------------------------ --------- ------------
Selwyn Isakow (1) . . . . . . . . . . . . . . . . . 155,724 50.27%
2000 N. Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
Rex E. Schlaybaugh, Jr . . . . . . . . . . . . . . . 20,900 6.75%
2000 N. Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
Steven M. Abelman (2) . . . . . . . . . . . . . . . 12,326 3.98%
Manfred J. Walt . . . . . . . . . . . . . . . . . . 2,300 *
175 Boor St., E., S. Tower, Suite 601
Toronto, Ontario, Canada M4W 3R8
Donald C. Campion (2) . . . . . . . . . . . . . . 4,000 1.29%
John H. Ferguson . . . . . . . . . . . . . . . . . . 6,180 2.0%
Larry C. Cornwall . . . . . . . . . . . . . . . . . 7,000 2.26%
Robert H. Orley . . . . . . . . . . . . . . . . . . 20,600 6.65%
2000 N. Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
Gregg L. Orley . . . . . . . . . . . . . . . . . . . 20,600 6.65%
2000 N. Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
All directors and officers as a group (7 persons) 208,430 67.29%
(1)(2)
- ------------------------------
*Less than 1.0%
(1) Includes 140,124 shares owned by Hilsel Investment Company Limited
Partnership, of which Tridec Management, Inc. is General Partner. Mr. Isakow
is the President and a shareholder of Tridec Management,
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Inc. In addition, Mr. Isakow may be deemed to be the beneficial owner of all of
the outstanding shares of Common Stock as a result of certain voting power over
such shares pursuant to the shareholder agreements described below and certain
purchase options that may be exercised by Mr. Isakow with respect to 52,400
outstanding shares of Common Stock.
(2) Each of Mr. Abelman's and Mr. Campion's Employment and
Noncompetition Agreement with Oxford Automotive provides Oxford Automotive with
the right to repurchase their respective shares of Common Stock if their
employment is terminated for any reason.
SHAREHOLDER AGREEMENTS
Each holder of Common Stock is a party to a shareholder agreement
which provides for certain restrictions on transfer by shareholders and grants
certain other shareholders the option to purchase the shares of a shareholder
upon his death. Each surviving shareholder has the right to exercise this
option within 30 days of the death of a shareholder. The exercising
shareholders will divide the deceased shareholder's shares as they agree or, if
they are not able to agree, pro rata. If the exercising shareholders are not
able to agree on a purchase price with the estate of the deceased shareholder,
then the per share purchase price shall be the per share value of the Company
based on the greater of the value of the Company as a going concern or on a
liquidation basis, as determined by an independent appraisal. The purchase
price shall be paid by an initial cash payment of up to 20% of the purchase
price with the balance paid pursuant to a five-year, unsecured promissory note
bearing interest at the prime rate. The agreements also provide that each
shareholder will grant a proxy to Mr. Isakow to vote all of the shareholder's
shares at any meeting of the Company; provided, however, that if holders of
shares having a majority in interest of the shares of Common Stock determine
that it is in the best interest of all of the shareholders to sell all or
substantially all of the assets of the Company or to cause the Company to merge
or consolidate with or into another corporation, Mr. Isakow shall exercise the
proxies provided to him consistent with that decision. As a result, except as
described above, Mr. Isakow has voting control of 100% of the Company's Common
Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As of March 31, 1997, Mr. Abelman issued a note to the Company in
connection with his acquisition of shares of the Company's Common Stock. The
principal amount of the note was $130,000 and the note bears interest at the
prime rate plus 1.0%, which rate is adjusted on March 31 of each year to
reflect the then current prime rate. Principal and interest on the note is
payable in equal annual installments with interest on the unpaid principal,
with the final payment due May 31, 2002.
As of March 31, 1997, the Company issued a subordinated demand note to
Mr. Robert H. Orley in connection with the redemption of certain shares of the
Company's Common Stock. The principal amount of the note was $108,203 and was
paid in full subsequent to March 31, 1997.
See also "Compensation Committee Interlocks and Insider Participation."
LEGAL
Rex E. Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the
Board and a director of the Company. Dykema Gossett PLLC, of which Mr.
Schlaybaugh is a member, has performed legal services for the Company since its
inception. The Company expects to continue to retain the firm as general
counsel.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The financial statements, supplementary financial information,
and financial statement schedules filed herewith are set forth on the Index to
Financial Statements and Financial Statement Schedules on page F-1 of the
separate financial section of this Report, which is incorporated herein by
reference.
A list of Exhibits included as part of this report is set forth in the
Exhibit Index which immediately precedes such exhibits and is incorporated
herein by reference.
(b) The following reports on Form 8-K were filed by the Company
during the quarter ended March 31, 1998:
(i) Report on Form 8-K/A, dated February 9, 1998, was filed
by the Company on February 9, 1998; such report amended a Report on
Form 8-K dated November 25, 1997 and contained information under Item
7 relating to RPI Holdings, Inc. and the related proforma financial
information.
(ii) Report Form 8-K, dated March 13, 1998, was filed by the
Company on March 16, 1998; such report contained information under
Item 5 with respect to the signing of an Asset Purchase Agreement
relating to the acquisition of the Suspension Division from Eaton
Corporation.
(iii) Report on Form 8-K/A, dated March 13, 1998, was filed
by the Company on March 20, 1998; such report amended information
under Item 5 of the Form 8-K filed on March 16, 1998.
(iv) Report on Form 8-K/A, dated March 20, 1998, was filed by
the Company on March 20, 1998; such report amended information under
Item 7 of the Form 8-KA filed on February 9, 1998.
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SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on June 25, 1998.
OXFORD AUTOMOTIVE, INC.
By: /s/ Steven M. Abelman
-------------------------------
Steven M. Abelman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Selwyn Isakow Chairman of the Board and Director
- -------------------------------------
Selwyn Isakow
/s/ Rex E. Schlaybaugh, Jr. Vice Chairman of the Board and Director
- -------------------------------------
Rex E. Schlaybaugh, Jr.
/s/ Steven M. Abelman President, Chief Executive Officer and
- ------------------------------------- Director
Steven M. Abelman
/s/ Donald C. Campion Senior Vice President-Chief Financial
- ------------------------------------- Officer (Principal Accounting and
Donald C. Campion Financial Officer)
/s/ Manfred J. Walt Director
- -------------------------------------
Manfred J. Walt
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
No Annual Report or Proxy Materials have been or will be sent to security
holders.
30
31
OXFORD AUTOMOTIVE, INC.
INDEX TO FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULES
Description Page
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets as of March 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Operations for the years ended March 31, 1998 and 1997, and
the period from October 28, 1995 through March 31, 1996 for the Company; and for the period
from April 1, 1995 through October 27, 1995 for the Predecessor . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Changes in Shareholders' Equity for the years ended March 31, 1998
and 1997, and the period from October 28, 1995 through March 31, 1996 for the Company; and
for the period from April 1, 1995 through October 27, 1995 for the Predecessor . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the years ended March 31, 1998 and 1997, and
the period from October 28, 1995 through Mach 31, 1996 for the Company; and for the period
from April 1, 1995 through October 27, 1995 for the Predecessor . . . . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
Financial Statement Schedules
II - Valuation and Qualifying Accounts
F-1
32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Oxford Automotive, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Oxford Automotive, Inc. and its subsidiaries (the Company) at March 31, 1998
and 1997 and the results of their operations and their cash flows for the years
ended March 31, 1998 and 1997 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
The financial statements of the Company as of March 31, 1996 and for the period
from October 28, 1995 through March 31, 1996 and the financial statements of
BMG North America Limited (the Predecessor) for the period from April 1, 1995
through October 27, 1995 were audited by other independent accountants whose
report dated May 21, 1996 expressed an unqualified opinion on those statements.
PRICE WATERHOUSE LLP
Bloomfield Hills, Michigan
June 22, 1998
F-2
33
INDEPENDENT AUDITORS' REPORT
To the Directors of
Oxford Automotive, Inc. and BMG North America Limited
We have audited the consolidated balance sheet of Oxford Automotive, Inc. as at
March 31, 1996 and the consolidated statements of operations, changes in
shareholders' equity and cash flows for the period from October 28, 1995 to
March 31, 1996 for Oxford Automotive, Inc. and the consolidated statements of
operations, changes in shareholders' equity and cash flows for the period from
April 1, 1995 to October 27, 1995 for BMG North America Limited. These
financial statements are the responsibility of the management of Oxford
Automotive, Inc. and BMG North America Limited. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Oxford Automotive, Inc., as at
March 30, 1996 and the results of its operations and its cash flows for the
period from October 28, 1995 to March 31, 1996 and the results of BMG North
America Limited's operations and its cash flows for the period from April 1,
1995 to October 27, 1995 in accordance with U.S. generally accepted accounting
principles.
DELOITTE & TOUCHE
Chartered Accountants
Kitchener, Ontario
May 21, 1996
F-3
34
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
MARCH 31,
1998 1997 1996
ASSETS
Current assets
Cash and cash equivalents $ 18,321 $ 9,671 $ -
Trade receivables, net 65,273 47,626 8,338
Inventories 21,305 13,411 3,719
Refundable income taxes 1,601 1,641
Reimbursable tooling 13,315 4,968 3,298
Deferred income taxes 4,399 4,633
Unexpended bond proceeds 4,159
Prepaid expenses and other current assets 2,803 1,354 1,181
---------- -------- ----------
TOTAL CURRENT ASSETS 131,176 83,304 16,536
Unexpended bond proceeds 3,937
Marketable securities 8,627
Other noncurrent assets 10,116 4,588 6,734
Deferred income taxes 6,405 5,087 6,139
Property, plant and equipment, net 163,708 146,778 19,791
---------- -------- ----------
TOTAL ASSETS $ 320,032 $243,694 $ 49,200
========== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 52,214 $ 31,421 $ 14,570
Employee compensation 4,808 4,986 1,883
Restructuring reserve 6,363 7,050 608
Accrued expenses and other current liabilities 12,242 9,040 3,299
Current portion of borrowings 10,965 24,274 11,258
---------- -------- ----------
TOTAL CURRENT LIABILITIES 86,592 76,771 31,618
Pension liability 4,727 3,631 1,080
Postretirement medical benefits liability 35,992 33,467
Deferred income taxes 15,332 10,442
Other noncurrent liabilities 2,596 2,187 67
Long-term borrowings -- less current portion 128,483 75,555 15,500
---------- -------- ----------
TOTAL LIABILITIES 273,722 202,053 48,265
---------- -------- ----------
Commitments and contingent liabilities (Note 15)
Redeemable Series A $3.00 Cumulative Preferred Stock, $100 stated
value -- 457,541 shares authorized, 397,539 shares issued and
outstanding in 1998 and 457,541 shares issued and outstanding in
1997 (Notes 3 and 13) 40,192 36,012
---------- --------
Redeemable Series B Preferred Stock, $100 stated value -- 49,938
shares authorized, no shares issued and outstanding in 1998 and
49,938 shares issued and outstanding in 1997 (Notes 3 and 13) 3,288
---------- --------
SHAREHOLDERS' EQUITY
Common stock, 400,000 shares authorized; 309,750
shares issued and outstanding at March 31, 1998 and 1997 and
75,000 shares issued and outstanding at March 31, 1996 1,050 1,050 750
Foreign currency translation adjustment (651) (28) 5
Retained earnings 4,750 1,572 415
Net unrealized gain on marketable securities 969
Equity adjustment for minimum pension liability (253) (235)
---------- -------- ----------
6,118 2,341 935
---------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 320,032 $ 243,694 $ 49,200
========== ========= ==========
The accompanying notes are an integral part of the financial statements.
F-4
35
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
COMPANY PREDECESSOR
------------------------------------------------------- ----------------
PERIOD FROM PERIOD FROM
YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995
MARCH 31, MARCH 31, THROUGH THROUGH
1998 1997 MARCH 31, 1996 OCTOBER 27, 1995
Net sales $ 410,321 $ 136,861 $ 35,572 $ 49,043
Cost of sales 368,420 125,375 31,624 46,895
----------- ---------- ---------- ----------
GROSS PROFIT 41,901 11,486 3,948 2,148
Selling, general and administrative 21,839 7,685 2,235 3,922
Restructuring provision 1,610
Gain on sale of equipment (1,602)
OPERATING INCOME 20,054 3,801 1,713 (1,774)
Other income (expense)
Interest expense (10,710) (3,388) (1,096) (1,048)
Other 321 2,201
----------- ----------
INCOME BEFORE BENEFIT (PROVISION) FOR
INCOME TAXES 9,665 2,614 617 (2,822)
Benefit (provision) for income taxes (4,074) (1,065) (202) 938
----------- ---------- ---------- ----------
NET INCOME 5,591 1,549 415 $ (1,884)
===========
Accrued dividends and accretion on
Redeemable preferred stock 1,334 300
----------- ---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK $ 4,257 $ 1,249 $ 415
=========== ========== ==========
NET INCOME PER SHARE (BASIC AND DILUTED) $ 13.74 $ 9.37 $ 9.10
=========== ========== ==========
The accompanying notes are an integral part of the financial statements.
F-5
36
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
-------------------------------------------------------------------------------
PREDECESSOR
------------------------------------------------------------------------------------
FOREIGN NET EQUITY
CURRENCY RETAINED UNREALIZED GAIN ADJUSTMENT FOR
COMMON TRANSLATION EARNINGS ON MARKETABLE MINIMUM PENSION
STOCK ADJUSTMENT (DEFICIT) SECURITIES LIABILITY TOTAL
BALANCES AT APRIL 1, 1995 $ 14,262 $ 40 $ (3,469) $ - $ - $ 10,833
Net loss (1,884) (1,884)
Foreign currency translation
adjustments 575 (155) 420
Issuance of common stock, net
of redemptions (40) (40)
--------- ------- --------- ----- ----- ---------
BALANCES AT OCTOBER 27, 1995 $ 14,797 $ (115) $ (5,353) $ - $ - $ 9,329
======== ======== ========== ===== ===== =========
COMPANY
------------------------------------------------------------------------------------
FOREIGN NET EQUITY
CURRENCY UNREALIZED GAIN ADJUSTMENT FOR
COMMON TRANSLATION RETAINED ON MARKETABLE MINIMUM PENSION
STOCK ADJUSTMENT EARNINGS SECURITIES LIABILITY TOTAL
BALANCES AT OCTOBER 28, 1995 $ 750 $ - $ - $ - $ - $ 750
Net income 415 415
Foreign currency translation
adjustments 5 5
Equity adjustment for
Minimum pension liability (235) (235)
------- ----- --------- ----- ----- --------
BALANCES AT MARCH 31, 1996 750 5 415 - (235) 935
Net income 1,549 1,549
Foreign currency translation
Adjustments (33) (33)
Equity adjustment for
Minimum pension liability (18) (18)
Accrued dividends and
Accretion of redeemable
Preferred stock (300) (300)
Issuance of common stock, net
of redemptions 300 (92) 208
------- ----- --------- ----- ----- --------
BALANCES AT MARCH 31, 1997 1,050 (28) 1,572 - (253) 2,341
Net income 5,591 5,591
Excess of purchase price over
Predecessor basis (1,079) (1,079)
Foreign currency translation
Adjustments (623) (623)
Unrealized gain on marketable
securities 969 969
Equity adjustment for
minimum pension liability 253 253
Dividends and accretion
on redeemable preferred stock (1,334) (1,334)
------ ---- --------- ----- ----- --------
BALANCES AT MARCH 31, 1998 $ 1,050 $(651) $ 4,750 $ 969 $ $ 6,118
======= ===== ========= ===== ===== ========
The accompanying notes are an integral part of the financial statements.
F-6
37
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
COMPANY PREDECESSOR
------------------------------------------------------ -----------------
PERIOD FROM PERIOD FROM
YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995
MARCH 31, MARCH 31, THROUGH THROUGH
1998 1997 MARCH 31, 1996 OCTOBER 27, 1995
OPERATING ACTIVITIES
Net income (loss) $ 5,591 $ 1,549 $ 415 $ (1,884)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities
Depreciation and amortization 20,279 5,041 687 919
Deferred income taxes 137 2,136 230 (1,036)
Gain on sale of equipment (1,586) (195) (2)
Changes in operating assets and liabilities
affecting cash
Trade receivables (4,615) (8,953) 6,617 (3,311)
Inventories 1,496 (299) (277) (259)
Reimbursable tooling (7,368) (1,601) 1,824 (760)
Prepaid expenses and other assets 569 129 1,592 (1,768)
Other noncurrent assets (836) 3,544
Trade accounts payable 11,416 (605) (6,501) 6,417
Employee compensation 169 (6,072) 309 (493)
Restructuring reserve (745) (398)
Accrued expenses and other liabilities (3,166) (1,885) (1,716) 3,504
Income taxes payable/refundable 2,914 (199)
Other noncurrent liabilities 1,731 (39)
---------- ---------- ----------- -----------
NET CASH PROVIDED BY (USED IN)OPERATING
ACTIVITIES 25,986 (7,847) 3,178 1,329
---------- ---------- ----------- -----------
INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired (24,219) (9,309) (1,983)
Purchase of property, plant and equipment (16,723) (3,326) (3,466) (5,111)
Proceeds from sale of equipment 5,433 341 33 11
Purchases of marketable securities (7,658)
NET CASH USED IN INVESTING ACTIVITIES (43,167) (12,294) (5,416) (5,100)
---------- ---------- ----------- -----------
FINANCING ACTIVITIES
Issuance of share capital 300 750
Proceeds from borrowing arrangements 126,653 78,823 23,814 921
Principal payments on borrowing arrangements (93,782) (49,186) (16,482) (7,477)
Payment of preferred stock dividends (1,193)
Debt financing costs (5,372)
Redemption and retirement of common stock (92) (40)
Obligation under capital lease - net (6) (3)
---------- ---------- ----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 26,306 29,845 8,076 (6,599)
---------- ---------- ----------- -----------
Effect of exchange rate changes on cash (475) (33)
---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 8,650 9,671 5,838 (10,370)
Cash and cash equivalents at beginning of
Period 9,671 (11,238) (868)
---------- ---------- ----------- -----------
Cash and cash equivalents at end of period $ 18,321 $ 9,671 $ (5,400) $ (11,238)
========== ========== =========== ===========
Cash paid for interest $ 7,338 $ 3,033 $ 1,096 $ 1,048
========== ========== =========== ===========
Cash paid for income taxes $ 4,670 $ - $ 42 $ 79
========== ========== =========== ===========
The accompanying notes are an integral part of the financial statements.
F-7
38
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Oxford Automotive, Inc. (the Company) is a full-service supplier of metal
stampings and welded assemblies used as original equipment components
primarily by North American original equipment automotive manufacturers.
The Company's products are used in a wide variety of sport utility
vehicles, light and medium trucks, vans and passenger cars. The Company
primarily operates from thirteen plants located in the United States,
Canada and Mexico. The Company's hourly workforce is represented by
various unions.
Net sales to the Company's three primary customers as a percentage of
total sales are as follows:
PERIOD FROM
OCTOBER 28, 1995
YEAR ENDED YEAR ENDED THROUGH
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996
General Motors Corporation 54% 62% 67%
Ford Motor Company 31% 17% -
Chrysler Corporation 9% - -
Accounts receivable from General Motors Corporation, Ford Motor Company
and Chrysler Corporation represent approximately 39%, 39% and 13%,
respectively, of the March 31, 1998 accounts receivable balance.
Although the Company is directly affected by the economic well being of
the automotive industry and customers referred to above, management does
not believe significant credit risk exists at March 31, 1998. The Company
does not require collateral to reduce such risk and historically has not
experienced significant losses related to receivables from individual
customers or groups of customers in the automotive industry.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements for the period from April 1, 1995 through
October 27, 1995 are those of BMG North America Limited (the
Predecessor), which was acquired by Oxford Automotive, Inc.
(formerly BMG-MI, Inc.) on October 28, 1995.
The consolidated financial statements as of March 31, 1998 and 1997 and
for the years then ended and for the period from October 28, 1995 through
March 31, 1996 are those of the Company and its subsidiaries. The
financial statements of the Company and the Predecessor are not
comparable in certain respects due to differences between the cost bases
of certain assets held by the Company versus that of the Predecessor,
resulting in reduced depreciation and amortization charges subsequent to
October 27, 1995, changes in accounting policies and the recording of
certain liabilities at the date of acquisition in connection with the
purchase of the Predecessor by the Company, as well as the Company's
acquisitions subsequent to October 28, 1995 discussed further in Note 3.
F-8
39
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of Oxford Automotive, Inc. and its wholly-owned subsidiaries, BMG
Holdings, Inc. (BMGH), Howell Industries, Inc. (Howell), Lobdell Emery
Corporation (Lobdell), RPI Holdings, Inc. (RPIH) and Oxford Automotriz de
Mexico S.A. de C.V. (Oxford Mexico). Intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Revenue is recognized by the Company upon shipment of product to the
customer.
FINANCIAL INSTRUMENTS
At March 31, 1998 and 1997, the carrying amount of financial instruments
such as cash and cash equivalents, trade receivables and payables and
unexpended bond proceeds, approximated their fair values. The carrying
amount of the long-term customer receivables and borrowings at March 31,
1998 and 1997, approximated their fair values based on the variable
interest rates available to the Company for similar arrangements.
CASH EQUIVALENTS
The Company considers all highly-liquid investments with maturity of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
principally determined by the last-in, first-out (LIFO) method for the
Company's United States operations and by the first-in first-out (FIFO)
method for the Company's Canadian 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
upon acceptance of the tooling by the customer. Certain of the Company's
tooling costs are financed through lending institutions and are
reimbursed by customers on a piece price basis. These tooling assets are
classified as either accounts receivable ($2,676, $3,695, and $1,809 at
March 31, 1998, 1997, and 1996 respectively), other noncurrent assets
(none, $3,800 and $6,734 at March 31, 1998, 1997, and 1996
respectively) or equipment depending upon the ultimate title holder of
the tooling assets.
F-9
40
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNEXPENDED BOND PROCEEDS
Unexpended bond proceeds in the accompanying consolidated balance sheet
represent unexpended proceeds from the issuance of industrial development
revenue bonds by Creative Fabrication Corporation (Creative), a
wholly-owned subsidiary of Lobdell, as discussed in Note 8, and are
invested in allowable money market accounts and commercial paper with a
maturity of 90 days or less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost and include
expenditures for improvements which materially increase the useful lives
of existing assets. Expenditures for normal repair and maintenance are
charged to operations as incurred. For federal income tax purposes,
depreciation is computed using accelerated and straight-line methods. For
financial reporting purposes, depreciation is computed principally using
the straight-line method over the following estimated useful lives:
YEARS
Land improvements 15
Buildings and improvements 30-40
Machinery and equipment 3-20
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived assets in accordance with Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This
Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be fully recoverable. The Company recognizes
impairment losses for assets or groups of assets where the sum of the
estimated future cash flows (undiscounted and without interest charges)
is less than the carrying amount of the related asset or group of assets.
The amount of the impairment loss recognized is the excess of the
carrying amount over the fair value of the asset or group of assets being
measured.
MARKETABLE SECURITIES
Marketable securities at March 31, 1998, mainly composed of equity
securities, are classified as available-for-sale securities and are
reported at fair value using quoted market prices. Unrealized holding
gains and losses are included as a separate component of shareholders'
equity until realized.
F-10
41
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations which do not contribute to current or
future revenue generation are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable and the
costs can be reasonably estimated. Estimated costs are based upon enacted
laws and regulations, existing technology and the most probable method of
remediation. The costs determined are not discounted and exclude the
effects of inflation and other social and economic factors.
INCOME TAXES
Deferred taxes are provided to give recognition to the effect of expected
future tax consequences of temporary differences between the carrying
amounts for financial reporting purposes and the tax bases for income tax
purposes of assets and liabilities.
FOREIGN EXCHANGE CONTRACTS
Gains and losses of foreign currency firm commitment hedges are deferred
and included in the basis of the transactions underlying the commitments.
During fiscal 1997, the Company recognized a gain of approximately $2,000
related to certain foreign currency exchange transactions terminated
during the year. The gain is included as a component of other income in
the accompanying March 31, 1997 statement of operations. Had the foreign
currency exchange transactions not been terminated, the recognized gain
would normally have been recorded as a component of sales.
FOREIGN CURRENCY TRANSLATION
The foreign currency financial statements of BMGH and Oxford Mexico,
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.
PER SHARE AMOUNTS
The per share amounts of the Predecessor have not been presented as the
Company's capital structure is not comparable to that of the Predecessor.
RECLASSIFICATIONS
Certain amounts from the prior year have been reclassified to conform
with the current year presentation.
F-11
42
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
3. ACQUISITIONS
On October 28, 1995, the Company acquired all of the outstanding common
stock of BMG North America Limited (BMGNA). The acquisition was financed
through a $750 Series A promissory note. The acquisition has been
recorded in accordance with the purchase method of accounting.
Accordingly, the purchase price plus direct cost of the acquisition have
been allocated to the assets acquired and liabilities assumed based on
their estimated fair values at the date of acquisition.
On January 10, 1997, pursuant to an Agreement and Plan of Merger among
Lobdell Emery Corporation, certain shareholders of Lobdell Emery
Corporation, BMG-MI, Inc. and L-E Acquisition, Inc. as amended (the
Agreement), certain Lobdell Emery Corporation shareholders and option
holders had their respective shares and options redeemed for cash of
approximately $8,500 and all outstanding shares of common stock of
Lobdell Emery Corporation (Oldco) were exchanged for shares of preferred
stock of Oldco with a face value of approximately $40,700. In addition,
approximately $3,500 of expenses incurred by Oldco were reimbursed by
L-E Acquisition, Inc. In connection with the exchange of Oldco's common
stock for preferred stock, L-E Acquisition, Inc. was merged with and
into Lobdell Emery Corporation (Newco).
The acquisition was financed through the issuance of preferred stock
described in Note 13 and a term loan, which was subsequently refinanced,
as described in Note 8. The acquisition has been recorded in accordance
with the purchase method of accounting. Accordingly, the purchase price
plus direct cost of the acquisition have been allocated to the assets
acquired and liabilities assumed based on their estimated fair values at
the date of acquisition.
The fair market value of assets acquired and liabilities assumed, after
giving effect to the settlement described in Note 13, is summarized as
follows:
Current assets $ 56,993
Property, plant and equipment 129,966
Noncurrent assets 9,953
Current liabilities (50,028)
Long-term liabilities (107,130)
------------
Fair value of preferred stock $ 39,754
============
In accordance with the purchase method of accounting, Lobdell's operating
results have been included with those of the Company since the date of
acquisition.
On August 13, 1997, the Company acquired all of the outstanding common
stock of Howell for approximately $23,700 in cash, including acquisition
costs. The acquisition was financed through the proceeds of the
subordinated notes described in Note 8. The acquisition has been recorded
in accordance with the purchase method of accounting. Accordingly, the
purchase price plus direct cost of the acquisition have been allocated to
the assets acquired and liabilities assumed based on their estimated fair
values at the date of acquisition.
F-12
43
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
3. ACQUISITIONS (CONTINUED)
The fair market value of assets acquired and liabilities assumed is
summarized as follows:
Current assets $ 22,900
Property, plant and equipment 18,100
Current liabilities (14,100)
Long-term liabilities (3,200)
------------
$ 23,700
============
On November 25, 1997, Oxford purchased all of the outstanding common
stock of RPIH for $2,500 in cash. The acquisition was financed through
the proceeds of the subordinated notes described in Note 8. The
acquisition has been recorded in accordance with the purchase method of
accounting. Accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed based on their estimated fair
values at the date of acquisition. The majority shareholder of Oxford was
also the majority shareholder of RPIH.
The fair market value of assets acquired and liabilities assumed is
summarized as follows:
Current assets $ 3,900
Property, plant and equipment 5,000
Noncurrent assets 1,600
Current liabilities (5,400)
Long-term liabilities (3,700)
Excess of purchase price over predecessor basis 1,100
------------
$ 2,500
============
The excess of purchase price over predecessor basis is a result of the
common ownership by the majority shareholder of Oxford and represents the
portion of the fair value of the net assets acquired in excess of their
book value, multiplied by the majority shareholder's ownership percentage
in RPIH. The Company has recorded this amount as a deduction from
retained earnings in the accompanying statement of changes in
shareholders' equity.
The following unaudited pro forma combined results of operations of the
Company have been prepared as if the acquisitions of Lobdell, Howell and
RPIH had occurred at the beginning of fiscal 1998 and 1997.
YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997
Net sales $ 453,685 $ 433,443
Net income $ 4,692 $ 2,364
Net income applicable to common shares $ 3,358 $ 1,052
Net income per common share $ 10.84 $ 3.40
The pro forma information is not intended to be a projection of future
results.
F-13
44
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
3. ACQUISITIONS (CONTINUED)
The foregoing unaudited pro forma results of operations reflect
adjustments for additional interest expense related to the financing of
the acquisitions and the additional depreciation expense, as a result of
the write-up of property, plant and equipment, net of the related tax
benefit.
4. ACCOUNTS RECEIVABLE
Accounts receivable are comprised of the following at March 31:
1998 1997 1998
Trade receivables $ 65,673 $ 48,898 $ 8,377
Less - allowance for doubtful accounts (400) (1,272) (39)
--------- --------- --------
Trade receivables, net $ 65,273 $ 47,626 $ 8,338
========= ========= ========
5. INVENTORIES
Inventories are comprised of the following at March 31:
1998 1997 1996
Raw materials $ 6,737 $ 5,688 $ 1,557
Finished goods and work-in-process 15,135 7,994 2,162
--------- --------- ---------
21,872 13,682 3,719
LIFO and other reserves (567) (271)
--------- --------- ---------
$ 21,305 $ 13,411 $ 3,719
========= ========= =========
The Company does not separately identify finished goods from
work-in-process.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at March 31:
1998 1997 1996
Land and land improvements $ 5,432 $ 5,073 $ 779
Buildings and improvements 29,126 24,697 3,171
Machinery and equipment 140,095 117,535 7,394
Construction-in-process 12,204 4,393 8,914
----------- --------- --------
186,857 151,698 20,258
Less - accumulated depreciation (23,149) (4,920) (467)
----------- --------- --------
$ 163,708 $ 146,778 $ 19,791
=========== ========= ========
F-14
45
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
6. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Certain machinery and equipment with a net book value of $9,900 was idle
at March 31, 1998. Management intends to redeploy these assets amongst
its operating facilities and does not believe that the net book value of
these assets is impaired at March 31, 1998. In addition, in connection
with the restructuring activities described in Note 10, management
expects that additional assets, mainly land and buildings with a net book
value of $7,300 at March 31, 1998, will be idled next year.
In March 1998, the Company sold assets acquired in connection with the
acquisition of Lobdell and recorded a gain on the sale of these assets
of $1,602.
As discussed in Note 10, certain of the Company's facilities were closed
during the year ended March 31, 1998. As management intends to sell these
facilities, the net book value of the land and buildings, approximating
$1,815, is classified in prepaid expenses and other current assets as of
March 31, 1998 in the accompanying consolidated balance sheet.
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following at March 31:
1998 1997 1996
Accrued interest $ 3,627 $ 103 $ -
Accrued workers' compensation 3,287 3,071 544
Accrued property taxes 1,454 2,350
Accrued medical benefits 1,040 1,827
Foreign exchange gain 1,975
Other 2,834 1,689 780
-------- -------- -------
$ 12,242 $ 9,040 $ 3,299
======== ======== =======
F-15
46
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
8. BORROWING ARRANGEMENTS
Borrowings consist of the following at March 31:
1998 1997 1996
SERIES A 10.125% SENIOR SUBORDINATED NOTES DUE 2007, OXFORD $ 124,827 $ - $ -
INDUSTRIAL DEVELOPMENT REVENUE BONDS, CREATIVE
$8,500 issued September 27, 1995, floating rate interest (3.85% at
March 31, 1998). Quarterly principal payments based on graduated
maturity schedule. Backed by NBD Bank letter of credit 7,600 8,300
EDC TOOLING LOAN, BMGNA
Interest at a fixed rate of 7.36%. Payments based on parts shipped,
matures September 30, 1999 2,967 5,110
BANK SYNDICATE--REVOLVING CREDIT LINE, OXFORD
Interest at prime rate (8.5% at March 31, 1998), matures June 24, 2003 1,825
BANK-- TERM LOAN, LOBDELL
Interest at .625% over 90-day LIBOR (6.435% at March 31, 1998).
Quarterly principal payments of approximately $400, matures
October 1, 1998 1,233 2,833
IRDP LOAN, BMGNA
Interest at 6%. Monthly principal payments of $7 to October 31, 2000 and
$11 thereafter, matures September 1, 2002 396 467 534
BANK SYNDICATE -- TERM LOAN, LOBDELL
Interest at variable spread over prime. Quarterly principal payments
ranging from $1,250-$2,750 plus interest, repaid in full during 52,750
fiscal 1998
BANK SYNDICATE -- REVOLVING CREDIT LINE, LOBDELL
Interest at variable spread over prime, repaid in full during fiscal 1998 1,250
BANK SYNDICATE -- TERM LOAN, BMGNA
Interest at prime rate plus 1.25%. Quarterly payments of $755 plus
interest, repaid in full during fiscal 1998 14,447
REVOLVING CREDIT LINE, BMGNA
Interest at prime rate plus 1.25%, repaid in full during fiscal 1998 10,376
NATIONS BANK -- SATURN TOOLING, BMGNA
Interest at a variable spread over prime (8.71% at March 31, 1997).
Payments based on parts shipped, repaid in full during fiscal 1998 1,380 7,047
CCFL LOAN, BMGNA
Interest at 11.11%. Monthly principal payments of $21, repaid in full
during fiscal 1998 2,475 2,768
TERM LOAN, BMGNA
Interest at Canadian Index Rate plus 3% or Canadian Banker's
Acceptance Rate plue 3.95%. Quarterly principal payments
based on graduated schedule, repaid in full during fiscal 1997 7,765
REVOLVING CREDIT LINE, BMGNA
Interest at Canadian Banker's Acceptance Rate plue 3.7%,
repaid in full during fiscal 1997 2,803
BANK LOAN, BMGNA
Interest at either the Canadian Index Rate plue 2.5% or BA
rate plus 3.45%, reapid in full during fiscal 1997 2,650
TOOLING LINE, BMGNA
Interest at the Canadian Index Rate plue 3% or the Canadian
Banker's Acceptance Rate plus 3.95%, repaid in full during
fiscal 1997 2,750
SERIES A PROMISSORY NOTE, BMGH
Interest at 7%, repaid in full during fiscal 1998 441 441
OTHER 600
---------- --------- --------
Total 139,448 99,829 26,758
Less - current portion of long-term borrowings (10,965) (24,274) (11,258)
---------- --------- --------
Long-term borrowings-- less current portion $ 128,483 $ 75,555 $ 15,500
========== ========= ========
F-16
47
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
8. BORROWING ARRANGEMENTS (CONTINUED)
On June 24, 1997, the Company issued $125,000 of Series A 10.125% Senior
Subordinated Notes Due 2007 (the Notes). The Notes mature on June 15,
2007 and require semi-annual interest payments of approximately $6,300.
The proceeds from the Notes were primarily used to repay certain of the
Company's indebtedness and finance the Company's acquisitions of Howell
and RPIH described in Note 3, as well as the acquisition of the assets of
the Suspension Division of Eaton Corporation described in Note 17. The
Notes are unsecured and are guaranteed by Oxford and certain of its
wholly-owned subsidiaries. See Note 18. On April 1, 1997, the Company
issued $35,000 of Series B 10.125% Senior Subordinated Notes Due 2007 as
discussed in Note 17.
Concurrent with the issuance of the Notes, the Company entered into a
credit agreement with a syndicate of banks (the Oxford Credit Agreement),
under which the Company may borrow up to $110,000, of which a maximum of
$15,000 is available for letters of credit. At March 31, 1998, $1,825 was
outstanding under the revolving line of credit and $9,437 was outstanding
under letters of credit, leaving $98,738 unused and available. The terms
of the Oxford Credit Agreement contain, amount other provisions,
requirements for maintaining defined levels of tangible net worth, total
debt to cash flows, interest coverage and fixed charge coverage. The
Oxford Credit Agreement also contains certain restrictions on the payment
of dividends. Quarterly commitment fees on the unused amounts of the
revolving credit line range from .25% to .50% of the unused portion.
Borrowings are secured by substantially all of the assets of Oxford.
The proceeds of the industrial development revenue bonds were used to
finance the real and personal property of Creative. These bonds are
backed by an NBD letter of credit, which carries a rate of 1.50% and is
collateralized by substantially all assets of Creative. The letter of
credit reimbursement agreement includes covenants requiring minimum
tangible capital, debt service coverage and limitations on other
indebtedness.
The Bank--term loan, Lobdell and EDC tooling loan, BMGNA are used to
finance customer tooling. These loans are collateralized by either a
customer purchase order or the tooling assets.
Aggregate maturities of long-term borrowings at March 31, 1998 are as
follows:
1999 $ 10,965
2000 2,032
2001 1,048
2002 93
2003 93
Thereafter 125,217
-----------
$ 139,448
===========
F-17
48
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
9. INCOME TAXES
The Company's income tax provision (benefit) consists of the following:
COMPANY PREDECESSOR
------------------------------------------------------------ ----------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED YEAR ENDED THROUGH THROUGH
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995
Current
Federal $ 3,116 $ (821) $ - $ -
State 1,098 (124)
Foreign 34 46
--------- -------- -------- --------
4,214 (945) 34 46
--------- -------- -------- --------
Deferred
Federal 2,300 899
State (608) 137
Foreign (1,832) 974 168 (984)
--------- -------- -------- --------
(140) 2,010 168 (984)
--------- -------- -------- --------
$ 4,074 $ 1,065 $ 202 $ (938)
========= ======== ======== ========
The difference between the statutory rate and the Company's effective
rate was as follows:
COMPANY PREDECESSOR
--------------------------------------------------------- ----------------
PERIOD FROM
PERIOD FROM APRIL 1, 1995
OCTOBER 28, 1995 THROUGH
YEAR ENDED YEAR ENDED THROUGH OCTOBER 27,
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 1995
Statutory rate 35.0% 34.0% 36.0% 36.0%
Foreign rates varying from 34% (0.5) 1.8
Large corporation tax (2.8) (1.6)
State taxes, net of federal benefit 3.3 0.3
Nondeductible items 1.9 4.1 (0.5) (1.2)
Other 2.5 0.5
------ ------
Effective income tax rate 42.2% 40.7% 32.7% 33.2%
====== ====== ====== ======
F-18
49
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
9. INCOME TAXES (CONTINUED
Significant components of the Company's deferred tax assets and
(liabilities) are as follows at March 31:
1998 1997 1996
Deferred tax liabilities
Tax depreciation in excess of book $ (30,930) $ (30,065) $ -
Inventory reserve (1,581) (1,292)
Other (170)
---------- --------- ---------
Gross deferred tax liabilities (32,681) (31,357)
---------- --------- ---------
Deferred tax assets
Postretirement medical benefits 14,397 13,387
Impairment reserve 22 1,200
Workers' compensation 1,345 1,089
Medical benefits accrual 473 702
Allowance for bad debts 97 502
AMT credit carryforward 3,000
Pension benefits 2,514 1,606 498
Net operating loss carryforwards 2,381 2,905 3,066
Book depreciation in excess of tax 989
Restructuring reserve 3,698 3,927 311
Foreign exchange 127 46 696
Other 3,299 2,471 579
---------- --------- ---------
Gross deferred tax assets 28,353 30,835 6,139
---------- --------- ---------
Valuation allowance (200) (200)
---------- --------- ---------
Net deferred tax asset (liability) $ (4,528) $ (722) $ 6,139
========== ========= =========
A valuation allowance is provided on the tax benefits otherwise
associated with certain tax attributes unless it is considered more
likely than not that the benefit will be realized.
The Company has net operating loss carryforwards for federal income tax
purposes with potential future tax benefits of approximately $2,147 at
March 31, 1998. The federal net operating losses expire during 2011. The
Company has net operating loss carryforwards for Canadian income tax
purposes with potential future tax benefits of approximately $2,950 at
March 31, 1998. The Canadian net operating losses expire during 2004 and
2005. In addition, the Company has net operating loss carryforwards for
Mexican income tax purposes with potential future tax benefits of
approximately $1,695 at March 31, 1998. The Mexican net operating losses
expire in seven to ten years.
The Company has net operating loss carryforwards with a potential future
tax benefit of approximately $202 for state income tax purposes and
Tennessee Jobs Tax Credit carryforwards of approximately $200 at March
31, 1998, both of which expire during 2010 and 2011.
F-19
50
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
10. RESTRUCTURING RESERVES
In connection with the acquisition of Lobdell described in Note 3,
management began to formulate and assess a plan to exit certain
activities of Lobdell and, accordingly, established certain restructuring
reserves aggregating $7,050 in Lobdell's opening balance sheet.
Management's restructuring plan included the sale of certain
subsidiaries, closure of a Lobdell owned manufacturing facility and sale
of the current Lobdell owned corporate offices. Included in the
restructuring reserves at March 31, 1997 were costs for severance and
benefits for employees to be relocated and terminated ($5,052) and other
restructuring related costs ($1,998). During the year ended March 31,
1998, total payments to employees that were terminated were $1,979. As a
result of management's plans, approximately 375 employees were
terminated.
In connection with management's plans to reduce costs and improve
operating efficiencies at other facilities, the Company recorded a
provision for restructuring of $1,610 during the year ended March 31,
1998 and established restructuring reserves aggregating $1,339 in
Howell's opening balance sheet.
A summary of the restructuring activity is presented below. There was no
activity during the period from January 10, 1997 to March 31, 1997.
Balance at March 31, 1997 $ 7,050
1998 provision 1,610
1998 activity:
Restructuring accrual associated with the
acquisition of Howell 1,339
Reduction in workforce and other cash outflows (2,355)
Reversal of excess accruals to noncurrent assets (1,281)
----------
Balance at March 31, 1998 $ 6,363
==========
The provision for restructuring recorded during the year ended March 31,
1998 represents costs associated with management's plans to close three
Company facilities. Management expects that, as a result of these
closures, approximately 160 employees will be permanently separated.
Severance costs for these employees will be recorded in 1999. Costs
recorded in 1998 primarily relate to fixed assets.
The restructuring reserve established in Howell's opening balance sheet
represents management's best estimate of the costs to be incurred in
connection with the closure of a leased Howell facility. As a result of
this closure, no employees are expected to be terminated. Management
continues to assess the future manufacturing capacity of Howell and
expects to complete its assessment and finalization of the restructuring
plan within one year of the acquisition date of Howell.
The reversal of excess accruals recorded during the year ended March 31,
1998 is due to management's finalization of its restructuring plans for
Lobdell. No future requirement for this accrual exists. These reversals
were recorded as a reduction of noncurrent assets.
F-20
51
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
10. RESTRUCTURING RESERVES (CONTINUED)
In connection with the Company's restructuring activities related to
Lobdell, certain employees of Lobdell were terminated. The termination of
certain of these employees resulted in a postretirement medical benefit
curtailment gain of $957 which, in accordance with the purchase method of
accounting, was treated as a reduction in liabilities assumed at the
acquisition date. Accordingly, no postemployment medical benefit
curtailment gain has been recognized in the Company's statement of
operations for the year ended March 31, 1997.
11. BENEFIT PLANS
The Company sponsors twelve noncontributory plans covering substantially
all employees meeting the age and length of service requirements as
specified in the plans. The plan covering salaried employees provides
pension benefits that are based on a percentage of the employee's average
monthly compensation during the five highest consecutive years out of
their last ten years, and their years of credited service up to a maximum
of 30 years. The hourly plans do not provide for increases in future
compensation levels. The Company's funding policy for the plan covering
salaried employees is to make contributions in amounts sufficient to
annually fund the plan's current service cost and the initial past
service cost, plus interest, over a period of 30 years. Plans covering
hourly employees generally provide benefits of stated amounts based on
their unique labor agreements for each year of service. The Company's
funding policy for these plans is to make at least the minimum annual
contributions required by applicable regulations.
The following table sets forth the plans' funded status and amounts
recognized on the Company's balance sheets at March 31:
OVERFUNDED PLANS UNDERFUNDED PLANS
1998 1997 1996 1998 1997 1996
Actuarial present value of benefit obligation
Vested benefits $ 20,132 $17,573 $ 2,376 $ 43,620 $ 34,106 $ 11,539
Nonvested benefits 659 1,170 74 2,602 1,853 356
-------- ------- ------- -------- -------- --------
20,791 18,743 2,450 46,222 35,959 11,895
Effect of projected future compensation levels 2,329 4,060 1,285 3,187
-------- ------- ------- -------- -------- --------
Projected benefit obligation for service rendered 23,120 22,803 3,735 49,409 35,959 11,895
Plan assets at fair value (primarily U.S.
government (23,740) (22,854) (4,155) (47,484) (32,280) (10,525)
-------- ------- ------- -------- -------- --------
securities, bonds and notes and mutual funds)
Plan assets less (greater) than projected
benefit (620) (51) (420) 1,925 3,679 1,370
obligation
Unrecognized net loss, including asset
gains/losses not (1,663) 10 2,723 (21)
yet reflected in market values
Unrecognized prior service cost 44 (20)
Unrecognized net obligation being recognized over
15-20 years 15
Experience gains (losses) (61) 125 (392) (363)
Adjustment required to recognize minimum liability 35 472 368
-------- ------- ------- -------- -------- --------
(Prepaid) accrued pension cost $ (2,283) $ (87) $ (295) $ 4,727 $ 3,718 $ 1,375
======== ======= ======= ======== ======== ========
The minimum pension liability in excess of the allowable intangible asset
has been recorded as a separate component of equity, net of tax.
F-21
52
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
11. BENEFIT PLANS (CONTINUED)
Net periodic pension cost for each year and the actuarial assumptions
used in determining the projected benefit obligation were as follows:
COMPANY PREDECESSOR
------------------------------------------------- -----------------
PERIOD FROM PERIOD FROM
YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995
MARCH 31, MARCH 31, THROUGH THROUGH
1998 1997 MARCH 31, 1996 OCTOBER 27, 1995
Service cost $ 2,143 $ 1,074 $ 266 $ 344
Interest cost 4,808 2,127 530 697
Actual return on assets (12,528) (2,138) (425) (533)
Net amortization and deferral 7,505 15 60
---------- --------- --------- ---------
Net periodic pension cost $ 1,928 $ 1,078 $ 371 $ 568
========== ========= ========= =========
Discount rate
U.S. plans 7.25% 7.75%
Canadian plans 6.50% 8.00% 8.50% 8.75%
Expected return on assets
U.S. plans 8.50-9.00% 9.00%
Canadian plans 8.50% 8.50% 8.50% 7.50%
Salary progression
U.S. plans 4.50% 4.50%
Canadian plans 5.50% 5.50% 5.50% 5.50%
The Company sponsors seven defined contribution 401(k) plans. The Company
generally contributes 25% of the first 6% of the base compensation that a
participant contributes to the plans.
12. POSTRETIREMENT MEDICAL BENEFITS
In addition to the Company's defined benefit pension plans, Lobdell
sponsors unfunded defined benefit medical plans that provide
postretirement medical benefits to certain full-time employees meeting
the age, length of service and contractual requirements as specified in
the plans. The plan covering salaried employees is a contributory plan
providing medical benefits to those hired before July 1, 1993. The
percentage of cost paid by the retiree currently ranges from 10% for 30
or more years of service at retirement to 55% for 15 years of service at
retirement, with Company contributions commencing upon attainment of age
62. Those retiring with less than 15 years of service and those hired
after June 30, 1993 may participate in the plan at their own cost. The
plan is currently noncontributory for those employees who retired prior
to July 1, 1993. The plans covering hourly employees provide medical
benefit plan options that are similar to those offered to active hourly
employees, with Lobdell contributions limited either to that available
under traditional coverage for Alma hourly retirees or to 87% of the
total applicable premium for Greencastle retirees.
F-22
53
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
12. POSTRETIREMENT MEDICAL BENEFITS (CONTINUED)
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's balance sheet at March 31.
1998 1997
Accumulated postretirement benefit obligation
Retirees $ 16,332 $ 14,479
Full eligible active plan participants 6,195 4,287
Other active plan participants 18,134 13,510
---------- ----------
Total unfunded obligation 40,661 32,276
Unrecognized gain (loss) (4,669) 1,191
---------- ----------
Postretirement medical benefits liability $ 35,992 $ 33,467
========== ==========
Net periodic postretirement benefit cost included the following
components:
FOR THE PERIOD FROM
FOR THE YEAR JANUARY 10, 1997
ENDED THROUGH
MARCH 31, 1998 MARCH 31, 1997
Service cost-- benefits earned during the period $ 1,025 $ 272
Interest cost on the accumulated postretirement benefit
obligation 2,711 623
---------- ----------
Net periodic postretirement benefit cost $ 3,736 $ 895
========== ==========
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% and 7.75% at March 31, 1998
and 1997, respectively. The weighted average annual assumed rate of
increase in the per capita cost of covered benefits (i.e., healthcare
cost trend rate) is 8.5% in 1998 trending to 6.5% in 2008 and thereafter
for retirees less than 65 years of age. For retirees 65 years of age and
over, the rate is 8.3% in 1998 trending to 6.5% in 2008 and thereafter.
The healthcare cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed healthcare cost
trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of March 31, 1998 by
approximately $5,919 and net periodic postretirement benefit cost for the
year ended March 31, 1998 by approximately $573.
F-23
54
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
13. REDEEMABLE PREFERRED STOCK
In connection with the acquisition of Lobdell described in Note 3,
redeemable preferred stock with a face value of $50,748 was issued.
Redeemable preferred stock with a face value of $40,748 was delivered to
the former shareholders of Lobdell on January 10, 1997. The remaining
redeemable preferred stock with a face value of $10,000 was placed in
escrow pending final determination of the purchase price. The preferred
stock issuance consisted of 457,541 shares of Series A $3.00 Cumulative
Preferred Stock (Series A Preferred) and 49,938 shares of Series B
Preferred Stock (Series B Preferred). On July 15, 1997, the Company
entered into a Settlement Agreement and Mutual Release with the preferred
shareholders of Lobdell (the Settlement Agreement). Pursuant to the
Settlement Agreement, 60,002 shares of Series A Preferred held in escrow
and all Series B Preferred previously issued were canceled. The remaining
39,938 shares of Series A Preferred held in escrow were released to the
preferred shareholders of Lobdell.
The annual dividend on the Series A Preferred is $3.00 per share, payable
semi-annually. Dividends on the Series A Preferred are cumulative, but do
not bear interest. Under the terms of the issuance of the Series A
Preferred (the Stock Agreement), the holders of the Series A Preferred
maintain limited voting rights. Holders are entitled to vote on any
provisions that would adversely affect their rights or privileges or
management's plans to issue any equity securities that would rank prior
to the Series A Preferred. Holders are also entitled to elect at least
one director of Lobdell, which, under certain provisions of the Stock
Agreement, may increase to two.
Lobdell is required to redeem all shares of Series A Preferred on
December 31, 2006 at a price of $100 per share, plus all declared or
accumulated but unpaid dividends. If Oxford does not commence an initial
public offering of common stock (IPO) prior to June 30, 2006, then the
redemption price of the Series A Preferred is $103 per share. If an IPO
does not occur by December 31, 2001, each holder of Series A Preferred
has the option to redeem annually a maximum of 20 percent of the shares
held at a price of $100 per share on each December 31, beginning in 2002.
Series A Preferred holders are not allowed to transfer, sell or assign
the shares prior to February 1, 1999. Subsequent to that date, Lobdell
has the right of first refusal to purchase any of the shares transferred,
sold or assigned by a holder of Series A Preferred.
Holders of Series A Preferred are entitled to convert their shares to
Oxford common stock issued in connection with an IPO. Individual holders
may convert a maximum of 50% of their shares, but the total of all Series
A Preferred shares converted may not exceed 25% of the total Series A
Preferred shares outstanding.
The Series A Preferred has been included in the accompanying consolidated
balance sheet at its fair value at the date of issuance of $39,754, and
has been adjusted for accrued dividends and accretion totaling $438 and
$258 for the years ended March 31, 1998 and 1997, respectively.
F-24
55
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
14. RELATED PARTY TRANSACTIONS
The Company is charged a fee by a related party, The Oxford Investment
Group, Inc., for consulting, finance and management services. Fees
charged to the Company by The Oxford Investment Group, Inc. approximated
$1,005 and $275 for the years ended March 31, 1998 and 1997,
respectively. In connection with the acquisitions of BMGNA, Lobdell and
Howell, investment banking fees of $200, $300 and $230, respectively,
were paid to The Oxford Investment Group, Inc., during the periods ended
March 31, 1996, 1997 and 1998, respectively.
As described in Note 3, the majority shareholder of the Company was also
the majority shareholder of RPIH.
15. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
As of March 31, 1998, the Company had long-term operating leases covering
certain machinery and equipment. The minimum rental commitments under
noncancellable operating leases with lease terms in excess of one year
are as follows as of March 31, 1998:
1999 $ 3,422
2000 3,480
2001 1,380
2002 3,370
2003 142
-----------
$ 11,794
===========
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws and regulations
which govern environmental matters. These laws regulate the discharge of
materials into the environment and may require the Company to remove or
mitigate the environmental effects of the disposal or release of
petroleum or chemical substances. The Company has identified several
environmental matters resulting from prior operations. Due to the
relatively early stage of investigation of certain of these identified
matters as well as potential indemnification by other potentially
responsible parties, management is unable to reasonably estimate the
ultimate cost of remediating certain of these identified environmental
matters. The Company has recorded a liability of approximately $1,746 and
$880 at March 31, 1998 and 1997, respectively, for estimated costs of
known environmental matters.
GENERAL
The Company is subject to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of
business. In the opinion of management, after reviewing the information
which is currently available with respect to such matters and consulting
with legal counsel, any liability which may ultimately be incurred with
respect to these matters will not materially affect the financial
position, results of operations or cash flows of the Company.
F-25
56
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
16. SEGMENT INFORMATION
The Company operates in one industry segment and all sales are to
unaffiliated customers. Net sales represent all sales to unaffiliated
customers. Net export sales represent sales to unaffiliated customers
outside of the enterprise's home country. The Company's home country is
the United States and the Predecessor's home country was Canada.
Accordingly, for the period from April 1, 1995 through October 27, 1995,
net export sales represent sales to unaffiliated customers outside of
Canada. For the period from October 28, 1995 to March 31, 1996 and for
the years ended March 31, 1997 and 1998, net export sales represent sales
to unaffiliated customers outside of the United States. Net sales by
geographic area, identifiable assets by geographic area and net export
sales by geographic area are as follows:
COMPANY PREDECESSOR
------------------------------------------------- -----------------
PERIOD FROM PERIOD FROM
YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995
MARCH 31, MARCH 31, THROUGH THROUGH
1998 1997 MARCH 31, 1996 OCTOBER 27, 1995
Net Sales
United States $ 324,335 $ 54,660 $ - $ -
Canada 85,030 82,201 35,572 49,043
Mexico 956
----------- ----------- ---------- ---------
$ 410,321 $ 136,861 $ 35,572 $ 49,043
=========== =========== ========== =========
Operating Income (Loss)
United States $ 22,234 $ 1,101 $ - $
Canada (462) 2,700 1,713 (1,774)
Mexico (1,718)
----------- ----------- ---------- ---------
$ 20,054 $ 3,801 $ 1,713 $ (1,774)
=========== =========== ========== =========
Identifiable Assets
United States $ 275,039 $ 189,308 $ -
Canada 40,634 57,153 49,200
Mexico 4,948
----------- ----------- ----------
$ 320,621 $ 246,461 $ 49,200
=========== =========== ==========
Net Export Sales
Canada $ 63,985 $ 41,846 $ 16,476 $ -
United States 25,397
Mexico 52,834 13,573 1,366 664
Other 4,893 2,120
----------- ----------- ---------- ---------
$ 121,712 $ 57,539 $ 17,842 $ 26,061
=========== =========== ========== =========
F-26
57
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
17. SUBSEQUENT EVENT
On April 1, 1998, the Company purchased the assets of the Suspension
Division of Eaton Corporation (Suspension) for cash of approximately
$53,500, including the investment in the Metalcar joint venture. The
acquisition was financed through the proceeds of the Notes described in
Note 8 and the issuance of $35,000 of Series B 10.125% Senior
Subordinated Notes Due 2007. The acquisition will be recorded in
accordance with the purchase method of accounting. Accordingly, the
purchase price plus direct cost of the acquisition will be allocated to
the assets acquired and liabilities assumed based on their estimated fair
values at the date of acquisition.
The estimated fair market value of assets acquired and liabilities
assumed is summarized as follows:
Current assets $ 22,700
Property, plant and equipment 47,200
Current liabilities (11,300)
Long-term liabilities (5,100)
------------
$ 53,500
============
The unaudited pro forma combined results of operations of the Company and
Suspension for the year ended March 31, 1998 including Howell and RPIH as
if the acquisitions had occurred at the beginning of fiscal 1998 and
after giving effect to certain pro forma adjustments are as follows:
Net sales $ 576,163
===========
Net income $ 2,261
===========
Net income applicable to common shares $ 927
===========
Net income per common share $ 2.99
===========
The pro forma information is not intended to be a projection of future
results. The foregoing unaudited pro forma results of operations reflect
adjustments for additional interest expense related to the financing of
the acquisitions and the additional depreciation expense, as a result of
the write-up of property, plant and equipment, net of the related tax
benefit.
18. CONDENSED CONSOLIDATING INFORMATION
The Notes are guaranteed by Oxford Automotive, Inc. and certain of its
wholly-owned subsidiaries, including Lobdell, Howell, BMGH and RPIH (the
Guarantor Subsidiaries). The Notes are not guaranteed by the Company's
other consolidated subsidiary, Oxford Mexico (the Non-guarantor
Subsidiary). The guarantee of the Notes by the Company and the Guarantor
Subsidiaries is full and unconditional. The following condensed
consolidated financial information presents the financial position,
results of operations and cash flows of (i) the Company as if it
accounted for its subsidiaries on the equity method, (ii) the Guarantor
Subsidiaries on a combined basis and (iii) the Non-guarantor Subsidiary.
F-27
58
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
(DOLLARS IN THOUSANDS)
ASSETS
Current assets
Cash $ 13,673 $ 322 $ 4,326 $ $ 18,321
Receivables (net) 7,206 868 64,652 (7,453) 65,273
Inventories 40 21,265 21,305
Reimbursable tooling 13,315 13,315
Income taxes refundable 1,601 1,601
Deferred income taxes 92 4,307 4,399
Prepaid expenses and other 172 10 8,443 (1,663) 6,962
---------- -------- --------- -------- ----------
TOTAL CURRENT ASSETS 21,143 1,240 117,909 (9,116) 131,176
Other noncurrent assets 14,626 45 10,477 25,148
Property, plant and equipment (net) 2,141 3,663 157,904 163,708
Investment in consolidated subsidiaries 31,861 (31,861)
---------- -------- --------- -------- ----------
TOTAL ASSETS $ 69,771 $ 4,948 $ 286,290 $(40,977) $ 320,032
========== ======== ========= ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 746 $ 351 $ 50,956 $ 161 $ 52,214
Employee compensation 1,330 3,478 4,808
Intercompany accounts (65,132) 6,041 52,986 6,105
Restructuring reserve 6,363 6,363
Accrued expenses and other 951 104 20,505 (9,318) 12,242
Current portion of borrowings 10,965 10,965
---------- -------- --------- -------- ----------
TOTAL CURRENT LIABILITIES (62,105) 6,496 145,253 (3,052) 86,592
Pension liability 4,727 4,727
Postretirement medical benefits 35,992 35,992
Deferred income taxes and other 279 (576) 18,225 17,928
Long-term borrowings 124,828 3,655 128,483
---------- -------- --------- -------- ----------
TOTAL LIABILITIES 63,002 5,920 207,852 (3,052) 273,722
---------- -------- --------- -------- ----------
Redeemable preferred stock 40,192 40,192
---------- -------- --------- -------- ----------
Shareholders' equity
Common stock 1,050 32,974 (32,974) 1,050
Foreign currency translation 147 (798) (651)
Retained earnings (accumulated deficit) 4,750 (1,119) 6,070 (4,951) 4,750
Unrealized gain on marketable securities 969 969
Equity adjustment for minimum pension
TOTAL SHAREHOLDERS' EQUITY 6,769 (972) 38,246 (37,925) 6,118
---------- -------- --------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 69,771 $ 4,948 $ 286,290 $(40,977) $ 320,032
========== ======== ========= ======== ==========
F-28
59
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
(DOLLARS IN THOUSANDS)
Sales $ - $ 956 $ 409,365 $ - $ 410,321
Cost of sales 2,674 365,746 368,420
---------- -------- --------- -------- ----------
GROSS PROFIT (1,718) 43,619 41,901
Selling, general and administrative expenses (665) 22,504 21,839
Restructuring provision 1,610 1,610
Gain on sale of equipment (1,602) (1,602)
---------- -------- --------- -------- ----------
OPERATING INCOME 665 (1,718) 21,107 20,054
Other income (expense)
Interest expense (467) 2 (10,245) (10,710)
Other 21 300 321
---------- -------- --------- -------- ----------
INCOME BEFORE BENEFIT (PROVISION)
FOR INCOME TAXES 198 (1,695) 11,162 9,665
Benefit (provision) for income taxes (314) 576 (4,336) (4,074)
---------- -------- --------- -------- ----------
INCOME BEFORE EQUITY IN INCOME OF
CONSOLIDATED SUBSIDIARIES (116) (1,119) 6,826 5,591
Equity in income of consolidated subsidiaries 5,707 (5,707)
---------- -------- --------- -------- ----------
NET INCOME $ 5,591 $ (1,119) $ 6,826 $ (5,707) $ 5,591
========== ======== ========= ======== ==========
F-29
60
OXFORD AUTOMOTIVE, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NON-GUARANTOR GUARANTOR
PARENT SUBSIDIARY SUBSIDIARIES CONSOLIDATED
(DOLLARS IN THOUSANDS)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (71,916) $ 3,801 $ 94,101 $ 25,986
--------- --------- ---------- ---------
INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired (24,219) (24,219)
Purchase of property, plant and equipment (2,228) (3,774) (10,721) (16,723)
Proceeds from sale of equipment 5,433 5,433
Purchases of marketable securities (7,658) (7,658)
--------- --------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (34,105) (3,774) (5,288) (43,167)
--------- --------- ---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowing arrangements 124,828 1,825 126,653
Principal payments on borrowing arrangements (93,782) (93,782)
Payment of preferred stock dividends (1,193) (1,193)
Debt financing costs (5,372) (5,372)
--------- --------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 119,456 (93,150) 26,306
--------- --------- ---------- ----------
Effect of foreign currency rate fluctuations on cash 295 (770) (475)
--------- --------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 13,435 322 (5,107) 8,650
Cash at beginning of period 238 9,433 9,671
--------- --------- ---------- ----------
Cash at end of period $ 13,673 $ 322 $ 4,326 $ 18,321
========= ========= ========== ==========
F-30
61
OXFORD AUTOMOTIVE, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLAR AMOUNTS IN THOUSANDS)
PERIOD FROM PERIOD FROM
OCTOBER 28, APRIL 1,
1995 1995
YEAR ENDED YEAR ENDED THROUGH THROUGH
MARCH 31, MARCH 31, MARCH 31, OCTOBER 27,
1998 1997 1996 1995
---------- ---------- ---------- -----------
Balance, beginning of period 1,272 39 31 25
Additions
Acquisition 200 1,254 -- --
Provision for additional allowance 12 8 5
Deductions
Currency translation adjustments (1) -- -- 1
Reversals (644) -- -- --
Doubtful accounts (charged) recovered (427) (33) -- --
---- ----- -- --
Balance, end of period 400 1,272 39 31
==== ===== == ==
F-31
62
EXHIBIT INDEX
The following exhibits are filed as part of this Report. Those exhibits with
an asterisk (*) designate the Registrant's management contracts or compensation
plans or arrangements for its executive officers.
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger by and among Howell Industries, Inc.,
the Company and HI Acquisition, Inc., dated May 21, 1997
(previously filed as Exhibit 2.1 to the Registrant's Registration
Statement on Form S-4, File No. 333-32975, and incorporated herein
by reference).
2.2 Shareholders Agreement by and among the Company, HI Acquisition,
Inc., and NBD Bank and Morton Schiff, co-trustees of the Herbert
H. Freedland Marital Trusts, dated May 21, 1997 (previously filed
as Exhibit 2.2 to the Registrant's Registration Statement on Form
S-4, File No. 333-32975, and incorporated herein by reference).
2.3 Agreement and Plan of Merger dated as of November 14, 1996, by and
between Lobdell Emery Corporation, BMG-MI, Inc. (now known as
"Oxford Automotive, Inc."), L-E Acquisition, Inc., the
Shareholders of Lobdell Emery Corporation, and D. Kennedy
Fesenmyer, as Shareholders' Agent (previously filed as Exhibit 2.3
to the Registrant's Registration Statement on Form S-4,
Registration No. 333-32975).
2.4 Amendment to Agreement and Plan of Merger, dated December 27, 1996
by and among Lobdell Emery Corporation, BMG-MI, Inc. (now known as
"Oxford Automotive, Inc."), L-E Acquisition, Inc., D. Kennedy
Fesenmyer, as Shareholders' Agent, and Lobdell Holdings, Inc.
(previously filed as Exhibit 2.4 to the Registrant's Registration
Statement on Form S-4, Registration No. 333-32975)
2.5 Agreement and Plan of Merger, dated as of January 8, 1997 among
Lobdell Holdings, Inc. and BMG-MI, Inc. (now known as "Oxford
Automotive, Inc.") (previously filed as Exhibit 2.5 to the
Registrant's Registration Statement on Form S-4, Registration No.
333-32975).
2.6 Stock Purchase Agreement, dated as of November 25, 1997, by and
among Oxford Automotive, Inc. and the Shareholders of RPI
Holdings, Inc. (previously filed as Exhibit 2.1 to the
Registrant's Form 8-K dated November 25, 1997, and incorporated
herein by reference)
2.7 Asset Purchase Agreement, dated as of March 13, 1998, between
Oxford Automotive, Inc. and Eaton Corporation. (previously filed
as Exhibit 2.1 to the Registrant's Form 8-K dated April 1, 1998,
and incorporated herein by reference)
3.1 Articles of Incorporation of the Company (previously filed as
Exhibit 3.1 to the Registrant's Registration Statement on Form
S-4, File No. 333-32975, and incorporated herein by reference)
3.2 Bylaws of the Company (previously filed as Exhibit 3.11 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
63
4.1 Indenture, dated as of June 15, 1997, by and among the Company,
the Subsidiary Guarantors and First National Trust Association, as
Trustee (including form of the 10 1/8% Senior Subordinated Notes
Due 2007, form of the Guaranty and form of Supplemental Indenture)
(previously filed as Exhibit 4.1 to the Registrant's Registration
Statement on Form S-4, File No. 333-32975, and incorporated herein
by reference)
4.2 Credit Agreement between the Company and NBD Bank, as agent, dated
June 24, 1997 (previously filed as Exhibit 4.2 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
4.3 +Registration Rights Agreement dated April 1, 1998 by and among
the Company, certain of its subsidiaries and the initial purchaser
of its 10 1/8% Senior Subordinated Notes Due 2007, Series B
10.1 Form of RPI Note (previously filed as Exhibit 10.1 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
10.2 *Form of Director Indemnification Agreement (previously filed as
Exhibit 10.2 to the Registrant's Registration Statement on Form
S-4, File No. 333-32975, and incorporated herein by reference)
10.3 *Employment and Noncompetition Agreement between the Company and
Steven M. Abelman (previously filed as Exhibit 10.3 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
10.4 *Employment and Noncompetition Agreement between the Company and
Donald C. Campion (previously filed as Exhibit 10.4 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
10.5 *Employment Agreement between BMG North America and Larry C.
Cornwall (previously filed as Exhibit 10.5 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
10.6 Shareholders Agreement among certain of the Shareholders of the
Company and BMG-MI, Inc. (now known as Oxford Automotive, Inc.),
dated October 23, 1995 (previously filed as Exhibit 10.6 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
10.7 Shareholders Agreement among certain of the Shareholders of the
Company and the Company dated January 10, 1997 (previously filed
as Exhibit 10.7 to the Registrant's Registration Statement on Form
S-4, File No. 333-32975, and incorporated herein by reference)
10.8 Management and Consulting Agreement ("Management Agreement")
between the Company and The Oxford Investment Group, Inc., dated
June 24, 1997 (previously filed as Exhibit 10.8 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
10.9 Settlement Agreement and Mutual Release, dated July 15, 1997,
regarding Lobdell Preferred Shareholders (previously filed as
Exhibit 10.9 to the Registrant's Registration Statement on Form
S-4, File No. 333-32975, and incorporated herein by reference)
64
10.10 +Amendment to Management Agreement, dated November 24, 1997
10.11 +Form of Purchase Agreement among the Company and the initial
purchasers of its 10 1/8% Senior Subordinated Notes Due 2007
12 +Statement regarding computation of ratios
21 +Subsidiaries of the Company
27 +Financial Data Schedule
- -------
+Filed herewith