1
As filed with the Securities and Exchange Commission on June 30, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OXFORD AUTOMOTIVE, INC.
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 3465 38-3262809
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
1250 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
248-577-1400
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
REX E. SCHLAYBAUGH, JR.
OXFORD AUTOMOTIVE, INC.
1250 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
248-577-1400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES TO:
Gerald T. Lievois
Dykema Gossett PLLC
1577 North Woodward Avenue, Suite 300
Bloomfield Hills, MI 48304-2820
(248) 203-0866
Approximate date of commencement of the proposed sale of the securities to
the public: As soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
Proposed Maximum
Title Of Each Class Of Amount To Be Offering Price Per Proposed Maximum Amount Of
Securities Registered Unit(1) Aggregate Offering Price Registration
To Be Registered (1) Fee
- ---------------------------------------------------------------------------------------------------------------------------------
10 1/8% Senior Subordinated $35,000,000 100% $35,000,000 $10,325
Notes Due 2007, Series B
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantees of 10 1/8% Senior (2) (2) (2) (2)
Subordinated Notes Due 2007,
Series B
- ---------------------------------------------------------------------------------------------------------------------------------
2
(1) Estimated pursuant to Rule 457(f) solely for the purposes of calculating
the registration fee.
(2) Pursuant to Rule 457(n), no registration fee is required with respect to
the Guarantees of the Senior Subordinated Notes registered hereby.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
TABLE OF ADDITIONAL REGISTRANTS
- -------------------------------------------------------------------------------------------------------------------
Exact Name of Guarantor Jurisdiction of IRS Employer Identification Primary Standard
Registrant as Specified in its Incorporation No. Industrial Classification
Charter Code Number
- -------------------------------------------------------------------------------------------------------------------
Lobdell Emery Corporation Michigan 38-0768460 3465
- -------------------------------------------------------------------------------------------------------------------
BMG North America Limited Ontario 98-0113060 3465
- -------------------------------------------------------------------------------------------------------------------
BMG Holdings, Inc. Ontario 00-0000000 3465
- -------------------------------------------------------------------------------------------------------------------
Winchester Fabrication Corporation Michigan 38-3209840 3465
- -------------------------------------------------------------------------------------------------------------------
Creative Fabrication Corporation Tennessee 62-1613148 3465
- -------------------------------------------------------------------------------------------------------------------
Parallel Group International, Inc. Indiana 35-1971190 3465
- -------------------------------------------------------------------------------------------------------------------
Laserweld International, L.L.C. Indiana 35-1969204 3465
- -------------------------------------------------------------------------------------------------------------------
Concept Management Corporation Michigan 38-3209841 3465
- -------------------------------------------------------------------------------------------------------------------
Lewis Emery Capital Corporation Michigan 38-6602578 3465
- -------------------------------------------------------------------------------------------------------------------
Howell Industries, Inc. Michigan 38-0479830 3465
- -------------------------------------------------------------------------------------------------------------------
RPI Holdings, Inc. Michigan 38-3134115 3465
- -------------------------------------------------------------------------------------------------------------------
3
PROSPECTUS
OFFER FOR ALL OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
IN EXCHANGE FOR 10 1/8% SENIOR SUBORDINATED
NOTES DUE 2007, SERIES B OF
OXFORD AUTOMOTIVE, INC. LOGO
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1998, UNLESS EXTENDED
Oxford Automotive, Inc. (the "Company"), hereby offers to exchange an aggregate
principal amount of up to $35 million of its 10 1/8% Senior Subordinated Notes
Due 2007, Series B (the "New Series B Notes") for a like principal amount of
its 10 1/8% Senior Subordinated Notes Due 2007, Series B (the "Old Series B
Notes") outstanding on the date hereof upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"). The Old Series B
Notes are substantially identical to, and rank pari passu in right of payment
with, the $125 million aggregate principal amount of 10 1/8% Senior
Subordinated Notes Due 2007 issued by the Company on June 24, 1997 (the "Series
A Notes"). The New Series B Notes and the Old Series B Notes are collectively
hereinafter referred to as the "Series B Notes" and the Series A Notes and the
Series B Notes are collectively hereinafter referred to as the "Notes." The
terms of the New Series B Notes are identical in all material respects to those
of the Old Series B Notes, except for certain transfer restrictions,
registration rights and certain interest rate step-up provisions. The New
Series B Notes will be issued pursuant to, and entitled to the benefits of, the
Indenture (as defined herein) governing the Old Series B Notes. The New Series
B Notes will mature on June 15, 2007. The New Series B Notes will bear interest
from and including the date of consummation of the Exchange Offer. Interest on
the New Series B Notes will be payable semi-annually on June 15 and December 15
of each year. Additionally, interest on the New Series B Notes will accrue
from the last interest payment date on which interest was paid on the Old
Series B Notes surrendered in exchange therefor or, if no interest has been
paid on the Old Series B Notes, from the date of original issue of the Old
Series B Notes. The New Series B Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after June 15, 2002, at the
redemption prices set forth herein, plus accrued and unpaid interest, if any,
to the date of redemption. In addition, at any time and from time to time prior
to June 15, 2000, the Company may redeem in the aggregate up to 35% of the
original principal amount of the Notes with the net proceeds of one or more
Public Equity Offerings (as defined) following which there is a Public Market
(as defined), at a redemption price of 110.125% of the principal amount to be
redeemed, plus accrued and unpaid interest, if any, to the redemption date,
provided that at least 65% of the original principal amount of the Notes
remains outstanding after each such redemption. Upon a Change of Control (as
defined), each holder of Notes ("Holder") will have the right to require the
Company to repurchase all or a portion of such Holder's Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase. However, there may be significant
limitations on the ability of the Company to make any repurchases required in
connection with a Change of Control. See "Risk Factors -- Change of Control"
and "Description of the Notes -- Change of Control."
The New Series B Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company. The New Series B Notes will rank pari passu with
or senior to all subordinated indebtedness of the Company. The Company is a
holding company that will derive all of its operating income and cash flow from
its subsidiaries. The New Series B Notes will be fully and unconditionally
guaranteed (collectively, the "Subsidiary Guaranties") on a joint and several
basis, and on an unsecured, senior subordinated basis by certain Restricted
Subsidiaries (as defined) (collectively, the "Subsidiary Guarantors") of the
Company. See "Description of the Notes -- Subsidiary Guaranties."
As of March 31, 1998, after giving effect to the offering of the Old Series B
Notes (the "Series B Offering"), and the application of the net proceeds
thereof, the Company had $1.8 million outstanding Senior Indebtedness and the
Subsidiary Guarantors' outstanding Senior Indebtedness was approximately $12.8
million. See "Description of the Notes --
4
Subordination." In addition, the Company had available approximately $98.7
million of undrawn borrowings under its Senior Credit Facility. The Indenture
governing the Notes (the "Indenture") permits the Company and the Subsidiary
Guarantors to incur additional indebtedness, including Senior Indebtedness and
indebtedness that will rank pari passu with the New Series B Notes.
The New Series B Notes are being offered hereunder in order to satisfy certain
obligations of the Company and certain of the Subsidiary Guarantors contained
in the Registration Agreement dated April 1, 1998 (the "Registration
Agreement"), among the Company, certain of the Subsidiary Guarantors and
Salomon Brothers Inc., (the "Initial Purchaser"), with respect to the initial
sale of the Old Series B Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all the expenses incident to the Exchange Offer. Tenders of Old
Series B Notes pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date (as defined) for the Exchange Offer. In the event
the Company terminates the Exchange Offer and does not accept for exchange any
Old Series B Notes with respect to the Exchange Offer, the Company will
promptly return such Old Series B Notes to the holders thereof. See "The
Exchange Offer."
Each broker-dealer that receives New Series B Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Series B Notes. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker- dealer in connection with resales of New Series B Notes
received in exchange for Old Series B Notes where such Old Series B Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. Each of the Company and certain of the Subsidiary
Guarantors has agreed that, starting on the Expiration Date, and ending on the
close of business on the first anniversary of the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the Old Series
B Notes. If a market for the New Series B Notes should develop, such New Series
B Notes could trade at a discount from their principal amount. The Company
currently does not intend to list the New Series B Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system and no active public market for the New Series B Notes is currently
anticipated. There can be no assurance that an active public market for the New
Series B Notes will develop.
The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1998, or such later date and time to which it may be extended by the Company,
which in no event shall be later than , 1998. The Exchange Offer is
not conditioned upon any minimum principal amount of Old Series B Notes being
tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE , FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY HOLDERS OF THE NOTES IN CONNECTION WITH
THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Securities and
Exchange Commission (the "Commission"). The Company and the Subsidiary
Guarantors have filed with the Commission a Registration Statement on Form S-4
(the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the New
Series B Notes being offered hereby. This Prospectus does not contain all the
information set forth in the Exchange Offer Registration Statement. For further
information with respect to the Company, the Subsidiary Guarantors and the
Exchange Offer, reference is made to the Exchange Offer Registration Statement.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to accurately describe the material terms
so referred to, but are not necessarily a complete description of the contents
of any such contract, agreement or other document. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. The Exchange Offer
Registration Statement, including the exhibits thereto, as well as the reports
and other information filed by the Company with the Commission, can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Regional Offices of the Commission at Seven World Trade Center, Suite 1300,
New York, New York 10048 and at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such Web site is: http://www.sec.gov.
In the event the Company ceases to be subject to the informational
requirements of the Exchange Act, the Company will be required under the
Indenture to continue to file with the Commission the annual and quarterly
reports, information, documents or other reports, including, without
limitation, reports on Forms 10-K, 10-Q and 8-K, which would be required
pursuant to the informational requirements of the Exchange Act. The Company
will also furnish such other reports as may be required by law. In addition,
for so long as any of the Notes are restricted securities within the meaning of
Rule 144(a)(3) under the Securities Act, the Company has agreed to make
available to any prospective purchaser of the Notes or beneficial owner of the
Notes, in connection with any sale thereof, the information required by Rule
144A(d)(4) under the Securities Act.
1
6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. For purposes of this Prospectus, the "Company" shall refer to
Oxford Automotive, Inc. ("Oxford Automotive") and all of its consolidated
subsidiaries, unless the context otherwise requires.
THE COMPANY
GENERAL
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. On a pro forma basis,
assuming the acquisitions of Howell Industries, Inc., a Michigan corporation
("Howell"), RPI Holdings, Inc., a Michigan corporation ("RPIH") and the
Suspension Division of Eaton Corporation (the "Suspension Division") (each
described below) had occurred on April 1, 1997, the Company would have had net
sales of $576.2 million and Adjusted EBITDA (as defined herein) of $47.1 million
for the fiscal year ended March 31, 1998. Based on pro forma 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, Ford Motor Company ("Ford"), General
Motors Corporation ("GM"), Chrysler Corporation ("Chrysler"), CAMI (a joint
venture of GM and Suzuki Motor Corporation ("Suzuki")) and The Saturn
Corporation ("Saturn"), accounted for approximately 41%, 38%, 13%, 2%, and 2%,
respectively of the Company's net sales for the fiscal year ended March 31,
1998, on a pro forma basis for the Howell, RPIH and Suspension Division
acquisitions. 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 84% of the Company's net sales, on a pro forma
basis assuming the acquisitions of Howell, RPIH and the Suspension Division
occurred on April 1, 1997, 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.
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
2
7
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.
The Company currently operates 17 manufacturing facilities 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 including both 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 and 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.
The principal executive offices of the Company are located at 1250
Stephenson Highway, Troy, Michigan 48083, and its telephone number is (248)
577-1400.
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:
(i) provide full-service program capability, (ii) supply complex, high
value-added systems, (iii) focus on high growth vehicle categories, (iv)
establish a global presence, and (v) pursue strategic acquisitions.
RECENT DEVELOPMENTS
On August 13, 1997, the Company acquired 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. Pursuant to the terms of a supplement to the Indenture, dated as
of August 13, 1997, Howell, a Restricted Subsidiary as defined in the
Indenture, became an additional Subsidiary Guarantor.
Howell's expertise has complemented and enhanced the Company's ability to
develop key suspension system components. Further, Howell's sales are
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 and Adjusted
EBITDA of $2.8 million.
3
8
On November 25, 1997, the Company acquired all of the outstanding
shares of common stock of RPIH. RPIH, through its wholly owned subsidiary RPI,
Inc.("RPI"), provides the Company 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 and Adjusted EBITDA was negative
$0.5 million. Pursuant to the terms of a supplement to the Indenture, dated as
of January 5, 1998, RPIH, a Restricted Subsidiary as defined in the Indenture,
became an additional Subsidiary Guarantor.
On April 1, 1998, the Company acquired the Suspension Division. 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 held
through two of the Company's subsidiaries, Oxford Suspension, Inc. and Oxford
Suspension Ltd. These two subsidiaries are currently Restricted Subsidiaries
but are not currently Subsidiary Guarantors.
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.
The Suspension Division had net sales of $125.8 million for its fiscal year
ended December 31, 1997. For its fiscal year ended December 31, 1997, the
Suspension Division had Adjusted EBITDA of $7.4 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 a pro forma basis for the fiscal year ended March 31, 1998, assuming the
acquisitions of Howell, RPIH and the Suspension Division had occurred on April
1, 1997, (i) net sales and Adjusted EBITDA for the Company would have been
$576.2 million and $47.1 million, respectively, (ii) the SUV, mini-van, van and
light truck segment represented approximately 84% of net sales and (iii) the
Company's net sales by major customers would have been approximately as
follows: Ford 41%; GM 38%; Chrysler 13%; CAMI 2%; and Saturn 2%.
THE EXCHANGE OFFER
Securities Offered ............................................ Up to $35.0 million aggregate principal amount of 10 1/8% Senior
Subordinated Notes Due 2007, Series B (the "New Series B Notes").
The terms of the New Series B Notes and Old Series B Notes
(collectively, the "Series B Notes") are identical in all material
respects, except for certain transfer restrictions, registration
rights and certain interest rate step-up provisions. See "The New
Series B Notes" and "The Exchange Offer."
4
9
The Exchange Offer ........................................... The New Series B Notes are being offered in exchange for a like
principal amount of Old Series B Notes. Old Series B Notes may be
exchanged only in integral multiples of $1,000. The issuance of
the New Series B Notes is intended to satisfy obligations of the
Company and certain of the Subsidiary Guarantors contained in the
Registration Agreement.
Expiration Date; Withdrawal of Tender......................... The Exchange Offer will expire at 5:00 p.m. New York City time, on
, 1998, or such later date and time to which it
may be extended by the Company, which in no event shall be later
than , 1998. The tender of Old Series B Notes pursuant to
the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. Any Old Series B Notes not accepted for exchange
for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer. The Company will
provide written notice of any extension, amendment, non-acceptance
or termination to the holders of Old Series B Notes, including
those holders who have previously tendered their Old Series B
Notes. See "The Exchange Offer -- Terms of the Exchange Offer;
Period for Tendering Old Series B Notes" and "-- Withdrawal
Rights."
Certain Conditions to the Exchange Offer...................... The Company's obligation to accept for exchange, or to issue New
Series B Notes in exchange for, any Old Series B Notes is subject
to certain customary conditions relating to compliance with any
applicable law, or order of any governmental agency or any
applicable interpretation by the Staff of the Commission, which
may be waived by the Company in its reasonable discretion. The
Company currently expects that each of the conditions will be
satisfied and that no waivers will be necessary. See "The Exchange
Offer -- Certain Conditions to the Exchange Offer."
Procedures for Tendering Old Series B Notes................... Each holder of Old Series B Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such Old
Series B Notes and any other required documentation, to the
Exchange Agent (as defined) at the address set forth herein. See
"The Exchange Offer -- Procedures for Tendering Old Series B
Notes."
5
10
Special Procedures for Beneficial Owners ..................... Any beneficial owner whose Old Series B Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender such Old Series B Notes in the
Exchange Offer should contact such registered holder promptly and
instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering his or her Old
Series B Notes, either make appropriate arrangements to register
ownership of the Old Series B Notes in such owner's name or obtain
a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time and may
not be completed prior to the Expiration Date.
Guaranteed Delivery Procedures ............................... Holders of Old Series B Notes who wish to tender their Old Series B
Notes and whose Old Series B Notes are not immediately available or
who cannot deliver their Old Series B Notes, the Letter of
Transmittal or any other documents required by the Letter of
Transmittal to the Exchange Agent, prior to the Expiration Date,
must tender their Old Series B Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Use of Proceeds............................................... There will be no proceeds to the Company from the exchange of
Series B Notes pursuant to the Exchange Offer.
Exchange Agent................................................ U.S. Bank Trust National Association (formerly known as First Trust
National Association) is serving as the Exchange Agent in
connection with the Exchange Offer.
Federal Income Tax Consequences............................... The Company believes that the exchange of Series B Notes pursuant
to the Exchange Offer will not be a taxable event for federal
income tax purposes. See "Certain Federal Income Tax
Considerations."
6
11
CONSEQUENCES OF EXCHANGING OLD SERIES B NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the Staff of the Commission
to third parties in unrelated transactions, the Company is of the view that
holders of Old Series B Notes (other than any holder who is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) who
exchange their Old Series B Notes for New Series B Notes pursuant to the
Exchange Offer generally may offer such New Series B Notes for resale, resell
such New Series B Notes, and otherwise transfer such New Series B Notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided such New Series B Notes are acquired in the ordinary
course of the holders' business and such holders have no arrangement with any
person to participate in a distribution of such New Series B Notes. Any holder
who tenders in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the New Series B Notes cannot rely on such
interpretation by the Staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing the information
required by the Securities Act. This Prospectus may be used for an offer to
resell, resale or other retransfer of New Series B Notes only as specifically
set forth herein. Each broker-dealer that receives New Series B Notes for its
own account in exchange for Old Series B Notes, where such Old Series B Notes
were acquired by such broker-dealer as a result of market-making activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such New Series B Notes. See "Plan of Distribution." In addition, to
comply with the securities laws of certain jurisdictions, if applicable, the
New Series B Notes may not be offered or sold unless they have been registered
or qualified for sale in such jurisdiction or in compliance with an available
exemption from registration or qualification. The Company has agreed, pursuant
to the Registration Agreement and subject to certain specified limitations
therein, to register or qualify the New Series B Notes for offer or sale under
the securities or blue sky laws of such jurisdictions as any holder of the
Notes reasonably requests in writing. If a holder of Old Series B Notes does
not exchange such Old Series B Notes for New Series B Notes pursuant to the
Exchange Offer, such Old Series B Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the Old
Series B Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. See "The
Exchange Offer -- Consequences of Failure to Exchange; Resales of New Series B
Notes."
THE NEW SERIES B NOTES
The terms of the New Series B Notes are identical in all material respects
to the Old Series B Notes, except for certain transfer restrictions,
registration rights and certain interest rate step-up provisions.
Unlike the New Series B Notes, the Old Series B Notes were not registered
under the Securities Act and were offered in a transaction not involving any
public offering within the meaning of the Securities Act, and are therefore
subject to certain transfer restrictions under the Securities Act.
The Old Series B Notes also included certain registration rights relating to
the Exchange Offer Registration Statement that are not applicable to the New
Series B Notes. Pursuant to the Registration Agreement, the Company agreed to,
(i) not later than 90 days after the closing of the sale of the Old Series B
Notes on April 1, 1998 (the "Closing Date"), file the Exchange Offer
Registration Statement with the Commission and (ii) cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act not
later than 150 days after the Closing Date. In addition, in the event that
applicable interpretations of the Staff of the Commission do not permit the
Company to effect the Exchange Offer, or if for any other reason the Exchange
Offer is not consummated within 180 days after the Closing Date, or if the
Initial Purchasers request with respect to Old Series B Notes not eligible to
be exchanged for New Series B Notes in the Exchange Offer, or
7
12
if any holder of Old Series B Notes is not eligible to participate in the
Exchange Offer or participates in but does not receive freely tradeable (except
for prospectus delivery requirements) New Series B Notes in the Exchange Offer,
the Company has agreed to file a shelf registration statement ("Shelf
Registration Statement") covering resales of the Old Series B Notes or the New
Series B Notes, as the case may be, to use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act, and
to keep the Shelf Registration Statement effective until two years after its
effective date (or shorter period that will terminate when all Old Series B
Notes or New Series B Notes, as the case may be, covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement).
The Old Series B Notes have interest rate step-up provisions which primarily
become effective in the event certain registration requirements are not
satisfied by specified dates. However, the New Series B Notes will only have
the benefit of the step-up provisions in the limited circumstance described in
clause (iii) below. The interest rate step-up provisions provide in part as
follows: if (i) within 150 days after the Closing Date, the Exchange Offer
Registration Statement has not been declared effective; (ii) within 180 days
after the Closing Date, neither the Exchange Offer has been consummated nor the
Shelf Registration Statement has been declared effective; or (iii) after either
the Exchange Offer Registration Statement or the Shelf Registration Statement
has been declared effective, such Registration Statement thereafter ceases to
be effective or usable (subject to certain exceptions) in connection with
resales of Old Series B Notes or New Series B Notes (each such event referred
to in clauses (i) through (iii), a "Registration Default"), interest ("Special
Interest") will accrue on the Old Series B Notes and the New Series B Notes, as
applicable, (in addition to the stated interest on the Old Series B Notes and
the New Series B Notes) from and including the date on which any such
Registration Default shall occur but excluding the date on which all
Registration Defaults have been cured. Special Interest will accrue at a rate
of 0.25% per annum during the 90-day period immediately following the
occurrence of any Registration Default and shall increase by 0.25% per annum at
the end of each subsequent 90-day period, but in no event shall such rate
exceed 1.00% per annum.
Issuer ........................................... Oxford Automotive, Inc.
Series B Notes ................................... $35.0 million in aggregate principal amount of
10 1/8% Senior Subordinated Notes Due 2007, Series B.
Maturity ......................................... June 15, 2007.
Interest Payment Dates ........................... Each June 15 and December 15.
Subsidiary Guaranties ............................ Like the Old Series B Notes, the New Series B Notes will be
fully and unconditionally guaranteed on a joint and
several basis, and on a senior subordinated basis by each
Restricted Subsidiary of the Company (other than certain
foreign subsidiaries) that is an obligor or guarantor of
any Bank Credit Agreement (the "Subsidiary Guaranties"). See
"Description of the Notes -- Subsidiary Guaranties."
8
13
Subordination of Series B Notes and
Subsidiary Guaranties............................. Like the Old Series B Notes, the New Series B Notes and the
Subsidiary Guaranties will be general unsecured senior
subordinated obligations of the Company and the Subsidiary
Guarantors, as applicable. The New Series B Notes and the
Subsidiary Guaranties will be subordinated in right of
payment to the prior payment in full of all existing and
future Senior Indebtedness (as defined) and will rank pari
passu with or senior to all present and future subordinated
indebtedness of the Company or the relevant Subsidiary
Guarantors, as applicable. As of March 31, 1998, the
Company had $1.8 million outstanding Senior Indebtedness
and the Subsidiary Guarantors' outstanding Senior
Indebtedness was approximately $12.8 million. See
"Description of the Notes -- Subordination."
Sinking Fund ..................................... None.
Optional Redemption .............................. Like the Old Series B Notes, the New Series B Notes will be
redeemable at the option of the Company, in whole or in part
at any time on or after June 15, 2002, at the redemption
prices set forth herein plus accrued and unpaid interest,
if any, to the redemption date. In addition, at any time
prior to June 15, 2000, the Company may redeem, at its
option, up to an aggregate amount of 35% of the original
principal amount of the Notes with the proceeds of one or
more Public Equity Offerings following which there is a
Public Market at a redemption price of 110.125% of the
principal amount thereof plus accrued and unpaid interest,
if any, to the redemption date, provided that at least 65%
of the original aggregate principal amount of the Notes
remains outstanding after each such redemption. See
"Description of the Notes -- Optional Redemption."
Change of Control ............................... Upon the occurrence of a Change of Control, each Holder
of Notes, including the Series B Notes, will have the
right to require the Company to purchase all or a portion
of such Holder's Notes at a price in cash equal to 101% of
the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase. In the
event of a Change of Control, there can be no assurance
that the Company will have the financial resources or be
permitted under the terms of its other indebtedness to
repurchase or redeem the Notes. See "Description of the Notes
-- Change of Control."
9
14
Certain Covenants; Defaults ...................... The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Restricted
Subsidiaries to (i) incur additional indebtedness, (ii)
pay dividends or make other distributions with respect
to Capital Stock (as defined) of the Company and its Restricted
Subsidiaries, (iii) create certain liens, (iv) sell material
assets of the Company or its Restricted Subsidiaries, (v)
enter into certain mergers and consolidations, and (vi) make
capital expenditures. The Indenture also contains certain
events of default including payment defaults and a default
arising upon an acceleration by the holders of certain other
Indebtedness (as defined), including the Senior Credit
Facility, because of a default. See "Description of the
Notes -- Certain Covenants and -- Defaults."
Risk Factors ..................................... See "Risk Factors" for a discussion of certain factors that
should be considered in connection with the Exchange Offer.
SENIOR CREDIT FACILITY
On June 24, 1997, concurrently with the offering of the Series A Notes (the
"Series A Offering"), the Company entered into a credit agreement with NBD
Bank, on behalf of itself and as agent for a syndicate of other lenders,
providing for up to $110.0 million of revolving credit availability (such
credit facility being referred to herein as the "Senior Credit Facility"). The
facility is in the form of a revolving credit line. Approximately $98.7
million was available under the revolver at March 31, 1998, reduced for the
effect of a Letter of Credit issued for the IRBs (as defined). The obligations
under the Senior Credit Facility are secured by substantially all the assets of
the Subsidiary Guarantors and the Company.
The Senior Credit Facility contains certain customary covenants, including
reporting and other affirmative covenants, financial covenants, and negative
covenants, as well as customary events of default, including non-payment of
principal, violation of covenants, and cross-defaults to certain other
indebtedness, including the indebtedness evidenced by the Notes. See
"Description of Certain Indebtedness and Preferred Stock -- Senior Credit
Facility."
As of March 31, 1998, there were borrowings of $1.8 million under the
Senior Credit Facility. See "Capitalization" and "Description of Certain
Indebtedness and Preferred Stock."
10
15
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth (i) summary historical financial data of BMG
(the "Predecessor") for the period from April 1, 1995 through October 27, 1995,
(ii) summary historical financial data of the Company from October 28, 1995
through March 31, 1996, for the years ended March 31, 1997 and 1998, and (iii)
summary pro forma financial data for the year ended March 31, 1998. The
summary 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 Prospectus, together with the
report of Deloitte & Touche, independent accountants. The summary 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 Prospectus, together with the report of Price Waterhouse LLP,
independent accountants. The summary pro forma statement of operations data
and other financial data for the fiscal year ended March 31, 1998 were prepared
to illustrate the effect of the Series A Offering, the Series B Offering, and
the acquisitions of Howell, RPIH and the Suspension Division, as if each had
occurred on April 1, 1997. The summary pro forma balance sheet data at March
31, 1998 was prepared to illustrate the effect of the Series B Offering and the
acquisition of the Suspension Division, as if each had occurred on March 31,
1998. The pro forma data does not purport to be indicative of the results of
operations or the financial position of the Company that would have been
obtained if the acquisitions and the Series B Offering had in fact been
completed as of such dates or to project the results of operations or the
financial position of the Company for any future date or period. The following
table should be read in conjunction with the "Selected Consolidated Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Pro Forma Combined Financial Data," and the
Consolidated Financial Statements of the Company and the related notes and
other financial information presented elsewhere in this Prospectus.
11
16
HISTORICAL PRO FORMA
------------------------------------------------------------------- -------------
PREDECESSOR COMPANY
-------------- ---------------------------------------------------
PERIOD PERIOD FISCAL YEAR FISCAL YEAR FISCAL YEAR
APR. 1, 1995 - OCT. 28, 1995 - ENDED ENDED ENDED
OCT. 27, 1995 MAR. 31, 1996 MAR. 31, 1997 MAR. 31, 1998 MAR. 31, 1998
-------------- ------------- ------------- ------------- -------------
AUDITED AUDITED AUDITED AUDITED UNAUDITED
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales. . . . . . . . . . . . $49,043 $35,572 $136,861 $ 410,321 $576,163
Gross profit . . . . . . . . . . 2,148 3,948 11,773 41,901 51,191
Equipment impairment and non-
recurring charges(a) . . . . . -- -- 287 -- --
Operating income (loss). . . . . (1,774) 1,713 3,801 20,054 19,934
Interest expense . . . . . . . . 1,048 1,096 3,388 10,710 16,843
Other income (expense) . . . . . -- -- 2,201 321 1,146
Income (loss) before income
taxes. . . . . . . . . . . . . (2,822) 617 2,614 9,665 4,237
Provision (benefit) for income
taxes. . . . . . . . . . . . . (938) 202 1,065 4,074 1,976
Net income (loss). . . . . . . . $(1,884) $ 415 $ 1,549 $ 5,591 $ 2,261
BALANCE SHEET DATA
(END OF PERIOD):
Cash and cash equivalents. . . . $ -- $ -- $ 9,671 $ 18,321 $ 2,508
Trade accounts receivable, net . 13,312 8,338 47,626 65,273 77,057
Inventories. . . . . . . . . . . 4,429 3,719 13,411 21,305 33,009
Total assets . . . . . . . . . . 59,770 49,200 243,694 320,032 374,070
Total debt . . . . . . . . . . . 23,233 26,758 99,829 139,448 176,492
Redeemable preferred stock . . . -- -- 39,300 40,192 40,192
Total shareholders' equity . . . 9,329 935(b) 2,341 6,118 6,118
FINANCIAL RATIOS AND OTHER DATA:
Depreciation and amortization. . $ 919 $ 687 $ 5,041 $ 20,279 $ 26,022
Capital expenditures . . . . . . 5,111 3,466 3,326 16,723 23,331
Ratio of earnings to fixed
charges(c) . . . . . . . . . . -- 1.5x 1.7x 1.7x 1.2x
Adjusted EBITDA(d) . . . . . . . $ (855) $ 2,400 $ 11,330 $ 40,654 $ 47,102
Gross margin(e). . . . . . . . . 4.38% 11.10% 8.60% 10.21% 8.88%
Adjusted EBITDA margin(f). . . . NM 6.75 8.28 9.91% 8.18%
Ratio of Adjusted EBITDA to
interest expense(g) . . . . . NM 2.2x 3.3x 3.0x 2.4x
Ratio of net debt to Adjusted
EBITDA(h). . . . . . . . . . . NM 4.7 7.6 2.9 3.6
See accompanying Notes to Summary Consolidated Historical and Pro Forma
Financial Data.
12
17
(a) The provision for equipment impairment and non-recurring charges includes,
for the year ended March 31, 1997, the loss before income taxes for the
discontinuance of Laserweld International L.L.C. ("Laserweld") a
wholly owned indirect subsidiary of the Company and Parallel Group
International ("Parallel"). Management does not anticipate that these
costs will be a part of future operations.
(b) The reduction in equity of $8.4 million from the period ended October 27,
1995 to the period ended March 31, 1996 is primarily a result of the
elimination of Predecessor equity as a part of the purchase accounting
adjustments made upon the acquisition of the Predecessor.
(c) For purposes of this computation, earnings consist of income (loss) before
income taxes plus fixed charges. Fixed charges consist of interest on
indebtedness plus that portion of rental expense representative of the
interest factor. For fiscal 1995, the Company's earnings were
insufficient to cover fixed charges by $1.6 million. For the period April
1, 1995 to October 27, 1995, the Company's earnings were insufficient to
cover fixed charges by $2.8 million.
(d) Adjusted EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization and equipment impairment and non- recurring
charges. For the fiscal year ended March 31, 1997, equipment impairment and
non-recurring charges aggregated $0.3 million, as described in Note (a)
above. Adjusted 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.
(f) Adjusted EBITDA margin is defined as Adjusted EBITDA as a percent of net
sales for each of the applicable periods.
(g) Defined as the ratio of Adjusted EBITDA to total interest expense.
(h) Defined as the ratio of net debt to Adjusted EBITDA with net debt
consisting of total debt less cash and cash equivalents and unexpended
bond proceeds.
13
18
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act, as amended. Discussions containing such
forward-looking statements may be found in the material set forth under
"Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as within the Prospectus
generally. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
the matters set forth in the Prospectus generally. The Company cautions the
reader, however, that this list of factors may not be exhaustive. In evaluating
the Exchange Offer, Holders of the Old Series B Notes should carefully consider
the following risk factors, as well as the other information set forth
elsewhere in this Prospectus. The risk factors set forth below are generally
applicable to the Old Series B Notes as well as the New Series B Notes.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
The Company has, and upon consummation of the Exchange Offer will have,
indebtedness which is substantial in relation to the shareholders' equity, as
well as interest and debt service requirements which are significant compared
to its cash flow from operations. At March 31, 1998, the Company's total
indebtedness was $139.4 million (exclusive of unused commitments under the
Senior Credit Facility of approximately $98.7 million) and the Company had
$40.2 million of preferred stock and $6.1 million of common shareholders'
equity. In addition, to the extent that the Company is required to incur or
assume additional indebtedness in connection with its acquisition strategy, the
Company's interest and debt service requirements will increase. See "Risk
Relating to Acquisitions." The degree to which the Company is leveraged could
have important consequences to Holders of the Notes, including the following:
(i) the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired; (ii) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of interest on the Notes and its other
existing indebtedness, thereby reducing the funds available to the Company for
other purposes; (iii) the agreements governing the Company's long-term
indebtedness contain certain restrictive financial and operating covenants;
(iv) certain indebtedness under the Senior Credit Facility will be at variable
rates of interest, which will cause the Company to be vulnerable to increases
in interest rates; (v) all of the indebtedness outstanding under the Senior
Credit Facility is secured by substantially all the assets of the Subsidiary
Guarantors and the Company and will become due prior to the time the principal
on the Notes will become due; (vi) the Company may be hindered in its ability
to adjust rapidly to changing market conditions; and (vii) the Company's
substantial degree of leverage could make it more vulnerable in the event of a
downturn in general economic conditions or in its business. The Indenture
permits the Company and the Subsidiary Guarantors to incur additional
indebtedness, including Senior Indebtedness and indebtedness that will rank
pari passu with the Notes.
The Company's ability to pay interest on the Notes and to satisfy its other
obligations will depend upon its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, many of which are beyond its control. The Company anticipates that its
operating cash flow, together with available borrowings under the Senior Credit
Facility, will be sufficient to meet its operating expenses, to service
interest requirements on its debt obligations as they become due and to
implement its business strategy. There can be no assurance, however, that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, to make anticipated
capital expenditures or to implement its business strategy. Further, the
Company is required to redeem the Lobdell Preferred Stock (as defined) prior to
the time the principal on the Notes will become due and the maximum aggregate
redemption price for such preferred stock, assuming the Company does not
commence a public offering of its common stock prior to June 30, 2000, is $40.9
million, plus any accrued and unpaid dividends to the date of redemption. The
Company's predecessor experienced a net loss of $1.3 million for the year ended
March 31, 1995, and experienced a net loss of $1.9 million during the period
from April 1, 1995 through October 27, 1995. In addition, for fiscal 1995, the
14
19
Company's earnings were insufficient to cover fixed charges by $1.6 million.
For the period April 1, 1995 to October 27, 1995, the Company's earnings were
insufficient to cover fixed charges by $2.8 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity, Capital Resources and Financial Condition" and
"Description of Certain Indebtedness and Preferred Stock."
The Senior Credit Facility contains certain customary covenants, including
without limitation, reporting and other affirmative covenants; financial
covenants, including ratio of total debt to EBITDA, net worth, fixed charge
coverage ratio, interest coverage ratio (each as defined in and calculated
pursuant to the Senior Credit Facility); and negative covenants, including
restrictions on incurrence of other indebtedness, payment of cash dividends and
other distributions to shareholders, liens in favor of parties other than the
lenders under the Senior Credit Facility, certain guaranties of obligations of
or advances to others, sales of material assets not in the ordinary course of
business, restrictions on mergers and acquisitions, and capital expenditures.
There can be no assurance that these requirements will be met in the future. If
they are not, the holders of the indebtedness under the Senior Credit Facility
would be entitled to declare such indebtedness immediately due and payable or,
if the Company were unable to repay such indebtedness, the holders thereunder
could proceed against the collateral securing the Senior Credit Facility, which
consists of substantially all of the assets of the Company and the Subsidiary
Guarantors. In addition, the Senior Credit Facility contains customary events
of default including non-payment of principal, violation of covenants and
cross-defaults to certain other indebtedness, including the indebtedness
evidenced by the Notes. See "Description of Certain Indebtedness and Preferred
Stock -- Senior Credit Facility."
SUBORDINATION OF NOTES AND THE SUBSIDIARY GUARANTIES; ASSET ENCUMBRANCES;
HOLDING COMPANY STRUCTURE
Like the Old Series B Notes, the New Series B Notes will be subordinated in
right of payment to all present and future Senior Indebtedness of the Company
and the Subsidiary Guarantors, including the principal, premium (if any) and
interest with respect to the obligations outstanding under the Senior Credit
Facility. In addition, the Subsidiary Guaranties will be subordinated in right
of payment to all existing and future Senior Indebtedness of the Subsidiary
Guarantors. As of March 31, 1998, the Company had $1.8 million of Senior
Indebtedness outstanding (excluding unused commitments under the Senior Credit
Facility) and the Subsidiary Guarantors had approximately $12.8 million of
Senior Indebtedness outstanding. Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the Company or any Subsidiary Guarantor, assets of the Company or such
Subsidiary Guarantor will be available to pay obligations of the Notes only
after all Senior Indebtedness of the Company or such Subsidiary Guarantor has
been paid in full, and there can be no assurance that there will be sufficient
assets to pay amounts due on all or any of the Notes. See "Description of the
Notes -- Subordination."
Like the Old Series B Notes, the New Series B Notes are unsecured and will
be effectively subordinated to any secured indebtedness of the Company or any
Subsidiary Guarantor. The indebtedness outstanding under the Senior Credit
Facility will be secured by liens on substantially all of the assets of the
Subsidiary Guarantors and the Company. The ability of the Company to comply
with the provisions of the Senior Credit Facility may be affected by events
beyond the Company's control. The breach of any such provisions could result in
a default under the Senior Credit Facility, in which case, depending upon the
actions taken by the lenders thereunder or their successors or assignees, such
lenders could elect to declare all amounts borrowed under the Senior Credit
Facility, together with accrued interest, to be due and payable, and the
Company could be prohibited from making payments of interest and principal on
the Notes until the default is cured or all Senior Indebtedness is paid or
satisfied in full. If the Company were unable to repay such borrowings, such
lenders could proceed against the collateral. If the indebtedness under the
Senior Credit Facility were accelerated, there can be no assurance that the
assets of the Company and the Subsidiary Guarantors would be sufficient to
repay in full such indebtedness and the other indebtedness of the Company,
including the Notes. See "Description of Certain Indebtedness and Preferred
Stock -- Senior Credit Facility" and "Description of the Notes --
Subordination."
15
20
The Company is a holding company which derives all of its operating income
from its subsidiaries. The Holders of the Notes will have no direct claim
against such subsidiaries other than the claim created by the Subsidiary
Guaranties, which may be subject to legal challenge in the event of the
bankruptcy of a subsidiary. See "Risk Factors -- Fraudulent Conveyance." If such
a challenge were upheld with respect to any such Subsidiary Guarantee, such
Subsidiary Guarantee would be invalidated and unenforceable. To the extent that
the Subsidiary Guarantee is not enforceable, the rights of Holders of the Notes
to participate in any distribution of assets of the Subsidiary Guarantor upon
liquidation, bankruptcy, reorganization or otherwise may, as is the case with
other unsecured creditors of the Company, be subject to prior claims of
creditors of that Subsidiary Guarantor. The Company must rely on dividends and
other payments from its subsidiaries to generate the funds necessary to meet its
obligations, including the payment of principal and interest on the Notes. The
Indenture contains covenants that restrict the ability of the Company's
subsidiaries to enter into any agreement limiting distributions and transfers,
including dividends to the Company. Further, the ability of the Company's
subsidiaries to pay dividends and make other payments are, and may in the future
be, subject to certain statutory, contractual and other restrictions. See
"Description of Certain Indebtedness and Preferred Stock."
CYCLICALITY; THE OEM SUPPLIER INDUSTRY
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. There can be no assurance that the automotive industry for which the
Company supplies components will not experience downturns in the future. An
economic recession may impact substantially leveraged companies, such as the
Company, more than similarly situated companies with less leverage. A decrease
in overall consumer demand for SUVs, light trucks, mini-vans, vans or passenger
cars could have a material adverse effect on the Company's financial condition
and results of operations.
The automotive industry is characterized by a small number of OEMs that are
able to exert considerable pressure on component and system suppliers to reduce
costs, improve quality and provide additional design and engineering
capabilities. In the past, OEMs have generally demanded and received price
reductions and measurable increases in quality by implementing competitive
selection processes, rating programs and various other arrangements. Also,
through increased partnering on platform work, OEMs have generally required
component and system suppliers to provide more design engineering input at
earlier stages of the product development process, the costs of which have, in
some cases, been absorbed by the suppliers. Although the Company, historically,
has regained the loss caused by price reductions to the OEMs through cost
reduction initiatives and assistance from the OEMs, there can be no assurance
that future price reductions, increased quality standards or additional
engineering capabilities required by OEMs will not have a material adverse
effect on the financial condition or results of operations of the Company.
Further, although the general trend of the OEMs is to outsource component
manufacturing, the OEMs have, from time to time, brought their stamping work
back in-house. There can be no assurance that the OEMs may not in-source some
of the jobs currently performed by the Company.
Many OEMs and their Tier 1 suppliers are unionized. Work stoppages and
slowdowns experienced by OEMs and their Tier 1 suppliers, as a result of labor
disputes, could have a material adverse effect on the Company's financial
condition or results of operations.
GM is currently experiencing a strike at certain of its production
facilities due to a labor dispute between GM and the International Union,
United Automobile, Aerospace and Agricultural Implement Workers of America
("UAW"). There can be no assurance that this strike will not have a material
negative impact on the Company's results of operations.
DEPENDENCE ON PRINCIPAL CUSTOMERS
Substantially all of the Company's sales for fiscal 1998 were to GM, Ford
and Chrysler. Although the Company has ongoing supply relationships with its
principal customers and is a long-term supplier to GM, Ford and Chrysler there
can
16
21
be no assurance that sales to GM, Ford and Chrysler will continue at the same
level. Furthermore, continuation of these relationships is dependent upon the
customers' satisfaction with the price, quality and delivery of the Company's
products. In addition, the Company's agreements to produce parts are assigned
to specific models or product lines of its customers. Accordingly, the
Company's business, and estimates for future business, are dependent upon
consumer demand for the specific models and product lines that incorporate the
Company's parts. The Company's arrangements with the OEMs are typically in the
form of purchase orders that may be canceled by the OEMs. However, the Company
believes that cancellation of purchase orders is rare, due, in part, to the OEM
production interruptions likely to be caused by changing suppliers. 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
customers would have a material adverse effect on the Company's financial
condition and results of operations. The loss of GM, Ford or Chrysler as a
customer would have a material adverse effect on the Company. In addition, the
delay or cancellation of material orders from, or design, development, delivery
or product projects at GM, Ford or Chrysler could have a material adverse
effect on the Company.
UNIONIZED WORKFORCE
Substantially all employees of the Company are covered by collective
bargaining agreements with various local unions. Except for a two-week
shutdown at the Chatham, Ontario facility, the Company has not experienced
any work stoppages in the last ten years and considers its relationship with
its employees to be good. Strikes or work stoppages and the resultant adverse
impact on its relationship with the OEMs could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company recently negotiated a new agreement at the Argos, Indiana facility
which will expire in March 2003. The Company's agreements at the Chatham and
Greencastle facilities will expire in February 1999. While the outcome,
including the terms of the new contracts and their impact on the future
results of the Company's operations cannot be predicted, management does not
believe that the financial terms of the new contracts will have a material
adverse effect on the Company. However, there can be no assurance that the
Company will be successful in its contract negotiations.
FRAUDULENT CONVEYANCE
If a court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy or the Company as a
debtor-in-possession, were to find under relevant federal or state fraudulent
conveyance statutes that the Company did not receive fair consideration or
reasonably equivalent value for incurring the indebtedness, including the
Series B Notes, and that, at the time of such incurrence, the Company (i) was
insolvent, (ii) was rendered insolvent by reason of such incurrence or grant,
(iii) was engaged in a business or transaction for which the assets remaining
with the Company constituted unreasonably small capital or (iv) intended to
incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, then such court, subject to applicable statutes of
limitation, could void the Company's obligations under the Series B Notes,
recover payments made under the Series B Notes, subordinate the Series B Notes
to other indebtedness of the Company or take other action detrimental to the
Holders of the Series B Notes.
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts
is greater than the fair value of all of that company's property or if the
present fair salable value of that company's assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured or if the Company is not able to pay its debts as
they become due. Moreover, regardless of solvency, a court could void an
incurrence of indebtedness, including the Series B Notes, if it determined that
such transaction was made with the intent to hinder, delay or defraud creditors.
In addition, a court could subordinate the indebtedness, including the Series B
Notes, to the claims of all existing and future creditors on similar grounds.
The Company believes that, after giving effect to the Series B Offering, the
Company (i) has not been rendered insolvent by the incurrence of indebtedness in
connection with the Series B Offering,
17
22
(ii) is in possession of sufficient capital to run its business effectively and
(iii) is incurring debts within its ability to pay as the same mature or become
due.
There can be no assurance as to what standard a court would apply in order
to determine whether the Company was "insolvent" upon the sale of the Old
Series B Notes or that, regardless of the method of valuation, a court would not
determine that the Company was insolvent upon consummation of the sale of the
Old Series B Notes.
In addition, the Subsidiary Guaranties may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit brought by or on behalf of
creditors of any of the Subsidiary Guarantors. In such a case, the analysis set
forth above would generally apply, except that the Subsidiary Guaranties could
also be subject to the claim that, since the Subsidiary Guaranties were incurred
for the benefit of the Company (and only indirectly for the benefit of the
Subsidiary Guarantors), the obligations of the Subsidiary Guarantors thereunder
were incurred for less than reasonably equivalent value or fair consideration. A
court could void the Subsidiary Guarantors' obligation under the Subsidiary
Guaranties, recover payments made under the Subsidiary Guaranties, subordinate
the Subsidiary Guaranties to other indebtedness of a Subsidiary Guarantor or
take other action detrimental to the Holders of the Notes.
CONTROL BY PRINCIPAL SHAREHOLDER
Selwyn Isakow (the "Principal Shareholder") beneficially owns 50.3% of the
Company's outstanding shares and exercises voting control over those shares not
owned by him, including shares held by the directors and officers of the
Company. Circumstances may occur in which the interests of the Principal
Shareholder could be in conflict with the interests of the Holders of the
Series B Notes. For example, if the Company encounters financial difficulties
or is unable to pay certain of its debts as they mature, the interests of the
Principal Shareholder might conflict with those of the Holders of the Series B
Notes. In addition, the Principal Shareholder may have an interest in pursuing
acquisitions, divestitures or other transactions that, in his judgment, could
enhance his equity investment, even though such transactions might involve
risks to the Holders of the Series B Notes. See "Principal Shareholders."
RISK RELATING TO ACQUISITIONS
To expand its markets and take advantage of the consolidation trend in the
automotive parts industry, the Company's business strategy includes growth
through acquisitions. The ability of the Company to successfully implement its
acquisition strategy depends upon a number of factors. There can be no
assurance that the Company will be able to consummate acquisitions in the
future on terms acceptable to the Company or to integrate any new acquisitions
(including Howell, RPIH and the Suspension Division) successfully into its
operations and achieve cost savings from such integration. To the extent that
any future acquisitions require the incurrence or assumption of additional
indebtedness, the Company's interest and debt service requirements will
increase, and the Company's increased leverage could have important
consequences to Holders of the Series B Notes. In addition, the Company is
pursuing acquisitions and strategic alliances in Europe and intends to pursue
such acquisitions and alliances in South America, Asia and other markets. The
Company is also continually investigating opportunities for domestic
acquisitions of other OEM suppliers. There can be no assurance that these
acquisitions or strategic alliances will be successful. See "Risk Factors --
Substantial Leverage and Debt Service Obligations," and "Business -- Business
Strategy."
COMPETITION
The motor vehicle parts industry in which the Company operates is fragmented
and competitive. The Company's competitors include divisions or subsidiaries of
companies that are larger and have substantially greater resources than the
18
23
Company as well as divisions of OEMs with internal stamping and assembly
operations. There can be no assurance that the Company's products will be able
to compete successfully with those of its competitors. See "Business --
Competition."
ENVIRONMENTAL RISKS
The Company's operations and properties are subject to federal, state, local
and foreign laws, regulations and ordinances relating to the use, storage,
handling, generation, treatment, emission, release, discharge and disposal of
certain materials, substances and wastes. In many jurisdictions these laws are
complex and change frequently. Such laws, including but not limited to the
Comprehensive Environmental Response, Compensation & Liability Act ("CERCLA" or
"Superfund") may impose joint and several liability and apply to remediation of
contamination at properties presently or formerly owned or operated by an
entity or its predecessors, as well as to conditions at properties at which
wastes or other contamination attributable to an entity or its predecessors
have been sent or otherwise come to be located. The nature of the Company's
operations exposes it to the risk of liabilities or claims with respect to
environmental matters, including off-site disposal matters, and there can be no
assurance that material costs will not be incurred in connection with such
liabilities or claims.
Based upon the Company's experience to date, the Company believes that the
future cost of compliance with existing environmental laws, regulations and
ordinances (or liability for known environmental claims) will not have a
material adverse effect on the Company's business, financial condition and
results of operations. However, future events, such as changes in existing laws
and regulations 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 and results of operations. Compliance with more
stringent laws or regulations, as well as more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws,
may require additional expenditures by the Company that may be material. See
"Business -- Regulatory Matters and -- Legal Proceedings."
CHANGE OF CONTROL
Upon a Change of Control, each Holder of the Notes will have the right to
require the Company to repurchase all or any part of such Notes at a price
equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase. The occurrence of a Change of
Control may constitute a default under the Senior Credit Facility. In addition,
the Senior Credit Facility will prohibit the purchase of the Notes by the
Company in the event of a default thereunder, unless and until such time as the
indebtedness under the Senior Credit Facility is repaid in full. The Company's
failure to purchase the Notes would result in a default under the Indenture.
The inability to repay the indebtedness under the Senior Credit Facility, if
accelerated, would also constitute an event of default under the Indenture,
which could have adverse consequences for the Company and the Holders of the
Notes. In the event of a Change of Control, there can be no assurance the
Company would have sufficient financial resources available to satisfy all of
its obligations under the Senior Credit Facility and the Notes. In addition,
the Company could engage in a highly leveraged transaction, with certain
adverse consequences to Holders of the Notes, which would not constitute a
Change of Control. See "Description of the Notes -- Change of Control" and
"Description of Certain Indebtedness and Preferred Stock -- Senior Credit
Facility."
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Series B Notes who do not exchange their Old Series B Notes
for New Series B Notes pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Old Series B Notes as set forth
in the legend thereon as a consequence of the issuance of the Old Series B
Notes pursuant to exemption from, or in transactions not subject to, the
registration requirements of, the Securities Act and applicable state laws, or
pursuant to an exemption therefrom. Subject to the obligation by the Company
to file a shelf registration statement covering resales of Old Series B Notes
in
19
24
certain limited circumstances, the Company does not intend to register the Old
Series B Notes under the Securities Act and, after consummation of the Exchange
Offer, will not be obligated to do so. In addition, any holder of Old Series B
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Series B Notes may be deemed to have received
restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Additionally, as a result of the
Exchange Offer, it is expected that a substantial decrease in the aggregate
principal amount of Old Series B Notes outstanding will occur. As a result, it
is unlikely that a liquid trading market will exist for the Old Series B Notes
at any time. This lack of liquidity will make transactions more difficult and
may reduce the trading price of the Old Series B Notes. See "The Exchange
Offer."
ABSENCE OF PUBLIC MARKET FOR THE NEW SERIES B NOTES
The New Series B Notes are new securities and there is currently no
established market for the New Series B Notes. Accordingly, there can be no
assurance as to the liquidity of any markets that may develop for the New
Series B Notes, the ability of holders to sell the New Series B Notes or the
price at which holders would be able to sell the New Series B Notes. Future
trading prices of the New Series B Notes will depend on many factors,
including, among other things, prevailing interest rates, the Company's
operating results and the market for similar securities. Historically, the
market for securities similar to the New Series B Notes, including
non-investment grade debt, has been subject to disruptions that have caused
substantial volatility in the prices of such securities. There can be no
assurance that any market for the New Series B Notes, if such market develops,
will not be subject to similar disruptions. The Initial Purchaser has advised
the Company that it currently intends to make a market in the New Series B
Notes offered hereby. However, the Initial Purchaser is not obligated to do so
and any market making may be discontinued at any time without notice. The
Company and the Subsidiary Guarantors do not intend to apply for listing of the
New Series B Notes on any national securities exchange or for their quotation
through the National Association of Securities Dealers Automated Quotation
System.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's and the
Subsidiary Guarantors' obligations under the Registration Agreement. The
Company will not receive any cash proceeds from the issuance of the New Series
B Notes in the Exchange Offer. In consideration for issuing the New Series B
Notes as contemplated in this Prospectus, the Company will receive Old Series B
Notes in like principal amount. The form and terms of the New Series B Notes
are identical in all material respects to the form and terms of the Old Series
B Notes, except for certain transfer restrictions and registration rights
relating to the Old Series B Notes and except for certain provisions providing
for an increase in the interest rate on the Old Series B Notes under certain
circumstances relating to the timing of the Exchange Offer. The Old Series B
Notes surrendered in exchange for the New Series B Notes will be retired and
canceled and cannot be reissued. Accordingly, issuance of the New Series B
Notes will not result in any increase in the outstanding debt of the Company.
The net proceeds to the Company from the sale of the Old Series B Notes were
approximately $37.6 million (after the inclusion of approximately $2.0 million
in premium and accrued interest of approximately $1.0 million paid by the
Initial Purchaser and the deduction of estimated expenses incurred in
connection with the Offering and related transactions of approximately
$0.4 million). The Company used all of the net proceeds in connection with
the acquisition of the Suspension Division. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity,
Capital Resources and Financial Condition."
20
25
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 and as adjusted to give effect to the Series B Offering and the
acquisition of the Suspension Division. This table should be read in
conjunction with the unaudited "Pro Forma Combined Consolidated Financial
Data," "Selected Consolidated Historical Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and related notes thereto included
elsewhere in this Prospectus. See also "Description of Certain Indebtedness
and Preferred Stock."
MARCH 31, 1998
---------------
AS
ACTUAL ADJUSTED
------ ---------
(IN THOUSANDS)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 18,321 $ 2,508
======== ========
Long-term debt (including current portion):
Senior Credit Facility (a) . . . . . . . . . . . . . . . . . 1,825 1,825
Lewis Emery . . . . . . . . . . . . . . . . . . . . . . . . . 1,233 1,233
Industrial Revenue Bonds . . . . . . . . . . . . . . . . . . 7,600 7,600
EDC Tooling . . . . . . . . . . . . . . . . . . . . . . . . . 2,967 2,967
Other Debt (b) . . . . . . . . . . . . . . . . . . . . . . . 996 996
10 1/8% Senior Subordinated Notes Due 2007, Series A 124,827 124,827
10 1/8% Senior Subordinated Notes Due 2007, Series B - 37,044
-------- --------
Total debt . . . . . . . . . . . . . . . . . . . . . . . 139,448 176,492
-------- --------
Redeemable preferred stock (c)
Series A . . . . . . . . . . . . . . . . . . . . . . . . . . 40,192 40,192
Shareholders' equity:
Common stock (400,000 shares authorized; 309,750
issued and outstanding) . . . . . . . . . . . . . . . . . 1,050 1,050
Foreign currency translation adjustment . . . . . . . . . . . (651) (651)
Net unrealized gain on marketable securities . . . . . . . . 969 969
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 4,750 4,750
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . . 6,118 6,118
-------- --------
Total capitalization . . . . . . . . . . . . . . . . . . . . . $145,566 $182,610
======== ========
- ----------------------
(a) Concurrently with the issuance of the Series A Notes, the Company entered
into the Senior Credit Facility. On March 31, 1998, the Company had $1.8
million of borrowings under the Senior Credit Facility and availability was
approximately $98.7 million.
(b) Consists of debt of RPIH and certain other debt of the Company. Certain of
the RPIH debt is secured by the assets of RPI.
(c) See "Description of Certain Indebtedness and Preferred Stock - Preferred
Stock of Lobdell."
21
26
PRO FORMA COMBINED FINANCIAL DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The unaudited pro forma combined balance sheet as of March 31, 1998 (the
"Unaudited Pro Forma Balance Sheet") gives pro forma effect to the Series B
Offering and the acquisition of the Suspension Division as if each had occurred
on March 31, 1998. The acquisition of the Suspension Division is accounted for
by the purchase method of accounting pursuant to which the purchase price is
allocated among the acquired tangible and intangible assets and assumed
liabilities in accordance with estimates of their fair values on the date of
acquisition. The pro forma adjustments represent management's preliminary
determination of purchase accounting adjustments and are based upon available
information and certain assumptions that the Company believes to be reasonable
under the circumstances. Consequently, the amounts reflected in the Unaudited
Pro Forma Balance Sheet are subject to change and the final values may differ
substantially from these amounts. Management does not expect that differences
between the preliminary and final purchase price allocation will have a
material impact on the Company's financial position. The Unaudited Pro Forma
Balance Sheet does not purport to be indicative of the financial position of
the Company had such transactions actually been completed as of the assumed
dates and for the periods presented, or which may be obtained in the future.
The unaudited pro forma combined statement of operations for the year ended
March 31, 1998 (the "Unaudited Pro Forma Statement of Operations") gives pro
forma effect to the Series A Offering, the Series B Offering, and the
acquisitions of Howell, RPIH and the Suspension Division as if they had
occurred on April 1, 1997. The Unaudited Pro Forma Statement of Operations do
not purport to be indicative of the results of operations of the Company had
such transactions actually been completed as of the assumed dates and for the
periods presented, or which may be obtained in the future.
22
27
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF MARCH 31, 1998
SUSPENSION
COMPANY DIVISION SERIES B PRO FORMA PRO FORMA
MAR. 31, 1998 MAR. 31, 1998(A) MAR. 31, 1998(B) ADJUSTMENTS COMBINED
------------- ---------------- ---------------- ----------- ---------
Cash and cash equivalents . . . . . . . . . $ 18,321 $ 2 $37,650 $(53,465)(c)(d) $ 2,508
Trade accounts receivable, net . . . . . . 65,273 11,784 - - 77,057
Inventories . . . . . . . . . . . . . . . . 21,305 11,704 - - 33,009
Reimbursable tooling . . . . . . . . . . . 13,315 - - - 13,315
Unexpended bond proceeds . . . . . . . . . 4,159 - - - 4,159
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . . . 4,404 30 - - 4,434
Deferred income taxes . . . . . . . . . . . 4,399 - - 4,399
-------- ------- ------- -------- --------
Total current assets . . . . . . . . . 131,176 23,520 37,650 (53,465) 138,881
Deferred income taxes . . . . . . . . . . . 6,405 - - - 6,405
Property, plant and equipment,
net . . . . . . . . . . .. . . . . . . . 163,708 26,869 - - 190,577
Goodwill . . . . . . . . . . . . . . . . . - - 10,373 (d) 10,373
Other noncurrent assets . . . . . . . . . . 18,743 8,653 438 - (d) 27,834
-------- ------- ------- -------- --------
Total assets . . . . . . . . . . . . . $320,032 $59,042 $38,088 $(43,092) $374,070
======== ======= ======= ======== ========
Trade accounts payable . . . . . . . . . . 52,214 6,002 - - $ 58,216
Accrued expenses and other
liabilities . . . . . . . . . . . . . . . 17,050 4,619 1,044 - 22,713
Restructuring reserve . . . . . . . . . . . 6,363 - - - 6,363
Current portion of long-term debt . . . . . 10,965 - - - 10,965
-------- ------- ------- -------- --------
Total current liabilities . . . . . . 86,592 10,621 1,044 - 98,257
Deferred income taxes . . . . . . . . . . . 15,332 2,059 - (2,059)(d) 15,332
Pension liability . . . . . . . . . . . . . 4,727 - - - 4,727
Postretirement medical benefits . . . . . . 35,992 2,554 - 1,218 (d) 39,764
Other noncurrent liabilities. . . . . . . . 2,596 1,557 - - 4,153
Long-term debt . . . . . . . . . . . . . . 128,483 37,044 - 165,527
-------- ------- ------- -------- --------
Total liabilities . . . . . . . . . . 273,722 16,791 38,088 (841) 327,760
-------- ------- ------- -------- --------
Redeemable Series A preferred
stock . . . . . . . . . . . . . . . . . . 40,192 - - 40,192
Total shareholders' equity 6,118 42,251 - (42,251)(d) 6,118
-------- ------- ------- -------- --------
Total liabilities and
shareholders' equity . . . . . . . . $320,032 $59,042 $38,088 $(43,092) $374,070
======== ======= ======= ======== ========
- ----------------------
See accompanying Notes to Unaudited Pro Forma Combined Balance Sheet.
23
28
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Dollars in thousands)
(a) Represents balance sheet of the Suspension Division at March 31, 1998.
The March 31, 1998 balance sheet for the Suspension Division was
derived from the Suspension Division's unaudited internal financial
statements.
(b) Represents the Series B Offering as if it had occurred on March 31,
1998.
Issuance of notes - $35.0 million face value, issued at 105.84% $37,044
Accrued interest on bonds - December 15, 1997 to March 31, 1998 1,044
Bond acquisition cost (438)
-------
Net proceeds of Series B Notes $37,650
=======
(c) Represents the estimated purchase price for the Suspension Division.
The acquisition was funded using proceeds of the Series B Offering,
remaining unused proceeds from the Series A Offering and other
available cash.
(d) The acquisition of the Suspension Division will be accounted for by
the purchase method of accounting, pursuant to which the purchase
price is allocated among the acquired tangible and intangible assets
and assumed liabilities in accordance with their estimated fair values
on the date of acquisition. The purchase price and preliminary
adjustments to historical book value of the Suspension Division as a
result of the transaction are as follows:
Estimated goodwill $10,373
-------
Net increase in assets $10,373
=======
Proceeds from Series A and Series B Offerings used to finance acquisition 53,465
Increase in Postretirement benefit obligation 1,218
Decrease in deferred taxes (2,059)
Elimination of predecessors investment in the Suspension Division (42,251)
-------
Net increase in liabilities and shareholders equity $10,373
=======
24
29
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SUSPENSION
COMPANY HOWELL RPIH DIVISION PRO FORMA
COMPANY(a) PRO FORMA PRO FORMA (e) PRO FORMA (f) PRO FORMA (g) COMBINED
---------- --------- --------- --------- --------- --------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAR. 31, 1998 MAR. 31, 1998 MAR. 31,1998 MAR. 31, 1998 MAR. 31, 1998 MAR. 31, 1998
------------- ------------- ------------ ------------- ------------- -------------
(dollars in thousands)
Net sales $410,321 $ - $34,329 $ 9,035 $122,478 $576,163
Cost of sales 368,420 - 31,189 10,642 114,721 524,972
-------- -------- ------- -------- -------- --------
Gross profit 41,901 3,140 (1,607) 7,757 51,191
Selling, general and
administrative expenses 21,839 37(b) 1,651 177 7,545 31,249
Restructuring provision 1,610 - - - - 1,610
Gain on sale of equipment (1,602) - - - - (1,602)
-------- -------- ------- -------- -------- --------
Income (loss) from Operations 20,054 (37) 1,489 (1,784) 212 19,934
Interest expense, net 10,710 (265)(c) 858 432 5,108 16,843
Other income (expense) 321 - - (35) 860 1,146
-------- -------- ------- --------- -------- --------
Income (loss) before income
taxes 9,665 228 631 (2,251) (4,036) 4,237
Provision (benefit) for income
taxes 4,074 91 (d) 269 (846) (1,612) 1,976
-------- -------- ------- -------- -------- --------
Net income (loss) $ 5,591 $ 137 $ 362 $ (1,405) $ (2,424) $ 2,261
======== ======== ======= ======== ======== ========
FINANCIAL RATIOS AND
OTHER DATA:
Depreciation and amortization $20,279 $ 37 $ 769 $ 296 $ 4,641 $ 26,022
Capital expenditures 16,723 - 728 119 5,761 23,331
Ratio of earnings to fixed
charges (h) 1.7x 1.2x
Adjusted EBITDA(i) 40,654 - 2,258 (1,523) 5,713 47,102
Ratio of Adjusted EBITDA to
interest expense(j) 3.0x 2.4x
Ratio of net debt to Adjusted
EBITDA(k) 2.9x 3.6x
See accompanying Notes to Unaudited Pro Forma Combined Statement of Operations.
25
30
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(a) Statement of Operations Data for the Company for the year ended March
31, 1998 includes operating data for Howell and RPIH for the periods
subsequent to acquisition (Howell - August 14, 1997 to March 31, 1998
and RPIH - November 26, 1997 to March 31, 1998).
(b) Represents amortization of bond acquisition fees associated with the
Series A Notes.
(c) Represents the net effect on interest expense as a result of (1) the
elimination of historical interest expense after the repayment of the
existing senior bank credit facilities and other outstanding debt,
using proceeds from the Series A Offering and (2) the Series A and
Series B Offerings, using an interest rate of 10.125% per annum for the
Series A Notes and 9.25% per annum for the Series B Notes. This amount
excludes interest on the portion of the proceeds of the Series A and
Series B Offerings used for the Howell, RPIH and the Suspension
Division acquisitions as follows:
Interest differential historical versus Offerings $ 4,053
Acquisition of:
Howell (884)
RPI (169)
Suspension (3,265)
-------
$ (265)
=======
See Notes (e)(4), (f)(4) and (g)(4).
(d) Represents the estimated income tax effect of the pro forma adjustments
using an effective tax rate of 40%.
(e) The Howell Pro Forma information includes Statement of Operations data
for Howell as if the Company had acquired Howell on April 1, 1997:
PRO FORMA HOWELL
HOWELL(1) ADJUSTMENTS PRO FORMA
--------------- --------------- ---------------
PERIOD FROM PERIOD FROM PERIOD FROM
APRIL 1, 1997 APRIL 1, 1997 APRIL 1, 1997
THROUGH THROUGH THROUGH
AUGUST 13, 1997 AUGUST 13, 1997 AUGUST 13, 1997
--------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
Net sales $34,329 $ - $34,329
Cost of sales 31,070 119 (2) 31,189
------- -------- -------
Gross profit 3,259 (119) 3,140
Selling, general and administrative expenses 1,626 25 (3) 1,651
Restructuring provision - - -
Gain on sale of equipment - - -
------- -------- -------
Income (loss) from operations 1,633 (144) 1,489
Interest expense, net (26) 884 (4) 858
Other income (expense) - - -
------- -------- -------
Income (loss) before income taxes 1,659 (1,028) 631
Provision (benefit) for income taxes 680 (411) (5) 269
------- -------- -------
Net income (loss) $ 979 $ (617) $ 362
======= ======== =======
(1) Statement of Operations data for Howell for the period prior to
acquisition by the Company (April 1, 1997 - August 13, 1997).
The information was derived from Howell's unaudited internal
financial statements.
26
31
(2) Represents increased depreciation expense as a result of the
write up of property, plant and equipment to fair market value
as a part of the purchase accounting related to the acquisition
of Howell.
(3) Represents amortization of acquisition expenses related to the
Howell acquisition.
(4) Represents the net effect on interest expense as a result of
the use of proceeds from the Series A Offering for the
acquisition of Howell of $23,245. Interest expense is
calculated using an interest rate of 10.125% per annum. See
Note (c).
(5) Represents the estimated income tax effect of the pro forma
adjustments using an effective tax rate of 40%.
(f) The RPIH Pro Forma information includes Statement of Operations data as
if the Company had acquired RPIH on April 1, 1997:
PRO FORMA RPIH
RPIH(1) ADJUSTMENTS PRO FORMA
----------- ----------- -----------
PERIOD FROM PERIOD FROM PERIOD FROM
APRIL 1, 1997 APRIL 1, 1997 APRIL 1, 1997
THROUGH THROUGH THROUGH
NOVEMBER 25, 1997 NOVEMBER 25, 1997 NOVEMBER 25, 1997
----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
Net sales $ 9,035 $ - $ 9,035
Cost of sales 10,602 40 (2) 10,642
------- -------- -------
Gross profit (1,567) (40) (1,607)
Selling, general and administrative expenses 127 50 (3) 177
Restructuring provision - - -
Gain on sale of equipment - - -
------- -------- -------
Income (loss) from operations (1,694) (90) (1,784)
Interest expense, net 263 169 (4) 432
Other income (expense) (35) - (35)
------- -------- -------
Income (loss) before income taxes (1,992) (259) (2,251)
Provision (benefit) for income taxes (742) (104) (5) (846)
------- -------- -------
Net income (loss) $(1,250) $ (155) $(1,405)
======= ======== =======
(1) Statement of Operations data for RPIH for the period prior to
acquisition by the Company (April 1, 1997 to November 25,
1997). The information was derived from RPIH's unaudited
internal financial statements.
(2) Represents increased depreciation expense as a result of the
write up of property, plant and equipment to fair market value
as a part of the purchase accounting related to the
acquisition of RPIH.
(3) Represents amortization of acquisition expenses and goodwill
related to the RPIH acquisition.
(4) Represents the net effect on interest expense as a result of
the use of proceeds from the Series A Offering for the
acquisition of RPIH of $2,500. Interest expense is calculated
using an interest rate of 10.125% per annum. See Note (c).
(5) Represents the estimated income tax effect of the pro forma
adjustments using an effective tax rate of 40%.
27
32
(g) The Suspension Division Pro Forma information includes Statement of
Operations data as if the Company had acquired the Suspension Division
on April 1, 1997:
SUSPENSION
SUSPENSION PRO FORMA DIVISION
DIVISION(1) ADJUSTMENTS PRO FORMA
----------- ----------- -----------
PERIOD FROM PERIOD FROM PERIOD FROM
APR. 1, 1997 - APR. 1, 1997 - APR. 1, 1997 -
MAR. 31, 1998 MAR. 31, 1998 MAR. 31, 1998
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
Net sales $122,478 $ - $122,478
Cost of sales 114,721 - 114,721
-------- ------- --------
Gross profit 7,757 7,757
Selling, general and administrative expenses 7,154 391 (2) 7,545
Restructuring provision - - -
Gain on sale of equipment - - -
-------- ------- --------
Income (loss) from operations 603 (391) 212
Interest expense, net 1,033 4,075 (3) 5,108
Other income (expense) 860 - 860
-------- ------- --------
Income (loss) before income taxes 430 (4,466) (4,036)
Provision (benefit) for income taxes 174 (1,786)(4) (1,612)
-------- ------- --------
Net income (loss) $ 256 ($2,680) ($2,424)
======== ======= ========
(1) Statement of Operations data for the Suspension Division
for the twelve months ended March 31, 1998 was derived
from the Suspension Division's unaudited internal
financial statements.
(2) Represents amortization of acquisition expenses and
goodwill related to the Suspension Division acquisition.
(3) Represents the net effect on interest expense as a
result of the use of proceeds from the Series A and
Series B Offerings for the acquisition of the Suspension
Division of $53,465. Interest expense is calculated
using an interest rate of 10.125% per annum for the
Series A Notes and 9.25% per annum for the Series B
Notes. See Note (c).
(4) Represents the estimated income tax effect of the pro
forma adjustments using an effective tax rate of 40%.
(h) For purposes of this computation, earnings consist of income (loss)
before income taxes plus fixed charges. Fixed charges consist
of interest on indebtedness plus that portion of rental expense
representative of the interest factor.
(i) Adjusted EBITDA is defined as income (loss) before interest, income
taxes, depreciation and amortization and equipment impairment and
non-recurring charges. Adjusted 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.
(j) Defined as the ratio of Adjusted EBITDA to total interest expense.
(k) Ratio of net debt to Adjusted EBITDA with net debt consisting of total
debt less cash and cash equivalents and unexpended bond proceeds.
28
33
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth (i) the selected consolidated historical
financial data of 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 Prospectus,
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 Prospectus, 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," "Pro Forma Combined
Financial Data," and the Consolidated Financial Statements of the Company and
the related notes and other financial information presented elsewhere in this
Prospectus.
HISTORICAL
-------------------------------------------------------------------------------------
PREDECESSOR COMPANY
------------------------------------------ --------------------------------------
MAR. 31, MAR. 31, APR. 1, 1995 - OCT. 28, 1995- MAR. 31, MAR. 31,
1994(A) 1995 OCT. 27, 1995 MAR. 31, 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
Ratio of earnings to fixed
charges(d) . . . . . . . . . . . . 2.2x -- -- 1.5x 1.7x 1.7x
Adjusted EBITDA(e) . . . . . . . . . $ 5,538 $ 1,065 $ (855) $ 2,400 $ 11,330 $ 40,654
Gross margin(f) . . . . . . . . . . . 9.14% 5.60% 4.38% 11.10% 8.60% 10.21%
See Notes to Selected Consolidated Historical Financial Data.
29
34
(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 and Parallel. 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.
(d)For purposes of this computation, earnings consist of income (loss) before
income taxes plus fixed charges. Fixed charges consist of interest on
indebtedness plus that portion of rental expense representative of the
interest factor. For fiscal 1995, the Company's earnings were insufficient
to cover fixed charges by $1.6 million. For the period April 1, 1995 to
October 27, 1995, the Company's earnings were insufficient to cover fixed
charges by $2.8 million.
(e)Adjusted EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization and equipment impairment and non-recurring
charges. For the fiscal year ended March 31, 1997, equipment impairment and
non-recurring charges aggregated $0.3 million. Adjusted 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.
(f)Gross margin is defined as gross profit as a percent of net sales for each of
the applicable periods.
30
35
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 "Pro Forma
Combined Financial Data" and the Consolidated Financial Statements of the
Company and notes thereto included elsewhere in this Prospectus. 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 (PN131).
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 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
31
36
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 0.1% 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 exisitng 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.
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 $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.
32
37
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.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Net income adjusted for non-cash charges (depreciation and
amortization, deferred income taxes, and gain on sale of equipment) generated
approximately $24.4 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.
33
38
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
the IRB's and workers compensation commitments.
During fiscal 1998, the Company received net proceeds of $37.6 million
from its offering of 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 the 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 acquistions, 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.
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.
34
39
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.
35
40
THE EXCHANGE OFFER
Pursuant to the Registration Agreement, the Company agreed (i) to file a
registration statement with respect to a registered offer to exchange the Old
Series B Notes for the New Series B Notes, which will have terms substantially
identical in all material respects to the Old Series B Notes (except that the
New Series B Notes will not contain terms with respect to transfer
restrictions, certain registration rights and certain interest rate step-up
provisions) within 90 days after the date of original issuance of the Old
Series B Notes, and (ii) to use reasonable best efforts to cause such
registration statement to become effective under the Securities Act at the
earliest possible time but in any event no later than 150 days after issuance
of the Old Series B Notes. The interest rate step-up provisions provide that
special interest will accrue on the Notes (in addition to the stated interest
on the Notes) at a rate of 0.25% per annum during the 90-day period immediately
following the occurrence of any Registration Default, and shall increase by
0.25% per annum at the end of each subsequent 90-day period, but in no event
shall such rate exceed 1.00% per annum. See "Summary -- The New Series B
Notes." In the event that applicable law or interpretations of the Staff of
the Commission do not permit the Company to file the registration statement
containing this Prospectus or to effect the Exchange Offer, or if certain
holders of the Old Series B Notes notify the Company that they are prohibited
by law or Commission policy from participating in the Exchange Offer, or
subject to other restrictions, the Company will use its reasonable best efforts
to cause to become effective a shelf registration statement with respect to the
resale of the Old Series B Notes and to keep the shelf registration statement
effective until the earlier of two years following the date the shelf
registration statement is declared effective by the Commission and such time as
all the Series B Notes have been sold thereunder. Holders of Old Series B
Notes do not have any appraisal or dissenters' rights in connection with the
Exchange Offer.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD SERIES B NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Series B Notes which
are properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1998; provided, however, that if the Company has
extended the period of time for which the Exchange Offer is open, which in no
event shall be later than , 1998, the term "Expiration Date" means the
latest time and date to which the Exchange Offer is extended.
As of the date of this Prospectus, $35.0 million aggregate principal
amount of the Old Series B Notes are outstanding. This Prospectus, together
with the Letter of Transmittal, is first being sent on or about , 1998 to
all holders of Old Series B Notes known to the Company. The Company's
obligation to accept Old Series B Notes for exchange pursuant to the Exchange
Offer is subject to certain conditions as set forth under "--Certain Conditions
to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to
time, to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for any exchange of any Old Series B Notes, by giving
written notice of such extension to the holders thereof, including those
holders who have previously tendered their Old Series B Notes. During any such
extension, all Old Series B Notes previously tendered will remain subject to
the Exchange Offer and may be accepted for exchange by the Company. Any Old
Series B Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Series B Notes not
theretofore accepted for exchange, upon the occurrence of any of the conditions
of the Exchange Offer specified below under "--Certain Conditions to the
Exchange Offer." The Company will give written notice of any extension,
amendment, non-acceptance or termination to the holders of the Old Series B
Notes, including those holders who have previously tendered their Old Series B
Notes, as promptly as practicable, such notice in the case of any extension to
36
41
be issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD SERIES B NOTES
The tender to the Company of Old Series B Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Series B Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to U.S. Bank Trust National
Association, (the "Exchange Agent") at one of the addresses set forth below
under "Exchange Agent" on or prior to the Expiration Date. In addition, either
(i) certificates for such Old Series B Notes must be received by the Exchange
Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Old Series B Notes,
if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY
OF OLD SERIES B NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD SERIES B NOTES SHOULD
BE SENT TO THE COMPANY.
Any beneficial owner whose Old Series B Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct
such registered holder of Old Series B Notes to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Old Series B Notes, either make
appropriate arrangements to register ownership of the Old Series B Notes in
such owner's name or obtain a properly completed bond power from the registered
holder of Old Series B Notes. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the Expiration
Date.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Series B Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the Old
Series B Notes who has not completed the box entitled "Special Issuance
Instruction" or "Special Delivery Instructions" on the Letter of Transmittal,
or (ii) for the account of an Eligible Institution (as defined below). In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantees must be by a
firm which is a member of a registered national securities exchange or a member
of the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States or an
eligible guarantor institution within the meaning of Rule 17Ad-15 under the
Exchange Act which is a member of one of the recognized signature guarantee
programs identified in the Letter of Transmittal (collectively, "Eligible
Institutions"). If Old Series B Notes are registered in the name of a person
other than a signer of the Letter of Transmittal, the Old Series B Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by, the
registered holder with the signature thereon guaranteed by an Eligible
Institution. If the Letter of Transmittal or any Old Series B Notes or powers
of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
37
42
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Series B Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Old Series B Notes not properly tendered or to
not accept any particular Old Series B Notes which acceptance might, in the
judgment of the Company or its counsel, be unlawful. The Company also reserves
the absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Old Series B Notes either before or after
the Expiration Date (including the right to waive the ineligibility of any
holder who seeks to tender Old Series B Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer as to any
particular Old Series B Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Old Series B Notes for exchange
must be cured within such reasonable period of time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall
be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Series B Notes for exchange, nor shall any of them
incur any liability for failure to give such notification.
In connection with the tender of the Old Series B Notes, each broker-dealer
holder will represent to the Company in writing that, among other things, the
New Series B Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the holder and any beneficial holder,
that neither the holder nor any such beneficial holder has an arrangement or
understanding with any person to participate in the distribution of such New
Series B Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company.
If the holder is not a broker-dealer, the holder must represent that it is not
engaged in nor does it intend to engage in a distribution of the New Series B
Notes.
ACCEPTANCE OF OLD SERIES B NOTES FOR EXCHANGE; DELIVERY OF NEW SERIES B NOTES
For each Old Series B Note accepted for exchange, the holder of such Old
Series B Note will receive a New Series B Note having a principal amount equal
to that of the surrendered Old Series B Note. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted properly tendered Old
Series B Notes for exchange when, as and if the Company has given oral and
written notice thereof to the Exchange Agent.
In all cases, issuance of New Series B Notes for Old Series B Notes that
are accepted for exchange pursuant to the Exchange Offer will be made only
after timely receipt by the Exchange Agent of certificates for such Old Series
B Notes or a timely Book-Entry Confirmation of such Old Series B Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Old Series B Notes are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Old Series B
Notes are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Series B Notes will be returned
without expense to the tendering holder thereof (or, in the case of Old Series
B Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Series B Notes will be credited to an
account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Series B Notes by
causing the Book-Entry Transfer Facility to transfer such Old Series B Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Old Series B Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or facsimile thereof with any required signature guarantees and any
other required
38
43
documents must, in any case, be transmitted to and received by the Exchange
Agent at one of the addresses set forth below under "Exchange Agent" on or
prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Series B Notes desires to tender such
Old Series B Notes and the Old Series B Notes are not immediately available, or
time will not permit such holder's Old Series B Notes or other required
documents to reach the Exchange Agent before the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if (i) the tender is made through an Eligible
Institution, and (ii) prior to the Expiration Date, the Exchange Agent received
from such Eligible Institution a properly competed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile, mail or hand delivery), setting forth the name and
address of the holder of Old Series B Notes and the amount of Old Series B
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange ("NYSE") trading days after the
Expiration Date, the certificates for all physically tendered Old Series B
Notes, in proper form for transfer, or a confirmation of book- entry transfer
of such Old Series B Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility (a "Book-Entry Confirmation"), as the case may be, a properly
completed and duly executed Letter of Transmittal and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent.
WITHDRAWAL RIGHTS
Tenders of Old Series B Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date. For
a withdrawal to be effective, a written notice of withdrawal must be received
by the Exchange Agent at one of the addresses set forth below under "Exchange
Agent." Any such notice of withdrawal must specify the name of the person
having tendered the Old Series B Notes to be withdrawn, identify the Old Series
B Notes to be withdrawn (including the principal amount of such Old Series B
Notes), and (where certificates for Old Series B Notes have been transmitted)
specify the name in which such Old Series B Notes are registered, if different
from that of the withdrawing holder. If certificates for Old Series B Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the release of such certificates, the withdrawing holder must also submit
the serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such holder is an Eligible Institution. If Old Series B Notes have been
tendered pursuant to the procedure for book-entry transfer described above, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Series B
Notes and otherwise comply with the procedures of such facility. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Old Series B Notes so withdrawn will be deemed
not to have been validly tendered for exchange for purposes of the Exchange
Offer. Any Old Series B Notes which have been tendered for exchange but which
are not exchanged for any reason will be returned to the holder thereof without
cost to such holder (or, in the case of Old Series B Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book entry transfer described above, such Old
Series B Notes will be credited to an account maintained with such Book- Entry
Transfer Facility for the Old Series B Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Series B Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Series B Notes"
above at any time on or prior to the Expiration Date.
39
44
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Series B Notes in
exchange for, any Old Series B Notes and may terminate or amend the Exchange
Offer if, at any time before the acceptance of such Old Series B Notes for
exchange or the exchange of New Series B Notes for such Old Series B Notes, the
Company determines that the Exchange Offer violates applicable law, any
applicable interpretation of the Staff of the Commission or any order of any
governmental agency or court of competent jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its reasonable discretion. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of such right and each such right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Series B
Notes tendered, and no New Series B Notes will be issued in exchange for any
such Old Series B Notes, if at such time any stop order shall be threatened or
in effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "TIA"). In any such event the Company is
required to use every reasonable effort to obtain the withdrawal of any stop
order at the earliest possible time.
EXCHANGE AGENT
U.S. Bank Trust National Association, has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows.
By Hand (New York depository only) By Hand (all others) By Registered, Certified or Overnight Mail:
- ---------------------------------- -------------------- -------------------------------------------
U.S. Bank Trust National Association U.S. Bank Trust National Association U.S. Bank Trust National Association
100 Wall Street, 20th Floor Fourth Floor - Bond Drop Window Attn.: Specialized Finance
New York, NY 10005 180 East Fifth Street 180 East Fifth Street
Attn.: Cathy Donohue St. Paul, MN 55101 St. Paul, MN 55101
By First Class Mail: By Facsimile: By Telephone
- -------------------- ------------- ------------
U.S. Bank Trust National Association (612) 244-1537 (800) 934-6802 Bondholder Services
P.O. Box 64485 (For Eligible Institutions Only)
St. Paul, MN 55164-9549
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
40
45
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Series B Notes will be recorded at the same carrying value as the
Old Series B Notes, which is the principal amount as reflected in the Company's
accounting records on the date of the exchange. Accordingly, no gain or loss
for accounting purposes will be recognized. The expenses of the Exchange Offer
will be capitalized for accounting purposes.
TRANSFER TAXES
Holders who tender their Old Series B Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that
holders who instruct the Company to register New Series B Notes in the name of,
or request that Old Series B Notes not tendered or not accepted in the Exchange
Offer be returned to, a person other than the registered tendering holder will
be responsible for the payment of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW SERIES B NOTES
Holders of Old Series B Notes who do not exchange their Old Series B Notes
for New Series B Notes pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Old Series B Notes as set forth
in the legend thereon as a consequence of the issuance of the Old Series B
Notes pursuant to the exemptions from, or in transactions not subject to, the
registration requirements of, the Securities Act and applicable state
securities law. Old Series B Notes not exchanged pursuant to the Exchange Offer
will continue to accrue interest at 10 1/8% per annum and will otherwise remain
outstanding in accordance with their terms. In general, the Old Series B Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Series B Notes under the
Securities Act. However if (i) the Initial Purchaser so requests with respect
to Old Series B Notes held by it following consummation of the Exchange Offer,
or (ii) any holder of Old Series B Notes is not eligible to participate in the
Exchange Offer because, for example, such holder is an affiliate of the
Company, does not acquire the New Series B Notes in the ordinary course of
business or has an arrangement to participate in the distribution of the New
Series B Notes, or (iii) any holder of Old Series B Notes that participates in
the Exchange Offer does not receive freely tradable New Series B Notes in
exchange for Old Series B Notes, the Company is obligated to file a shelf
registration statement on the appropriate form under the Securities Act
relating to the Notes held by such persons.
Based on certain interpretive letters issued by the staff of the
Commission to third parties in unrelated transactions, the Company is of the
view that New Series B Notes issued pursuant to the Exchange Offer may be
offered for resale, resold or otherwise transferred by holders thereof (other
than (i) any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act, or (ii) any broker-dealer that
purchases Notes from the Company to resell pursuant to Rule 144A or any other
available exemption) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Series B
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate in
the distribution of such New Series B Notes. If any holder has any arrangement
or understanding with respect to the distribution of the New Series B Notes to
be acquired pursuant to the Exchange Offer, such holder (i) could not rely on
the applicable interpretations of the staff of the Commission, and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. A
broker-dealer who holds Old Series B Notes that were acquired for its own
account as a result of market-making or other trading activities may be deemed
to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of New Series B Notes. Each such broker-dealer
that receives New Series B Notes for its own
41
46
account in exchange for Old Series B Notes, where such Old Series B Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of such New Series B Notes.
See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the New Series B Notes may not be offered or sold unless they
have been registered or qualified for sale in such jurisdiction or an exemption
from registration or qualification is available and is complied with. The
Company has agreed, pursuant to the Registration Agreement and subject to
certain specified limitations therein, to register or qualify the New Series B
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Notes reasonably requests in writing.
BUSINESS
GENERAL
The Company is a leading Tier 1 or direct supplier of high-quality,
engineered metal components, assemblies and modules used by 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 of a variety of
SUVs, light and medium trucks, mini-vans, vans and passenger cars. The Company
is the sole source supplier of these products to its customers. On a pro forma
basis, assuming the acquisitions of Howell, RPIH and the Suspension Division
had occurred on April 1, 1997, the Company would have had net sales of $576.2
million and Adjusted EBITDA (as defined herein) of $47.1 million for the fiscal
year ended March 31, 1998. Based on pro forma 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, Ford Motor Company ("Ford"), General
Motors Corporation ("GM"), Chrysler Corporation ("Chrysler"), CAMI (a joint
venture of GM and Suzuki Motor Corporation ("Suzuki")) and The Saturn
Corporation ("Saturn"), accounted for approximately 41%, 38%, 13%, 2%, and 2%,
respectively of the Company's net sales for the fiscal year ended March 31,
1998, on a pro forma basis for the Howell, RPIH and Suspension Division
acquisitions. 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 84% of the Company's net sales, on a pro forma
basis assuming the acquisitions of Howell, RPIH and the Suspension Division
occurred on April 1, 1997, 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
the Oxford Automotive, Inc. Notes to Consolidated Financial Statements
for a description of the Company's domestic and export sales.
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.
42
47
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.
The Company currently operates 17 manufacturing facilities 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 including both 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 to has the ability to produce large, complex
stampings, as well as the technical expertise and automated assembly
capabilities that provide high value-added modules such as door apertures and
assemblies, A-pillars, Class A surface products and 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), and 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
43
48
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 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 84% of the Company's net sales on a
pro forma basis for the acquisitions of Howell, RPIH and the Suspension
Division 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 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. 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. Pursuant to the terms of a supplement to the Indenture, dated as
of August 13, 1997, Howell, a Restricted Subsidiary as defined in the
Indenture, became an additional Subsidiary Guarantor.
Howell's expertise has complemented and enhanced the Company's ability to
develop key suspension system components. Further, Howell's sales are
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 and Adjusted
EBITDA of $2.8 million.
On November 25, 1997, the Company acquired all of the outstanding shares of
common stock of RPIH. RPIH, through its wholly owned subsidiary RPI, Inc.,
provides the Company 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
44
49
March 31, 1997 for RPIH were $8.8 million and Adjusted EBITDA was a negative
$0.5 million. Pursuant to the terms of a supplement to the Indenture, dated as
of January 5, 1998, RPIH, a Restricted Subsidiary as defined in the
Indenture, became an additional Subsidiary Guarantor.
On April 1, 1998, the Company acquired the Suspension Division. 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 held
through two of the Company's subsidiaries, Oxford Suspension, Inc. and Oxford
Suspension Ltd. These two subsidiaries are currently Restricted Subsidiaries but
are not currently Subsidiary Guarantors.
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
Metalcar, a Venezuelan manufacturer of conventional leaf springs and coil
springs for both light and heavy trucks. The Suspension Division had net
sales of $125.8 million for its fiscal year ended December 31, 1997. For its
fiscal year ended December 31, 1997, the Suspension Division had Adjusted
EBITDA of $7.4 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 a pro forma basis for the fiscal year ended March 31, 1998, assuming the
acquisitions of Howell, RPIH and the Suspension Division had occurred on April
1, 1997, (i) net sales and Adjusted EBITDA for the Company would have been
$576.2 million and $47.1 million, respectively, (ii) the SUV, mini-van, van and
light truck segment represented approximately 84% of net sales and (iii) the
Company's net sales by major customers would have been approximately as
follows: Ford 41%; GM 38%; Chrysler 13%; CAMI 2%, and Saturn 2%.
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. OEM's 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 and tooling. OEMs
generally
45
50
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:
46
51
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 Door Assemblies, Tailgate Assemblies,
(2000 Launch) 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, Radiator Supports
Monte 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, Rocker Panels
Seville, 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 Leaf Springs
Eurostar (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
47
52
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
approximatley $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 CAMIJ2, 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 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 and GM and, in management's judgment, was an essential
factor in winning the LS Program business.
CUSTOMERS AND MARKETING
48
53
The Company supplies its products on a long-term preferred and sole source
basis, primarily to Ford (41%), GM (38%), Chrysler (12%), CAMI (2%), and Saturn
(2%) (percentages are approximates of net sales for the fiscal year ended as of
March 31, 1998 on a pro forma basis for the acquisitions of Howell, RPIH and
the Suspension Division) 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.
MANUFACTURING AND FACILITIES
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 operates over 380 presses ranging from under 100 ton to 2,600 ton
capabilities. The Company is capable of producing components and assemblies
from the smallest brackets to full-size, Class 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
49
54
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
Greencastle, Indiana 214,000
Cambridge, Ontario 290,000
Delhi, Ontario 115,000
Athens, Tennessee 100,000
Masury, Ohio 150,000
Lapeer, Michigan 85,000
Pudenville, Michigan 76,000
Oscoda, Michigan 57,000
Hamilton, Indiana 85,000
Chatham, Ontario 190,000
Wallaceburg, Ontario 240,000
Saltillo, Mexico(1) 20,000
Silao, Mexico(1) 42,000
50
55
Troy, Michigan(1) 34,000
Valencia, Venezuela(2) 122,000
_________________
(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.
RAW MATERIALS
The cost of raw materials represented approximately 51% of net sales of the
Company for the fiscal year ended March 31, 1998 on a pro forma basis for the
acquisitions of Howell, RPIH and the Suspension Division. On an annual basis,
steel represents approximately 68% of total raw materials purchases. The
Company expects to purchase nearly 360,000 tons of steel in fiscal 1999 for use
in its production. The remaining 32% of raw materials purchases is represented
by 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 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.
51
56
In 1994, the Company experienced a two-week work stoppage at the Chatham
Ontario facility. Other than this event, 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
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 15 to
Oxford Automotive, Inc. Notes to Consolidated Financial Statements.
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
52
57
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.
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. See "Risk Factors -- Environmental Risks and -- Legal Proceedings."
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.
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.
MANAGEMENT
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
53
58
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 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 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.
54
59
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 factors, such as length of service
and subjective assessments. The Compensation Committee consists of Messrs.
Isakow and Walt.
DIRECTOR COMPENSATION AND ARRANGEMENTS
The Company pays fees to its non-employee directors of $1,000 per
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
"Principal Shareholders -- Shareholder Agreements."
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. Pursuant to
the terms of the Indenture, the Company is not permitted to enter into any
transaction (including employee compensation arrangements) with any Affiliate
(as defined) unless the transaction is arm's
55
60
length and, if the transaction involves amounts in excess of $1 million in any
one year, the terms of the transaction are set forth in writing and approved by
a majority of the disinterested members of the Board of Directors. For similar
transactions in excess of $5 million in any one year, an opinion of a
recognized investment banking firm that such transaction is fair, from a
financial standpoint, is also required. See "Description of the Notes --
Certain Covenants." See "Certain Transactions."
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 years ended March 31, 1998, 1997 and 1996 the Company
paid Oxford Investment management fees of approximately $1.0 million, $275,000
and $71,000 respectively and investment banking fees during the fiscal years
ended March 31, 1998, 1997 and 1996 of $230,000, $300,000 and $200,000
respectively. In connection with the acquisition of the Suspension Division,
the Company paid Oxford Investment an investment banking fee of approximately
$500,000 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 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.
56
61
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."
57
62
(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 Transactions -- Management Agreements."
PRINCIPAL SHAREHOLDERS
As of June 1, 1998, there were 309,750 issued and outstanding shares of the
Common Stock, without par value, 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
58
63
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%
59
64
(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, 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.
CERTAIN 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 "Management - Compensation Committee Interlocks and Insider
Participation."
LEGAL
60
65
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,
including services performed in connection with the Offering and this Exchange
Offer. The Company expects to continue to retain the firm as general counsel
after the Exchange Offer.
DESCRIPTION OF CERTAIN
INDEBTEDNESS AND PREFERRED STOCK
SENIOR CREDIT FACILITY
General. In connection with the Series A Offering, on June 24, 1997, the
Company entered into a credit agreement with NBD Bank, on behalf of itself
and as agent for a syndicate of other lenders, providing for up to $110.0
million (the "Commitment Amount") of revolving credit availability including
the issuance of letters of credit (the "Senior Credit Facility"). The Company
and certain principal operating subsidiaries (the "Senior Credit Obligors") are
parties to or guarantors of the Senior Credit Facility. The obligations under
the Senior Credit Facility (the "Obligations") are secured by a first lien on
substantially all the assets of the Senior Credit Obligors. The Obligations
and guaranties of the Senior Credit Obligors (the "Senior Credit Guaranties")
will rank senior to all other indebtedness of the Company, including the Notes.
Availability under the revolver at March 31, 1998 was approximately $98.7
million, reduced for the effect of a Letter of Credit issued for the IRB's (as
defined). Funds under the Senior Credit Facility are available for general
corporate purposes (including acquisitions) and letters of credit.
Interest Rates. Interest on outstanding borrowings under the Senior Credit
Facility is payable monthly and accrues at an annual rate equal to (a) the
Applicable Margin (as defined in the Senior Credit Facility) plus either
(i) the higher of the Prime Rate (as defined in the Senior Credit Facility) or
0.5% over the Federal Funds Rate or (ii) with respect to Canadian based
borrowings, the higher of the prime rate of First Chicago NBD Bank, Canada or
0.5% over the BA Rate (the one month bankers' acceptance rates, as further
defined in the Senior Credit Facility), or (b) the London Interbank Offered
Rate plus the Applicable Margin (a "LIBOR-based Rate") or, with respect to
Canadian based borrowings, the BA Rate. The Applicable Margin will be based
upon the Company's trailing four quarter Ratio of Total Debt to EBITDA (as
defined in the Senior Credit Facility) as follows:
RATIO OF TOTAL
FUNDED APPLICABLE MARGIN
DEBT TO EBITDA PRIME/LIBOR
-------------- -----------------
> 5.00 .75% / 2.25%
4.51 -- 5.00 .50% / 2.00%
3.76 -- 4.50 .25% / 1.75%
3.01 -- 3.75 0% / 1.50%
<= 3.00 0% / 1.25%
Maturity and Optional Prepayments. All borrowings under the Senior Credit
Facility mature in June 2003, and the aggregate principal amount
outstanding may not exceed the Commitment Amount at any time. Borrowings under
the Senior Credit Facility may be prepaid at any time without premium or
penalty, except that any prepayment of a LIBOR-based Rate loan that is made
prior to the end of the applicable interest period shall be subject to
reimbursement of breakage costs.
Covenants. The Senior Credit Facility contains certain customary covenants,
including without limitation, reporting and other affirmative covenants;
financial covenants including: ratios of total debt to EBITDA beginning at not
greater than 5.50 to 1.00 and decreasing to not greater than 4.50 to 1.00 after
June 30, 1999; net worth of not less than $35.4
61
66
million plus a percentage of the Company's net income plus any proceeds from
the issuance of capital stock; fixed charge coverage ratio beginning at not
less than 1.45 to 1.00 and increasing to not less than 1.60 to 1.00 after March
31, 1998; and interest coverage ratio beginning at not less than 2.00 to 1.00
and increasing to not less than 2.25 to 1.00 after March 31, 1999 (each as
defined in and calculated pursuant to the Senior Credit Facility); and negative
covenants, including: restrictions on incurrence of indebtedness (other than
as provided for in the Senior Credit Facility, purchase money debt, the Notes,
tooling debt, and guaranties of certain other debt not to exceed $30.0
million), payment of cash dividends and other distributions to shareholders,
liens in favor of parties other than the lenders under the Senior Credit
Facility, certain guaranties of obligations of or advances to others, sales of
material assets not in the ordinary course of business, restrictions on mergers
and acquisitions, and capital expenditures (each as defined in and calculated
pursuant to the Senior Credit Facility). The Company remained in compliance
with its covenants following the acquisition of Howell, RPIH and the Suspension
Division.
Events of Default. The Senior Credit Facility contains customary events of
default including non-payment of principal, interest or fees; violation of
covenants; inaccuracy of representations or warranties; cross-defaults to
certain other indebtedness, including the indebtedness evidenced by the Notes,
and bankruptcy.
Fees. The Company will pay, on a quarterly basis, a per annum fee on the
unused Commitment Amount ranging from 0.25% to 0.50% and letter of credit
fees ranging from 1.25% to 2.25%, in each case based on certain financial ratios
of the Company.
OTHER INDEBTEDNESS
The Canadian Department of Regional Industrial Expansion has provided a
term loan (the "IRDP Loan") to BMG, bearing interest at 6% with a final
maturity date of September 1, 2002. The IRDP Loan is unsecured. As of March
31, 1998, $0.4 million was outstanding with respect to the IRDP Loan.
The Export Development Corporation of Canada ("EDC") has provided a tooling
line facility to BMG (the "EDC Facility"), bearing interest at a fixed rate of
7.36%. The EDC Facility is secured by tooling at BMG relating to specific
Saturn contracts and has a final maturity of September 30, 1999. As of March
31, 1998, $3.0 million was outstanding with respect to the EDC Facility.
Lobdell, through Lewis Emery Capital Corporation, its wholly-owned
subsidiary, has been provided with a term loan facility from NBD Bank (the "LE
Loan"), bearing interest at 0.625% over 90-day LIBOR with a final maturity date
of October 1, 1998. This loan is collateralized by a purchase order from Ford,
which allows for recovery of the term-debt principal and interest,
administrative costs and a predetermined markup. As of March 31, 1998, $1.2
million was outstanding with respect to the LE Loan.
Lobdell, through its subsidiary Creative Fabrication Corporation
("Creative"), is financially obligated to the County of McMinn, Tennessee
pursuant to certain revenue bonds issued on behalf of Creative. On September
27, 1995, the Industrial Development Board of the County of McMinn issued $8.5
million of its Industrial Development Revenue Bonds ("IRBs") for the purpose of
lending the proceeds from the sale of the IRBs to Creative. The IRBs bear
interest at a variable rate which was 3.85% at March 31, 1998. The IRBs are
collateralized by a letter of credit issued by NBD Bank for the benefit of the
trustee under the indenture relating to the IRBs and by a mortgage on the
Creative facilities located in Tennessee and are guaranteed by Lobdell.
Creative is prohibited from paying, declaring or authorizing any dividend if
62
67
there is an event of default under the IRB documents. The IRBs mature in
September 2010. As of March 31, 1998, $7.6 million principal amount of IRBs
were outstanding.
RPIH, through its subsidiary has been provided with a $0.6 million loan
facility from the National Association of Credit Managers (the "RPIH Loan"),
bearing interest at 6.0% with a final maturity date of April 30, 1999. As of
March 31, 1998, $0.4 million was outsanding with respect to the RPIH Loan.
PREFERRED STOCK OF LOBDELL
In connection with the Company's acquisition of Lobdell, Lobdell issued
457,541 shares of its Series A $3.00 Cumulative Preferred Stock ( the "Series
A Preferred Stock") and 49,938 shares of its Series B Preferred Stock (the
"Series B Preferred Stock" and together with the Series A Preferred Stock the
"Lobdell Preferred Stock"), each having a stated value of $100 per share, of
which only 397,539 shares of Series A Preferred Stock are currently outstanding.
All of the Series B Preferred Stock has been cancelled, as described below.
Generally, except as required by law, the holders of Lobdell Preferred Stock
have no voting rights. However, the holders of Series A Preferred Stock, voting
as a separate class, are entitled to elect (i) one director of Lobdell, and (ii)
if Lobdell fails to pay three consecutive semi-annual dividend payments to the
holders of Series A Preferred Stock, one additional director until the payment
default is cured. Dividends on the Series A Preferred Stock accrue annually at
the rate of $3.00 per share and are cumulative, whether or not earned or
declared. Lobdell may not declare or pay any dividend or other distribution,
other than in Lobdell Common Stock or other stock junior to the Lobdell
Preferred Stock ("Junior Stock"), with respect to any Junior Stock unless all
accrued, unpaid and current dividends with respect to the Series A Preferred
Stock have either been paid or sufficient funds have been set apart for such
payment. The Series A Preferred Stock also has certain liquidation preferences.
The Series A Preferred Stock is mandatorily redeemable by Lobdell on
December 31, 2006 at a price per share of $100, plus accrued and unpaid
dividends to the date of redemption. However, if the Company does not commence
a public offering of its common stock pursuant to a firm commitment
underwritten offering prior to June 30, 2006, the payment for the shares of
Series A Preferred Stock to be redeemed will be $103 per share, plus accrued
and unpaid dividends to the date of redemption. In addition, at the option of
the holders of Series A Preferred Stock, if the Company does not commence such
a public offering of its common stock on or before December 31, 2001, Lobdell
must redeem on December 31 of each year commencing with 2002 up to 20% of the
aggregate number of shares of Series A Preferred Stock held by any such holder
immediately prior to December 31, 2002. The Subsidiary Guaranty of Lobdell
ranks senior to the Lobdell Preferred Stock. See "Description of the Notes --
Subsidiary Guaranties."
In connection with the acquisition of Lobdell by the Company, the Company
has agreed to exchange its common stock for the shares of Series A Preferred
Stock upon the initial public offering ("Initial Public Offering") of its
common stock to the public which is exclusively for cash, subject to an
effective registration statement and underwritten on a firm commitment basis by
one or more underwriters. The holders of Series A Preferred Stock have the right
to exchange up to 50% or some lesser portion of their shares of Series A
Preferred Stock (the "Election Amount") for a number of shares of Company common
stock equal to (i) the Election Amount, multiplied by (ii) the Exchange Ratio
(the number equal to the redemption value of a share of Series A Preferred
Stock, divided by the price per share to the public of Company common stock in
the Initial Public Offering); provided, however, that, in the aggregate, holders
of Series A Preferred Stock may not receive more than 25% of the number of
shares of Company common stock registered pursuant to the Initial Public
Offering.
Pursuant to the acquisition of Lobdell, the Company obtained various
indemnities for certain purchase price adjustments arising out of a closing
balance sheet and for claims relating to representations and warranties made by
the
63
68
former common shareholders of Lobdell in connection with the acquisition.
At the closing of such acquisition, 100,000 shares of Series A Preferred Stock
were placed with an escrow agent to fund indemnification claims of the Company.
The Company and the preferred shareholders of Lobdell have settled certain
purchase price adjustments relating to the difference between the shareholder's
equity reflected on the closing balance sheet and the amount that had
previously been projected by Lobdell, which has resulted in the cancellation of
60,002 shares of the escrowed Series A Preferred Stock and 49,938 shares of
Series B Preferred Stock, which represented all of the outstanding Series B
Preferred Stock. The remaining 39,998 shares of escrowed Series A Preferred
Stock were released to the preferred shareholders of Lobdell.
DESCRIPTION OF THE NOTES
GENERAL
The Old Series B Notes were issued under an Indenture (the "Indenture")
dated as of June 15, 1997, among the Company, the Subsidiary Guarantors and
U.S. Bank Trust National Association (formerly known as First Trust National
Association), as Trustee (the "Trustee"). The terms of the Indenture apply to
the Old Series B Notes and to the New Series B Notes to be issued in exchange
therefor pursuant to the Exchange Offer (all such notes are referred to herein
collectively as the "Series B Notes"). The terms of the Indenture also apply to
the Series A Notes, which are substantially identical to, and rank pari passu in
right of payment with the Series B Notes. The Series A Notes and the Series B
Notes are collectively hereinafter referred to as the "Notes."
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes is available upon
request to the Company. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Indenture, including
the definitions of certain terms therein and those terms made a part thereof by
the Trust Indenture Act of 1939, as amended. Capitalized terms used herein and
not otherwise defined have the meanings set forth in the section "-- Certain
Definitions." As used in this section, the term "Company" refers to Oxford
Automotive, Inc.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company, which, unless otherwise provided by the Company, will be the offices
of the Trustee. At the option of the Company, payment of interest may be made
by check mailed to the addresses of the Holders as such addresses appear in the
Note register.
The Notes are issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $160.0 million aggregate principal amount (of which $125.0 million
were issued in the Series A Offering and $35.0 million were issued in the Series
B Offering), and will mature on June 15, 2007. The Notes bear interest at the
rate per annum shown on the cover page hereof from the most recent date to which
interest has been paid or provided for, payable semi-annually to Holders of
record at the close of business on the June 1 or December 1 immediately
preceding the interest payment date on June 15 and December 15 of each year.
The Company will pay interest on overdue principal at 1% per annum in excess of
such rate, and it will pay interest on overdue installments of interest at such
higher rate to the extent lawful.
64
69
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes are not redeemable at
the option of the Company prior to June 15, 2002. Thereafter, the Notes are
redeemable, at the Company's option, in whole or in part, at any time or from
time to time, upon not less than 30 nor more than 60 days' prior notice mailed
by first-class mail to each Holder's registered address, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
June 15 of the years set forth below:
REDEMPTION
PERIOD PRICE
------ ----------
2002 . . . . . 105.063%
2003 . . . . . 103.375
2004 . . . . . 101.688
2005 and thereafter 100.000
In addition, at any time and from time to time prior to June 15, 2000,
the Company may redeem in the aggregate up to 35% of the original principal
amount of the Notes with the proceeds of one or more Public Equity Offerings
following which there is a Public Market, at a redemption price (expressed as a
percentage of principal amount) of 110.125% plus accrued and unpaid interest,
if any, to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date); provided, however, that at least 65% of the original aggregate
principal amount of the Notes must remain outstanding after each such
redemption.
SELECTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note.
SUBSIDIARY GUARANTIES
Each of BMG, Lobdell, Howell, RPIH, BMG Holdings, Inc., an Ontario
corporation, Winchester Fabrication Corporation, a Michigan corporation,
Creative Fabrication Corporation, a Tennessee corporation, Parallel Group
International, Inc., an Indiana corporation, Laserweld International, L.L.C.,
an Indiana limited liability company, Concept Management Corporation, a
Michigan corporation, and Lewis Emery Capital Corporation, a Michigan
corporation (each a "Subsidiary Guarantor"), irrevocably and unconditionally
Guarantee, jointly and severally, as primary obligors and not merely as
sureties, on an unsecured senior subordinated basis the performance and
punctual payment when due, whether at Stated Maturity, by acceleration or
otherwise, of all obligations of the Company under the Indenture and the Notes,
whether for payment of principal of or interest on the Notes, expenses,
indemnification or otherwise (all such obligations guaranteed by the Subsidiary
Guarantors being herein called the "Guaranteed Obligations"). The Subsidiary
Guarantors agree to pay, in addition to the amount stated above, any and all
expenses (including reasonable counsel fees and expenses) incurred by the
Trustee or the Holders in enforcing any rights under the Subsidiary Guaranties.
Each Subsidiary Guaranty
65
70
will be limited in amount to an amount not to exceed the maximum amount that
can be guaranteed by the applicable Subsidiary Guarantor without rendering such
Subsidiary Guaranty voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. After the Issue Date, the Company will cause each
Restricted Subsidiary that becomes an obligor or guarantor with respect to any
of the obligations under one or more of the Bank Credit Agreements to execute
and deliver to the Trustee a supplemental indenture pursuant to which such
Restricted Subsidiary will Guarantee payment of the Notes. See "Certain
Covenants -- Future Subsidiary Guarantors" below.
Each Subsidiary Guaranty is a continuing guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon each Subsidiary Guarantor and (c) inure to the benefit of
and be enforceable by the Trustee, the Holders and their successors,
transferees and assigns. A Subsidiary Guaranty will be released upon the sale of
all the capital stock, or all or substantially all of the assets, of the
applicable Subsidiary Guarantor if such sale is made in compliance with the
Indenture.
SUBORDINATION
The indebtedness evidenced by the Notes and the Subsidiary Guaranties
represents senior subordinated obligations of the Company and the Subsidiary
Guarantors, as the case may be. The payment of the principal of, premium (if
any) and interest on the Notes, the payment of any Subsidiary Guaranty and all
other Obligations under or in connection with the Notes, the Subsidiary
Guaranties, the Indenture and/or any related agreements, documents or
instruments are subordinate in right of payment, as set forth in the Indenture,
to the prior payment in full of all Senior Indebtedness of the Company or the
relevant Subsidiary Guarantor, as the case may be, whether outstanding on the
Issue Date or thereafter incurred, including all Obligations of the Company and
such Subsidiary Guarantor under the Senior Credit Facility. The Notes and the
Subsidiary Guaranties are also effectively subordinated to any Secured
Indebtedness of the Company and the Subsidiary Guarantors to the extent of the
value of the assets securing such Indebtedness and to any liabilities of
Subsidiaries other than the Subsidiary Guarantors.
As of March 31, 1998, (i) the Company had $1.8 million outstanding Senior
Indebtedness (excluding unused commitments under the Senior Credit Facility)
and (ii) Senior Indebtedness of the Subsidiary Guarantors was approximately
$12.8 million. Although the Indenture contains limitations on the amount of
additional Indebtedness that the Company and its Restricted Subsidiaries may
incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness. See
"Certain Covenants -- Limitation on Indebtedness."
Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior
Indebtedness will rank senior to the Notes and the relevant Subsidiary Guaranty
in accordance with the provisions of the Indenture. The Notes and each
Subsidiary Guaranty will in all respects rank pari passu with all other senior
subordinated Indebtedness of the Company and the relevant Subsidiary Guarantor,
respectively. The Company and each Subsidiary Guarantor has agreed in the
Indenture that it will not Incur, directly or indirectly, any Indebtedness that
is subordinate or junior in ranking in right of payment to its Senior
Indebtedness unless such Indebtedness is pari passu with or is expressly
subordinated in right of payment to the Notes. Unsecured Indebtedness is not
deemed to be subordinated or junior merely because it is unsecured.
The Company may not pay, directly or indirectly, principal of, premium
(if any) or interest on, the Notes or any other Obligations under or in
connection with the Notes, the Indenture and/or any related agreements,
documents or instruments or make any deposit pursuant to the provisions
described under "-- Defeasance" below and may not repurchase, redeem or
otherwise retire any Notes (collectively, "pay the Subordinated Debt") if (i)
any Senior Indebtedness is not paid when due or (ii) any other default on any
such Senior Indebtedness occurs and the maturity of such Senior Indebtedness is
accelerated in accordance with its terms unless, in either case, the default
has been cured or waived and any such
66
71
acceleration has been rescinded or such Senior Indebtedness has been paid in
full in cash. However, the Company may pay the Subordinated Debt without
regard to the foregoing if the Company and the Trustee receive written notice
approving such payment from the Representative of the Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clauses (i) and
(ii) of the second preceding sentence) with respect to any Senior Indebtedness
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company
may not pay the Subordinated Debt for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 180 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice has been waived in
writing or (iii) because such Designated Senior Indebtedness has been repaid in
full in cash). Notwithstanding the provisions described in the immediately
preceding sentence, unless the holders of such Designated Senior Indebtedness
or the Representative of such holders has accelerated the maturity of such
Designated Senior Indebtedness, the Company may resume payments on the Notes
after the end of such Payment Blockage Period. The Notes shall not be subject
to more than one Payment Blockage Period in any consecutive 360-day period,
irrespective of the number of such nonpayment defaults with respect to
Designated Senior Indebtedness during such period.
Upon any payment or distribution of the assets of the Company of any kind
or character, whether in cash, property or securities, to creditors upon a
total or partial liquidation or dissolution or reorganization of or similar
proceeding relating to the Company or its property or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding, the holders of
Senior Indebtedness will be entitled to receive payment in full in cash of such
Senior Indebtedness before the Noteholders are entitled to receive any payment,
and, until the Senior Indebtedness is paid in full in cash, any payment or
distribution to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of such Senior Indebtedness
as their interests may appear. If a payment or distribution is made to
Noteholders that, due to the subordination provisions, should not have been made
to them, such Noteholders are required to hold it in trust for the holders of
Senior Indebtedness and pay it over to them as their interests may appear.
The obligations of a Subsidiary Guarantor under its Subsidiary Guaranty are
senior subordinated obligations. As such, the rights of Noteholders to receive
payment by a Subsidiary Guarantor pursuant to its Subsidiary Guaranty will be
subordinated in right of payment to the rights of holders of Senior
Indebtedness of such Subsidiary Guarantor. The terms of the subordination
provisions described above with respect to the Company's obligations under the
Notes apply equally to a Subsidiary Guarantor and the obligations of such
Subsidiary Guarantor under its Subsidiary Guaranty.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company or a Subsidiary Guarantor
who are holders of Senior Indebtedness of the Company or a Subsidiary Guarantor,
as the case may be, may recover more, ratably, than the Noteholders, and
creditors of the Company who are not holders of Senior Indebtedness may recover
less, ratably, than holders of Senior Indebtedness and may recover more,
ratably, than the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to and in accordance with the provisions described under "--
Defeasance."
67
72
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require that the Company repurchase all or a portion of such Holder's
Notes at a purchase price in cash equal to 101% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date), in accordance with the provisions of
the next paragraph.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount outstanding at the repurchase date plus accrued and unpaid
interest, if any, to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest on the relevant interest
payment date); (2) the circumstances and relevant facts and relevant financial
information regarding such Change of Control; (3) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); and (4) the instructions determined by the Company,
consistent with the covenant described hereunder, that a Holder must follow in
order to have its Notes repurchased.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to the covenant described
hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Senior Credit Facility. Future
Senior Indebtedness of the Company may contain prohibitions of certain events
which would constitute a Change of Control or require such Senior Indebtedness
to be repurchased upon a Change of Control. Moreover, the exercise by the
Holders of their right to require the Company to repurchase the Notes could
cause a default under such Senior Indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on the Company.
Finally, the Company's ability to pay cash to the Holders upon a repurchase may
be limited by the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
repurchases required in connection with a Change of Control. The Company's
failure to purchase the Notes in connection with a Change in Control would
result in a default under the Indenture which would, in turn, constitute a
default under the Senior Credit Facility. In such circumstances, the
subordination provisions in the Indenture would likely restrict payment to the
Holders of the Notes.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Old Series B Notes have been issued and the
New Series B Notes will initially be issued in the form of a Global Note. The
Global Note will be deposited with, or on behalf of, the Depository and
registered in the name of the Depository or its nominee. Except as set forth
below, the Global Note may be transferred, in whole and not in part, only to the
Depository or another nominee of the Depository. Investors may hold their
beneficial interests in the Global Note directly through the Depository if they
have an account with the Depository or indirectly through organizations which
have accounts with the Depository.
New Series B Notes issued in exchange for Old Series B Notes that were (i)
originally issued to institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) who are not qualified
institutional buyers ("QIBs") or (ii) issued as described below under "--
Certificated Notes" will be issued in definitive form. Upon the
68
73
transfer of a Note in definitive form, such Note will, unless the Global Note
has previously been exchanged for Notes in definitive form, be exchanged for an
interest in the Global Note representing the principal amount of Notes being,
transferred.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). The Depository was created to hold securities
of institutions that have accounts with the Depository ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depository's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of a Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of participants. The accounts to
be credited shall be designated by the Initial Purchaser of such Notes.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depository (with respect to participants' interest) and such participants
(with respect to the owners of beneficial interests in the Global Note other
than participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in a Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of such Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in a Global Note will not be entitled to have the Notes
represented by such Global Note registered in their names, will not receive
or be entitled to receive physical delivery of certificated Notes in definitive
form and will not be considered to be the owners or holders of any Notes under
such Global Note. The Company understands that under existing industry practice,
in the event an owner of a beneficial interest in a Global Note desires to take
any action that the Depository, as the holder of a Global Note, is entitled to
take, the Depository would authorize the participants to take such action, and
that the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
Payment of principal of and interest on Notes represented by a Global Note
registered in the name of and held by the Depository or its nominee will be made
to the Depository or its nominee, as the case may be, as the registered owner
and holder of such Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
the Depository or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in a Global Note held through
such participants will be governed by standing instructions and customary
practices and will be the responsibility of such participants. The Company will
not have any responsibility or liability for any aspect of the records relating
to, or payments made on account of, beneficial ownership interests in a Global
Note for any Note or for maintaining, supervising or
69
74
reviewing any records relating to such beneficial ownership interests or for
any other aspect of the relationship between the Depository and its
participants or the relationship between such participants and the owners of
beneficial interests in such Global Note owned through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, a Global Note may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
The Notes represented by a Global Note are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of
U.S.$1,000 and integral multiples thereof if (i) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for such Global
Note or if at any time the Depository ceases to be a clearing agency registered
under the Exchange Act, (ii) the Company in its discretion at any time
determines not to have all of the Notes represented by a Global Note or (iii) a
default entitling the holders of the Notes to accelerate the maturity thereof
has occurred and is continuing. Any Note that is exchangeable pursuant to the
preceding sentence is exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, a Global Note is not exchangeable, except for a Global
Note of the same aggregate denomination to be registered in the name of the
Depository or its nominee.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company shall not, and shall not
permit any Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness unless, immediately after giving effect to such Incurrence, the
Consolidated Coverage Ratio exceeds 2.00 to 1 if such Indebtedness is Incurred
prior to June 15, 1999 or 2.25 to 1 if such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1)
Indebtedness and other Obligations Incurred pursuant to the Bank Credit
Agreements; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of such Indebtedness and other
Obligations then outstanding does not exceed the greater of (i) $110 million and
(ii) the sum of (x) 60% of the net book value of the inventory of the Company
and its Restricted Subsidiaries, and (y) 90% of the net book value of the
accounts receivable of the Company and its Restricted Subsidiaries, in each case
determined in accordance with GAAP, and (z) $70 million; (2) Indebtedness
represented by the Notes issued in the offerings; (3) Indebtedness outstanding
on the Issue Date (other than Indebtedness described in clause (1) of this
paragraph), including, without limitation, the Existing Preferred Stock; (4)
Indebtedness of the Company owed to and held by any Wholly Owned Subsidiary or
Indebtedness of a Restricted Subsidiary owed to and held by the Company or a
Wholly Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Indebtedness
70
75
by the issuer thereof; (5) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (a) or pursuant to clause (1), (2), (3) or this
clause (5); (6) Indebtedness in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds entered into by the
Company and the Restricted Subsidiaries in the ordinary course of their
business; (7) Hedging Obligations consisting of Interest Rate Agreements and
Currency Agreements entered into in the ordinary course of business and not for
the purpose of speculation; provided, however, that, in the case of Currency
Agreements and Interest Rate Agreements, such Currency Agreements and Interest
Rate Agreements do not increase the Indebtedness of the Company outstanding at
any time other than as a result of fluctuations in foreign currency exchange
rates or interest rates or by reason of fees, indemnities and compensation
payable thereunder; (8) Purchase Money Indebtedness and Capital Lease
Obligations Incurred to finance the acquisition or improvement by the Company
or a Restricted Subsidiary of any assets in the ordinary course of business and
which do not exceed $15 million in the aggregate at any time outstanding; (9)
Indebtedness and other Obligations represented by the Subsidiary Guaranties and
Guarantees of Indebtedness Incurred pursuant to the Bank Credit Agreements;
(10) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in
the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business, provided that such Indebtedness is extinguished
within five business days of Incurrence; (11) Indebtedness of the Company and
its Restricted Subsidiaries arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, in any
case Incurred in connection with the disposition of any assets of the Company
or any Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by
any Person acquiring all or any portion of such assets for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (12) Tooling Indebtedness; and (13)
Indebtedness in an aggregate principal amount which, together with all other
Indebtedness of the Company and its Restricted Subsidiaries outstanding on the
date of such Incurrence (other than Indebtedness permitted by clauses (1)
through (12) above or paragraph (a)), does not exceed $20 million.
(c) Notwithstanding the foregoing, the Company shall not, and shall not
permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the
foregoing paragraph (b) if the proceeds thereof are used, directly or
indirectly, to Refinance (i) any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Notes and the Subsidiary Guaranties,
as applicable, to at least the same extent as such Subordinated Obligations or
(ii) any Senior Subordinated Indebtedness unless such Indebtedness shall be
Senior Subordinated Indebtedness or shall be subordinated to the Notes and the
Subsidiary Guaranties, as applicable.
(d) For purposes of determining compliance with the foregoing covenant, (i)
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness described above, the Company, in its sole discretion,
will classify such item of Indebtedness and only be required to include the
amount and type of such Indebtedness in one of the above clauses and (ii) an
item of Indebtedness may be divided and classified in more than one of the types
of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, the Company shall not, and
shall not permit any Subsidiary Guarantor to, Incur (i) any Indebtedness if
such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable,
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness or (ii) any
Secured Indebtedness that is not Senior Indebtedness of the Company or such
Subsidiary Guarantor, as applicable, unless contemporaneously therewith
effective provision is made to secure the Notes or the Subsidiary Guaranty, as
applicable, equally and ratably with such Secured Indebtedness for so long as
such Secured Indebtedness is secured by a Lien.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a
Restricted Payment if at the time the Company or such Restricted Subsidiary
makes such Restricted
71
76
Payment: (1) a Default shall have occurred and be continuing (or would result
therefrom); (2) the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant described under "--
Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted
Payment together with all other Restricted Payments (the amount of any payments
made in property other than cash to be valued at the fair market value of such
property, as determined in good faith by the Board of Directors) declared or
made since the Issue Date would exceed the sum of: (A) 50% of the Consolidated
Net Income accrued during the period (treated as one accounting period) from
the beginning of the fiscal quarter immediately following the fiscal quarter
during which the Notes are originally issued to the end of the most recent
fiscal quarter prior to the date of such Restricted Payment for which financial
statements are available (or, in case such Consolidated Net Income accrued
during such period (treated as one accounting period) shall be a deficit, minus
100% of such deficit); (B) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company); (C) the amount by which Indebtedness of the Company
or its Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date, of any Indebtedness of the Company or its
Restricted Subsidiaries convertible or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of any cash, or the
fair value of any other property, distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); (D) an amount equal to the sum of
(i) the net reduction in Investments in Unrestricted Subsidiaries resulting
from dividends, repayments of loans or advances or other transfers of assets
subsequent to the Issue Date, in each case to the Company or any Restricted
Subsidiary from Unrestricted Subsidiaries, and (ii) the portion (proportionate
to the Company's equity interest in such Subsidiary) of the fair market value
of the net assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made (and treated as a Restricted Payment) by
the Company or any Restricted Subsidiary in such Unrestricted Subsidiary; and
(E) $5 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company or any Restricted Subsidiary made in exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the Company
(other than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of the Company); provided, however, that (A) such purchase or
redemption shall be excluded from the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the
calculation of amounts under clause (3)(B) of paragraph (a) above; (ii) any
purchase or redemption of (A) Subordinated Obligations of the Company made in
exchange for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
paragraphs (b) and (c) of the covenant described under "-- Limitation on
Indebtedness" or (B) Subordinated Obligations of a Restricted Subsidiary made in
exchange for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of such Restricted Subsidiary or the Company which is permitted to
be Incurred pursuant to paragraphs (b) and (c) of the covenant described under
"-- Limitation on Indebtedness"; provided, however, that such purchase or
redemption shall be excluded from the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of (A) Disqualified Stock of the
Company made in exchange for, or out of the proceeds of the substantially
concurrent sale of, Disqualified Stock of the Company or (B) Disqualified Stock
of a Restricted Subsidiary made in exchange for, or out of the proceeds of the
substantially concurrent sale of, Disqualified Stock of such Restricted
Subsidiary or the Company; provided, however, that (1) at the time of such
exchange, no Default or Event of Default shall have occurred and be continuing
or would result therefrom and (2) such purchase or redemption will be excluded
from the calculation of the amount of Restricted Payments; (iv) dividends paid
within 60 days after the date of declaration thereof if at such date of
declaration such dividend would have complied with this covenant; provided,
however, that at the time of payment of such dividend, no other Default shall
have occurred and be continuing (or would result therefrom); provided, further,
however, that such dividend shall be included in the calculation of the amount
of Restricted Payments; (v) the repurchase of shares of, or options to purchase
shares of, Capital Stock of the Company or any of its Subsidiaries from
officers, former officers, employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted
72
77
transferees of such employees, former employees, directors or former directors),
pursuant to the terms of the agreements (including employment agreements) or
plans (or amendments thereto) approved by the Board of Directors under which
such individuals purchase or sell, or are granted the option to purchase or
sell, shares of such common stock; provided, however, that the aggregate amount
of such repurchases shall not exceed $2.5 million in any one year and $5.0
million in the aggregate; provided, further, however, that (1) at the time of
such repurchase, no Default or Event of Default shall have occurred and be
continuing or would result therefrom and (2) all such repurchases shall be
included in the calculation of the amount of Restricted Payments; or (vi)
dividends and redemptions required to be made with respect to the Existing
Preferred Stock; provided, however, that (1) at the time of any such dividend or
redemption, no Default or Event of Default shall have occurred and be continuing
or would result therefrom and (2) all such dividends and redemptions shall be
included in the calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any Restricted
Subsidiary (a) to pay dividends or make any other distributions on its Capital
Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to
the Company, (b) to make any loans or advances to the Company or (c) transfer
any of its property or assets to the Company, except: (i) any encumbrance or
restriction pursuant to an agreement in effect at or entered into on the Issue
Date; (ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by
such Restricted Subsidiary which was entered into on or prior to the date on
which such Restricted Subsidiary was acquired by the Company (other than as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date; (iii)
any encumbrance or restriction pursuant to an agreement effecting a Refinancing
of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or
(ii) of this covenant (or effecting a Refinancing of such Refinancing
Indebtedness pursuant to this clause (iii)) or contained in any amendment to an
agreement referred to in clause (i) or (ii) of this covenant or this clause
(iii); provided, however, that the encumbrances and restrictions with respect to
such Restricted Subsidiary contained in any such refinancing agreement or
amendment are no more restrictive in any material respect than the encumbrances
and restrictions with respect to such Restricted Subsidiary contained in such
agreements; (iv) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder; (v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness (other than Tooling
Indebtedness) of a Restricted Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements or
mortgages; (vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; and (vii) any restriction
imposed by applicable law.
Limitation on Sales of Assets and Subsidiary Stock. The Company shall not,
and shall not permit any Restricted Subsidiary to, consummate any Asset
Disposition unless the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares and assets
subject to such Asset Disposition and at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
cash equivalents. For the purposes of this covenant, the following are deemed to
be cash and cash equivalents: (x) the assumption of Indebtedness of the Company
or any Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Restricted
Subsidiary from the transferee that are immediately converted by the Company or
such Restricted Subsidiary into cash.
73
78
With respect to any Asset Disposition occurring on or after the Issue Date
from which the Company or any Restricted Subsidiary receives Net Available Cash,
the Company or such Restricted Subsidiary shall (i) within 360 days after the
date such Net Available Cash is received and to the extent the Company or such
Restricted Subsidiary elects (or is required by the terms of any Senior
Indebtedness) to (A) apply an amount equal to such Net Available Cash to prepay,
repay or purchase Senior Indebtedness of the Company or such Restricted
Subsidiary, in each case owing to a Person other than the Company or any
Affiliate of the Company, or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A), in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary) and (ii) apply
such excess Net Available Cash (to the extent not applied pursuant to clause
(i)) as provided in the following paragraphs of the covenant described
hereunder; provided, however, that in connection with any prepayment, repayment
or purchase of Senior Indebtedness pursuant to clause (A) above, the Company or
such Restricted Subsidiary shall retire such Senior Indebtedness and shall cause
the related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased. The amount of Net
Available Cash required to be applied pursuant to clause (ii) above and not
theretofore so applied shall constitute "Excess Proceeds." Pending application
of Net Available Cash pursuant to this provision, such Net Available Cash shall
be invested in Temporary Cash Investments.
If at any time the aggregate amount of Excess Proceeds not theretofore
subject to an Excess Proceeds Offer (as defined below) totals at least $5
million, the Company shall, not later than 30 days after the end of the period
during which the Company is required to apply such Excess Proceeds pursuant to
clause (i) of the immediately preceding paragraph (or, if the Company so
elects, at any time within such period), make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate principal
amount of Notes equal to the Excess Proceeds (rounded down to the nearest
multiple of $1,000) on such date, at a purchase price equal to 100% of the
principal amount of such Notes, plus, in each case, accrued interest (if any) to
the date of purchase (the "Excess Proceeds Payment"). Upon completion of an
Excess Proceeds Offer the amount of Excess Proceeds remaining after application
pursuant to such Excess Proceeds Offer, (including payment of the purchase price
for Notes duly tendered) may be used by the Company for any corporate purpose
(to the extent not otherwise prohibited by the Indenture).
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
thereunder in the event that such Excess Proceeds are received by the Company
under the covenant described hereunder and the Company is required to repurchase
Notes as described above. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of the covenant described
hereunder, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
covenant described hereunder by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction or series of related transactions (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof (1) are no less favorable to the Company
or such Restricted Subsidiary than those that could be obtained at the time of
such transaction in arm's-length dealings with a Person who is not such an
Affiliate, (2) if such Affiliate Transaction (or series of related Affiliate
Transactions) involve aggregate payments in an amount in excess of $1 million in
any one year, (i) are set forth in writing, (ii) comply with clause (1) and
(iii) have been approved by a majority of the disinterested members of the Board
of Directors and (3) if such Affiliate Transaction (or series of related
Affiliate Transactions) involve aggregate payments in an amount in excess of $5
million in any one year, (i) comply with clause (2) and (ii) have been
determined by a nationally recognized investment banking firm to be fair, from a
financial standpoint, to the Company and its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) any Restricted Payment permitted to be paid pursuant to the covenant
described under "-- Limitation on Restricted Payments," (ii) any issuance of
securities, or other
74
79
payments, awards or grants in cash, securities or otherwise, pursuant to, or
the funding of, employment arrangements, stock options and stock ownership
plans in the ordinary course of business and approved by the Board of
Directors, (iii) the grant of stock options or similar rights to employees and
directors of the Company in the ordinary course of business and pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees
in the ordinary course of business of the Company or its Restricted
Subsidiaries, (v) fees, compensation or employee benefit arrangements paid to
and indemnity provided for the benefit of directors, officers or employees of
the Company or any Subsidiary in the ordinary course of business, (vi) payments
made to The Oxford Investment Group, Inc. for (x) management and consulting
services in an aggregate amount not to exceed $1,000,000 in any one year and
(y) investment banking services in connection with acquisition of assets or
businesses, by the Company or any Subsidiary not to exceed the greater of (A)
1.25% of the purchase price paid by the Company or such Subsidiary for the
assets or business acquired (including Indebtedness assumed by the Company or
such Subsidiary as part of such acquisition) and (B) $200,000; or (vii) any
Affiliate Transaction between the Company and a Restricted Subsidiary or
between Restricted Subsidiaries in the ordinary course of business (so long as
the other stockholders of any participating Restricted Subsidiaries which are
not Wholly Owned Restricted Subsidiaries are not themselves Affiliates of the
Company).
Limitation on the Issuance or Sale of Capital Stock of Restricted
Subsidiaries. The Company shall not (i) sell, pledge, hypothecate or otherwise
dispose of any shares of Capital Stock of a Restricted Subsidiary (other than
pledges of Capital Stock securing Senior Indebtedness) or (ii) permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock other than (A) to the Company or a
Wholly Owned Subsidiary, (B) directors' qualifying shares, (C) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary or (D) the issuance of Preferred
Stock by any Subsidiary Guarantor as partial payment for the acquisition by such
Subsidiary Guarantor of Additional Assets. Notwithstanding the foregoing, the
Company may sell, and may permit a Restricted Subsidiary to issue and sell, up
to 20% of the outstanding Common Stock of a Restricted Subsidiary to officers
and employees of such Restricted Subsidiary. The proceeds of any sale of such
Capital Stock permitted hereby will be treated as Net Available Cash from an
Asset Disposition and must be applied in accordance with the terms of the
covenant described under "-- Limitation on Sales of Assets and Subsidiary
Stock."
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any
Lien of any nature whatsoever on any property of the Company or any
Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary),
whether owned at the Issue Date or thereafter acquired, which secures
Indebtedness that ranks pari passu with or is subordinated to the Notes or the
Subsidiary Guaranties unless (i) if such Lien secures Indebtedness that ranks
pari passu with the Notes and the Subsidiary Guaranties, the Notes are secured
on an equal and ratable basis with the obligation so secured until such time as
such obligation is no longer secured by a Lien or (ii) if such Lien secures
Indebtedness that is subordinated to the Notes and the Subsidiary Guaranties,
such Lien shall be subordinated to a Lien granted to the Holders on the same
collateral as that securing such Lien to the same extent as such subordinated
Indebtedness is subordinated to the Note and the Subsidiary Guaranties.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
related transactions, all or substantially all its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and the
Successor Company (if not the Company) shall expressly assume, by an indenture
supplemental thereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness which becomes an obligation of
the Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by such Successor Company or such Subsidiary at the time of
such transaction), no Default shall have occurred and be continuing; (iii)
except in the case of a merger the sole purpose of which is to change the
Company's jurisdiction of incorporation, immediately after giving effect to such
transaction on a pro forma basis, the Successor Company would be able to Incur
an additional $1.00 of
75
80
Indebtedness pursuant to paragraph (a) of the covenant described under "--
Limitation on Indebtedness"; (iv) immediately after giving effect to such
transaction on a pro forma basis, the Successor Company shall have Consolidated
Net Worth in an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture. Notwithstanding the foregoing
clauses (ii), (iii) and (iv), any Restricted Subsidiary may consolidate with,
merge into or transfer all or part of its properties and assets to the Company.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of
a conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
The Company shall not permit any Subsidiary Guarantor to consolidate with or
merge with or into, or convey, transfer or lease, in one transaction or a series
of transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (if not such Subsidiary) shall be
a Person organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Company (if not
such Subsidiary) shall expressly assume, by a Guaranty Agreement, in form
satisfactory to the Trustee, all the obligations of such Subsidiary under its
Subsidiary Guaranty; (ii) immediately after giving effect to such transaction on
a pro forma basis (and treating any Indebtedness which becomes an obligation of
the resulting, surviving or transferee Person as a result of such transaction as
having been Incurred by such Person at the time of such transaction), no Default
shall have occurred and be continuing; and (iii) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such Guaranty
Agreement comply with the Indenture. The provisions of clauses (i) and (iii)
above shall not apply to any transactions which constitute an Asset Disposition
if the Company has complied with the applicable provisions of the covenant
described under "-- Limitation on Sales of Assets and Subsidiary Stock" above.
Future Guarantors. The Company shall cause each Restricted Subsidiary that
at any time becomes an obligor or guarantor with respect to any obligations
under one or more Bank Credit Agreements to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Restricted Subsidiary will
Guarantee payment of the Notes on the same terms and conditions as those set
forth in the Indenture. Each Subsidiary Guaranty will be limited in amount to an
amount not to exceed the maximum amount that can be Guaranteed by the applicable
Subsidiary Guarantor without rendering such Subsidiary Guaranty voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
SEC Reports. Until such time as the Company shall become subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall provide the Trustee, the Initial Purchasers, the Noteholders and
prospective Noteholders (upon request) with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so provided at the
times specified for the filing of such information, documents and reports under
such Sections. Thereafter, notwithstanding that the Company may not be required
to remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC and provide the Trustee and
Noteholders and prospective Noteholders (upon request) with such annual reports
and such information, documents and other reports as are specified in such
Sections and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections; provided, however, that the Company shall not be required to file
any report, document or other information with the SEC if the SEC does not
permit such filing.
DEFAULTS
76
81
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due (whether or not such payment is
prohibited by the provisions described under "Subordination" above), continued
for 30 days, (ii) a default in the payment of principal of any Note when due at
its Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise (whether or not such payment is prohibited by the
provisions described under "Subordination" above), (iii) the failure by the
Company, to comply for 30 days after notice with any of its obligations under
the covenants described under "-- Limitation on Indebtedness," "-- Limitation on
Restricted Payments," "Limitation on Sales of Assets and Subsidiary Stock," and
"Merger, Consolidation and Sale of Assets", (iv) the failure by the Company to
comply for 60 days after notice with its other agreements contained in the
Indenture, (v) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $5 million (the "cross-acceleration
provision"), (vi) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the "bankruptcy provisions"), (vii) any
judgment or decree for the payment of money in excess of $5 million is rendered
against the Company or a Restricted Subsidiary, remains outstanding following
such judgment and is not discharged, waived or stayed within 60 days after entry
of such judgment or decree (the "judgment default provision"), or (viii) a
Subsidiary Guaranty ceases to be in full force and effect (other than in
accordance with the terms of such Subsidiary Guaranty) or a Subsidiary Guarantor
denies or disaffirms its obligations under its Subsidiary Guaranty. However, a
default under clause (iii) or (iv) will not constitute an Event of Default until
the Trustee or the Holders of 25% in principal amount of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified in clauses (iii) and (iv) hereof after receipt of such
notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes may declare
the principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders of the Notes. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Notes have not given the Trustee
a direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the
Default within 90 days after it occurs. Except in the case of a Default in the
payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers
77
82
determines that withholding notice is not opposed to the interest of the
Holders. In addition, the Company is required to deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate indicating whether
the signers thereof know of any Default that occurred during the previous year.
The Company also is required to deliver to the Trustee, within 30 days after
the occurrence thereof, written notice of any event which would constitute
certain Defaults, their status and what action the Company is taking or
proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the Holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
Holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the amount of Notes whose Holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "-- Optional
Redemption" above, (v) make any Note payable in money other than that stated in
the Note, (vi) impair the right of any Holder to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes or any
Subsidiary Guaranty, (vii) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions or (viii) make any
change to the subordination provisions of the Indenture that would adversely
affect the Noteholders.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add guarantees with respect to the Notes, to release Subsidiary
Guarantors when permitted by the Indenture, to secure the Notes, to add to the
covenants of the Company for the benefit of the Holders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder or to comply with any requirement of
the SEC in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
their Representative) consents to such change.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
Certificated Notes will be issued in registered form and will be
transferable only upon the surrender of the Notes being transferred for
registration of transfer. The Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
with certain transfers and exchanges.
DEFEASANCE
78
83
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "-- Change of
Control" and under the covenants described under "-- Certain Covenants" (other
than the covenant described under "-- Merger and Consolidation"), the operation
of the cross-acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under "--
Defaults" above and the limitations contained in clauses (iii) and (iv) under
"Certain Covenants -- Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because
of an Event of Default with respect thereto. If the Company exercises its
covenant defeasance option, payment of the Notes may not be accelerated because
of an Event of Default specified in clause (iii) (but only with respect to
clauses (iii) or (iv) under "Certain Covenants -- Merger and Consolidation as it
relates to the failure to comply with such covenants), (iv), (v), (vi) or (vii)
under "-- Defaults" above or because of the failure of the Company to comply
with clause (iii) or (iv) under "Certain Covenants -- Merger and Consolidation"
above. If the Company exercises its legal defeasance option or its covenant
defeasance option, each Subsidiary Guarantor will be released from all of its
obligations with respect to its Subsidiary Guaranty.
In order to exercise either defeasance option, (a) such defeasance must not
result in a breach of, or otherwise constitute a default under any
agreement or investment with respect to any Senior Indebtedness, and no default
may exist under any Indebtedness and (b) the Company must irrevocably deposit in
trust (the "defeasance trust") with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the Notes to redemption
or maturity, as the case may be, and must comply with certain other conditions,
including delivery to the Trustee of an Opinion of Counsel to the effect that
holders of the Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
CONCERNING THE TRUSTEE
U.S. Bank Trust National Association (formerly known as First Trust National
Association) is the Trustee under the Indenture and has been appointed by the
Company as Registrar and Paying Agent with regard to the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes are governed by, and construed
in accordance with, the laws of the State of New York without giving effect
to applicable principles of conflicts of law to the extent that the application
of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
79
84
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; or (ii) the Capital
Stock of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; provided, however, that any such Restricted Subsidiary is primarily
engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "Certain Covenants -- Limitation on
Restricted Payments," "Certain Covenants -- Limitation on Affiliate
Transactions" and "Certain Covenants -- Limitations on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Company or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares and, to the
extent required by local ownership laws in foreign countries, shares owned by
foreign shareholders), (ii) all or substantially all the assets of any division,
business segment or comparable line of business of the Company or any Restricted
Subsidiary or (iii) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such Restricted
Subsidiary. Notwithstanding the foregoing, the term "Asset Disposition" shall
not include (x) a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for
purposes of the covenant described under "Certain Covenants -- Limitation on
Sales of Assets and Subsidiary Stock", a disposition that constitutes a
Permitted Investment or a Restricted Payment permitted by the covenant described
under "Certain Covenants -- Limitation on Restricted Payments", and (z) a
disposition of assets having a fair market value of less than $1 million.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest
rate borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included in
such Sale/Leaseback Transaction (including any period for which such lease has
been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreements" means the Senior Credit Facility and any other
bank credit agreement or similar facility entered into in the future by the
Company or any Restricted Subsidiary as any of the same may be amended, waived,
modified, Refinanced or replaced from time to time (except to the extent that
any such amendment, waiver, modification, replacement or Refinancing would be
prohibited by the terms of the Indenture).
"Bank Indebtedness" means any and all present and future amounts payable
under or in respect of the Bank Credit Agreements, including principal, premium
(if any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization, whether or not a claim for
post-filing interest is allowed in such proceedings), fees,
80
85
charges, expenses, reimbursement obligations, Guarantees and all other amounts
and other Obligations payable thereunder or in respect thereof at any time.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that for purposes of this clause
such person or group shall be deemed to have "beneficial ownership" of all
shares that any such person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 40% of the total voting power of the
Voting Stock of the Company; provided, however, that such event shall not be
deemed to be a Change of Control so long as the Permitted Holders
beneficially own, directly or indirectly, in the aggregate a greater
percentage of the total voting power of the Voting Stock of the Company than
such other person or group;
(ii) after the first public offering of common stock of the Company,
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by a
majority vote of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office; or
(iii) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the sale
of all or substantially all the assets of the Company to another Person
(other than a Person that is controlled by the Permitted Holders), and, in
the case of any such merger or consolidation, the securities of the Company
that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of the
Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
81
86
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less, the
number of days after the end of such fiscal quarter as the consolidated
financial statements of the Company shall be available) prior to the date of
such determination (determined, for the first three fiscal quarters ending
subsequent to the Issue Date, by annualizing such quarters to the extent
completed) to (ii) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that (1) if the Company or any Restricted Subsidiary has
Incurred any Indebtedness since the beginning of such period that remains
outstanding on such date of determination or if the transaction giving rise to
the need to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period and the discharge of any other Indebtedness repaid, repurchased, defeased
or otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period (except that, in the case
of Indebtedness used to finance working capital needs incurred under a revolving
credit or similar arrangement, the amount thereof shall be deemed to be the
average daily balance of such Indebtedness during such four-fiscal-quarter
period), (2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such period
shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period, and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person
(to the extent the Company and its Restricted Subsidiaries are no longer liable
for such Indebtedness) or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the Company shall
have consummated a Public Equity Offering following which there is a Public
Market, Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its Restricted
Subsidiaries in connection with such Public Equity Offering for such period, (4)
if since the beginning of such period the Company or any Restricted Subsidiary
(by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary) or an
acquisition of assets, which acquisition constitutes all or substantially all of
an operating unit of a business, including any such Investment or acquisition
occurring in connection with a transaction requiring a calculation to be made
hereunder, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income, earnings or expense relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred in connection
therewith, the pro forma calculations shall be prepared in accordance with
Article 11 of Regulation S-X promulgated by the Commission as determined in good
faith by a responsible financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest of such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term in excess of
12 months).
82
87
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to Capital Lease Obligations, (ii) amortization of debt discount,
(iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), (vii) Preferred Stock dividends in
respect of all Preferred Stock held by Persons other than the Company or a
Wholly Owned Subsidiary, and (viii) interest actually paid on any Indebtedness
of any other Person that is Guaranteed by the Company or any Restricted
Subsidiary. Notwithstanding the foregoing, net interest expense attributable to
Tooling Indebtedness shall not be included in Consolidated Interest Expense
except to the extent such expense would be included in interest expense in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income (or loss)
of any Person if such Person is not a Restricted Subsidiary, except that subject
to the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below); (ii) for purposes of subclause (a)(3)(A) of the covenant
described under "Certain Covenants -- Limitation on Restricted Payments" only,
any net income (or loss) of any Person acquired by the Company or a Subsidiary
in a pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject to
the exclusion contained in clause (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary consistent with such restriction
during such period to the Company or another Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other distribution
paid to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such Consolidated
Net Income; (iv) any gain (or loss) realized upon the sale or other disposition
of any assets of the Company or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise
disposed of in the ordinary course of business and any gain (or loss) realized
upon the sale or other disposition of any Capital Stock of any Person; (v)
extraordinary gains or losses; and (vi) the cumulative effect of a change in
accounting principles. Notwithstanding the foregoing, for the purposes of the
covenant described under "Certain Covenants--Limitation on Restricted Payments"
only, there shall be excluded from Consolidated Net Income any dividends,
repayments of loans or advances or other transfers of assets from Unrestricted
Subsidiaries to the Company or a Restricted Subsidiary to the extent such
dividends, repayments or transfers increase the amount of Restricted Payments
permitted under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Currency Agreement" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
83
88
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to lend
up to, at least $10 million and is specifically designated by the Company in
the instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable, at the option of the holder thereof, for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes.
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus, without duplication, the following to the
extent deducted in calculating such Consolidated Net Income: (i) income tax
expense (including Michigan Single Business Tax expense), (ii) depreciation
expense, (iii) amortization expense and (iv) all other non-cash items reducing
Consolidated Net Income (other than items that will require cash payments and
for which an accrual or reserve is, or is required by GAAP to be, made), less
all non-cash items increasing Consolidated Net Income, in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Subsidiary of
the Company shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion) that the net income of such Subsidiary
was included in calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Preferred Stock" means the Series A $3.00 cumulative Preferred
Stock issued by Lobdell and the Series B Preferred Stock issued by Lobdell in
the aggregate amount of $50.7 million, less any shares of such preferred stock
repurchased, redeemed or canceled subsequent to the Issue Date, as the terms of
such preferred stock shall exist as of the Issue Date.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board and (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person (whether
arising by virtue of partnership arrangements, or by agreements to keep-well, to
purchase assets, goods, securities or services, to take-or-pay or to maintain
financial statement conditions or otherwise) or (ii) entered into for the
purpose of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing
any obligation.
84
89
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary; provided, further, however, that
in the case of a discount security, neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness, but the entire face amount of such security shall be deemed
Incurred upon the issuance of such security. The term "Incurrence" when used as
a noun shall have a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person for money borrowed and (B)
indebtedness evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property or
services, all conditional sale obligations of such Person and all obligations of
such Person under any title retention agreement (but excluding trade accounts
payables arising in the ordinary course of business and which are not more than
90 days past due and not in dispute), which purchase price or obligation is due
more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services (provided
that, in the case of obligations of an acquired Person assumed in connection
with an acquisition of such Person, such obligations would constitute
Indebtedness of such Person); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the tenth Business Day
following receipt by such Person of a demand for reimbursement following payment
on the letter of credit); (v) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of such Person, any Preferred Stock
(but excluding, in each case, any accrued dividends); (vi) all obligations of
the type referred to in clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee; (vii) all obligations of the
type referred to in clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured; and (viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations as
described above at such date; provided, however, that the amount outstanding at
any time of any Indebtedness issued with original issue discount shall be deemed
to be the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
85
90
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extensions
of credit (including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "Certain Covenants -- Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
by the Company or any of its Subsidiaries therefrom (including any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such
properties or assets or received in any other noncash form) in each case net of
(i) all legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all Federal, state, provincial, foreign and local taxes
required to be paid or accrued as a liability under GAAP, as a consequence of
such Asset Disposition, (ii) all payments made on any Indebtedness which is
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind with respect to
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out of the
proceeds from such Asset Disposition, (iii) all distributions and other payments
required to be made to minority interest holders in Subsidiaries or Joint
Ventures as a result of such Asset Disposition and (iv) the deduction of
appropriate amounts provided by the seller as a reserve, in accordance with
GAAP, against any liabilities associated with the property or other assets
disposed in such Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition, including without limitation
liabilities under any indemnification obligations associated with such Asset
Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys fees,
accountants fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means all present and future obligations for principal,
premium, interest (including, without limitation, any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law), penalties, fees, indemnifications,
86
91
reimbursements (including, without limitation, all reimbursement and other
obligation pursuant to any letters of credit, bankers acceptances or similar
instruments or documents), damages and other liabilities payable under the
documentation at any time governing any indebtedness.
"Permitted Holders" means (i) any of Selwyn Isakow, his spouse and any
of his lineal descendants and their respective spouses (collectively, the
"Isakow Family") whether acting in their own name or as one or as a majority of
persons having the power to exercise the voting rights attached to, or having
investment power over, shares held by others, (ii) any controlled Affiliate of
any member of the Isakow Family, and (iii) any trust solely for the benefit of
one or more members of the Isakow Family (whether or not any member of the
Isakow Family is a trustee of such trust).
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, (ii) a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (iii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iv) Temporary Cash Investments; (v) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (vi) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vii) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(viii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (ix) Persons other than Restricted
Subsidiaries that are primarily engaged in a Related Business, in an aggregate
amount not to exceed $15 million (to the extent utilized for an Investment, such
amount will be reinstated to the extent that the Company or any Restricted
Subsidiary receives dividends, repayments of loans or other transfers of assets
as a return of such Investment); (x) any Person to the extent such Investment is
received in exchange for the transfer to such Person of the assets owned as of
the Issue Date by Laserweld International L.L.C.; and (xi) any Person to the
extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted pursuant to the covenant
described under "Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock."
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
87
92
"Public Market" means any time after (i) a Public Equity Offering has been
consummated and (ii) at least 10% of the total issued and outstanding common
stock of the Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Purchase Money Indebtedness" mean Indebtedness (i) consisting of the
deferred purchase price of property, conditional sale obligations,
obligations under any title retention agreement, other purchase money
obligations and obligations in respect of industrial revenue bonds or similar
Indebtedness, in each case where the maturity of such Indebtedness does not
exceed the anticipated useful life of the asset being financed, and (ii)
incurred to finance the acquisition by the Company or a Restricted Subsidiary of
such asset, including additions and improvements; provided, however, that any
Lien arising in connection with any such Indebtedness shall be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property on which such asset is
attached; and provided, further, however, that such Indebtedness is Incurred
within 90 days after such acquisition of such asset by the Company or Restricted
Subsidiary.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture; provided, however, that (i)
such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
(as determined in good faith by the Board of Directors) to the businesses of the
Company and the Restricted Subsidiaries on the Issue Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"Restricted Payment" means, with respect to any Person, (i) the
declaration or payment of any dividends or any other distributions on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the holders
of its Capital Stock, except dividends or distributions payable solely in its
Capital Stock (other than Disqualified Stock) and except dividends or
distributions payable solely to the Company or a Restricted Subsidiary (and, if
such Restricted Subsidiary is not wholly owned, to its other shareholders on a
pro rata basis or on a basis that results in the receipt by the Company or a
Restricted Subsidiary of dividends or distributions of greater value than it
would receive on a pro rata basis), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company held by
any Person or of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase,
88
93
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
"Senior Credit Facility" means the credit agreement dated as of the Issue
Date, between the Company, the lenders and other persons party thereto and NBD
Bank, as Agent, together with the related documents thereto executed at any time
(including, without limitation, any guarantee agreements, security agreements
and other collateral documents) and the credit facilities thereunder, in each
case as such documents may be amended (including, without limitation, any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limitation, increasing
the amount of available borrowings thereunder (provided that such increase in
borrowings is permitted by the covenant described under "Certain Covenants --
Limitation on Indebtedness") or adding subsidiaries as additional borrowers or
guarantors thereunder).
"Senior Indebtedness" of the Company means (i) all Bank Indebtedness of the
Company, whether outstanding on the Issue Date or thereafter Incurred, including
the Guarantees by the Company of all Bank Indebtedness, and (ii) accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post- filing interest is allowed in such proceeding) in respect
of (A) indebtedness of the Company for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which the Company is responsible or liable unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it
is provided that such obligations are subordinate in right of payment to the
Notes; provided, however, that Senior Indebtedness shall not include (1) any
obligation of the Company to any Subsidiary, (2) any liability for Federal,
state, local or other taxes owed or owing by the Company, (3) any accounts
payable or other liability to trade creditors arising in the ordinary course of
business (including guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of the Company (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in any respect
(other than as a result of the Indebtedness being unsecured) to any other
Indebtedness or other obligation of the Company, including any Senior
Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations
with respect to any Capital Stock or (6) that portion of any Indebtedness which
at the time of Incurrence is Incurred in violation of the Indenture. "Senior
Indebtedness" of any Subsidiary Guarantor has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the Notes and any
other Obligations under or in connection with the Notes, the Indenture and/or
any related agreements, documents or instruments, whether now owing or hereafter
incurred or owing and any other Indebtedness of the Company that specifically
provides that such Indebtedness is to rank
89
94
pari passu with the Notes in right of payment and is not subordinated by its
terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of
any Subsidiary Guarantor has a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect. "Subordinated Obligation" of any Subsidiary Guarantor has a correlative
meaning.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total
voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Subsidiary Guaranty" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"Subsidiary Guarantor" means each Subsidiary designated as such on the
signature pages of the Indenture and any other Subsidiary that has issued a
Subsidiary Guaranty.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50,000,000 (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by an registered broker
dealer or mutual fund distributor, (iii) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) investments in commercial paper, maturing not more than
90 days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America, any State thereof or the District of Columbia or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Group, and (v) investments in securities with maturities of
six months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
90
95
"Tooling Indebtedness" means all present and future Indebtedness of the
Company or any Restricted Subsidiary the proceeds of which are utilized to
finance dies, molds, tooling and similar items (collectively "Tooling") for
which the sales of such Tooling is covered under specific written purchase
orders or agreements between the Company or any Restricted Subsidiary and the
purchaser of such Tooling.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "Certain Covenants -- Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"Certain Covenants -- Limitation on Indebtedness" and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be notified by the Company to the Trustee by promptly filing with the Trustee a
copy of the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares) is owned by the
Company and/or one or more Wholly Owned Subsidiaries.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the certain United States federal
income tax consequences of the Exchange Offer to a holder of Old Series B Notes
that is an individual citizen or resident (within the meaning of Section
7701(b) of the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code")) of the United States or a United States corporation that
purchased the Old Series B Notes pursuant to their original issue (a "U.S.
Holder"). It is based on the Code, existing and proposed Treasury regulations,
and judicial and administrative determinations, all of which are subject to
change at any time, possibly on a retroactive basis. The following relates only
to the Old Series B Notes, and the New Series B Notes received therefor, that
are held as "capital assets" within the meaning of Section 1221 of the Code by
U.S. Holders. It does not discuss state, local, or foreign tax consequences,
nor does it discuss tax consequences to categories of holders that are subject
to special rules, such as foreign persons, tax-exempt organizations, insurance
companies, banks, and dealers in stocks and securities. Tax consequences may
vary depending on the particular status of an investor. No rulings will be
sought from the Internal Revenue Service with respect to the federal income tax
consequences of the Exchange Offer.
91
96
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE OLD SERIES
B NOTES FOR NEW SERIES B NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX
ADVISOR CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX
LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE OLD
SERIES B NOTES FOR NEW SERIES B NOTES.
THE EXCHANGE OFFER
The exchange of Old Series B Notes pursuant to the Exchange Offer should
be treated as a continuation of the corresponding Old Series B Notes because
the terms of the New Series B Notes are not materially different from the terms
of the Old Series B Notes. Accordingly, it is the Company's belief that such
exchange will not constitute a taxable event to U.S. Holders and, therefore,
(i) no gain or loss should be realized by a U.S. Holder upon receipt of a New
Series B Note, (ii) the holding period of the New Series B Note should include
the holding period of the Old Series B Note exchanged therefor and (iii) the
adjusted tax basis of the New Series B Note should be the same as the adjusted
tax basis of the Old Series B Note exchanged therefor immediately before the
exchange.
STATED INTEREST
Stated interest on a Series B Note will be taxable to a U.S. Holder as
ordinary interest income at the time that such interest accrues or is received,
in accordance with the U.S. Holder's regular method of accounting for federal
income tax purposes. The Old Series B Notes are not considered to have been
issued with original issue discount for federal income tax purposes, and there
will be no original issue discount with respect to the New Series B Notes.
PREMIUM
The Old Series B Notes were issued for an amount that, at the time of
issuance, was in excess of the amount payable at the maturity date of the Old
Series B Notes. Therefore, a U.S. Holder of a New Series B Note will be
treated as holding the New Series B Note at a premium.
A U.S. Holder generally may elect to amortize the premium over the term of
the New Series B Note on a constant yield method. The amount amortized in any
year will be treated as a reduction of the U.S. Holder's interest income from
the New Series B Note. The U.S. Holder's adjusted tax basis in the New Series B
Note will be reduced to the extent of the deduction of amortizable bond
premium. Premium on a New Series B Note held by a U.S. Holder that does not
make such an election to amortize will decrease the gain or increase the loss
otherwise recognized on disposition of the New Series B Note.
U.S. Holders otherwise permitted to report income under the "cash method"
of accounting should carefully consider the advisability of such an election to
amortize premium, since it would not permit them to report interest income from
the New Series B Note using the cash method and, accordingly, it may result in
an acceleration of interest income from a New Series B Note.
The election to amortize premium on a constant yield method, once made,
applies to all debt obligations held or subsequently acquired by the electing
U.S. Holder on or after the first day of the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
92
97
A U.S. Holder's tax basis in a New Series B Note generally will be its
cost. A U.S. Holder generally will recognize gain or loss on the sale,
exchange or retirement of a New Series B Note in an amount equal to the
difference between the amount realized on the sale, exchange or retirement and
the tax basis of the New Series B Note. Gain or loss recognized on the sale,
exchange or retirement of a New Series B Note (excluding amounts received in
respect of accrued interest, which will be taxable as ordinary interest income)
generally will be capital gain or loss and will be long-term capital gain or
loss if the New Series B Note was held for more than one year.
BACKUP WITHHOLDING
Under certain circumstances, a U.S. Holder of a Series B Note may be
subject to "backup withholding" at a 31% rate with respect to payments of
interest thereon or the gross proceeds from the disposition thereof. This
withholding generally applies if the U.S. Holder fails to furnish his or her
social security number or other taxpayer identification number in the specified
manner and in certain other circumstances. Any amount withheld from a payment
to a U.S. Holder under the backup withholding rules is allowable as a credit
against such U.S. Holder's federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
Corporations and certain other entities described in the Code and Treasury
regulations are exempt from backup withholding if their exempt status is
properly established.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Series B Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Series B Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Series B Notes received in
exchange for Old Series B Notes where such Old Series B Notes were acquired as
a result of market-making activities or other trading activities. Each of the
Company and the Subsidiary Guarantors has agreed that, starting on the
Expiration Date and ending on the close of business on the first anniversary of
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1998 (90 days after the date of this
Prospectus), all dealers effecting transactions in the New Series B Notes may
be required to deliver a prospectus.
Neither the Company nor any of the Subsidiary Guarantors will receive any
proceeds from any sale of New Series B Notes by broker-dealers. New Series B
Notes received by broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Series B Notes or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Series B Notes. Any
broker-dealer that resells New Series B Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Series B Notes may be deemed to be
an "underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Series B Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and each of the Subsidiary Guarantors
have agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Old Series B Notes) other than
commissions or
93
98
concessions of any brokers or dealers and will indemnify the holders of the Old
Series B Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Series B Notes offered hereby will be passed upon
for the Company by Dykema Gossett PLLC, Bloomfield Hills, Michigan. Rex E.
Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the Board and a director
of the Company. Mr. Schlaybaugh is a member of Dykema Gossett PLLC. Certain
matters relating to the Subsidiary Guaranties and the application of Ontario law
to them will be passed upon for the Company by Fasken Campbell Godfrey, Toronto,
Ontario.
EXPERTS
On March 28, 1997, Price Waterhouse LLP, independent accountants, were
selected by the Board of Directors of Oxford Automotive, Inc. to audit the
financial statements of Oxford Automotive, Inc. for the fiscal year ended March
31, 1997.
On March 28, 1997, Oxford Automotive, Inc. dismissed its principal
accountant, Deloitte & Touche, upon the recommendation of the Board of
Directors of Oxford Automotive, Inc. There were no disagreements with Deloitte
& Touche and Oxford Automotive, Inc. and its predecessors during the two fiscal
years ended March 31, 1996 and 1995 and subsequent interim period ended March
28, 1997 on any matter of accounting principles or practices, financial
statement disclosures or auditing scope or procedure, which disagreements if
not resolved to the satisfaction of Deloitte & Touche would have caused
Deloitte & Touche to make reference thereto in their report on the financial
statements as of and for the two years ended March 31, 1996. The reports of
Deloitte & Touche on the financial statements of Oxford Automotive, Inc. and
its predecessors as of and for the two years ended March 31, 1996 do not
contain an adverse opinion, disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principle.
The consolidated financial statements of the Company as of and for the years
ended March 31, 1998 and 1997 included in this Prospectus have been so included
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of the Company as of March 31, 1996
and for the period from October 28, 1995 through March 31, 1996 appearing in
this Prospectus and the related financial statement schedule included in the
Exchange Offer Registration Statement have been audited by Deloitte & Touche,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of BMG North America Limited
(Predecessor) for the period from April 1, 1995 through October 27, 1995
appearing in this Prospectus and the related financial statement schedule
included in the Exchange Offer Registration Statement have been audited by
Deloitte & Touche, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of Lobdell Emery Corporation as of
December 31, 1996 and 1995 and for each year in the three-year period ended
December 31, 1996 included in this Prospectus have been so included in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The financial statements of Howell Industries, Inc. as of and for the year
ended July 31, 1997 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
94
99
The consolidated balance sheet of RPI Holdings, Inc. as of June 30, 1996
and the consolidated statments of operations, stockholders' equity, and cash
flows for the year ended June 30, 1996 included in this Prospectus, have been so
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of RPI Holdings, Inc. as of March
31, 1997 and for the period from July 1, 1996 to March 31, 1997 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The combined financial statements of the Suspension Division as of
December 31, 1997 and for the year ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
95
100
INDEX TO FINANCIAL STATEMENTS
Page
----
OXFORD AUTOMOTIVE, INC.
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Balance Sheets as of March 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
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-6
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-7
Consolidated Statements of Cash Flows 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-8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
LOBDELL EMERY CORPORATION
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
Consolidated Balance Sheets as of December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-33
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . F-34
Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 1996, 1995 and
1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . F-36
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-37
HOWELL INDUSTRIES, INC.
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-48
Balance Sheet as of July 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-49
Statement of Operations for the year ended July 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-50
Statement of Shareholders' Equity for the year ended July 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-51
Statement of Cash Flows for the year ended July 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-52
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-53
RPI HOLDINGS, INC.
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-59
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-60
Consolidated Balance Sheets as of March 31, 1997, June 30, 1996 and September 30, 1997 (unaudited) . . . . . . . . . . . F-61
Consolidated Statements of Operations for the period from July 1, 1996 to March 31, 1997, for the year ended
June 30, 1996, and the six months ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . F-62
Consolidated Statement of Changes in Shareholders' Equity for the period from July 1, 1996 to March 31, 1997,
the period from July 1, 1995 to June 30, 1996, and for the six months ended September 30, 1997 (unaudited). . . . . . . F-63
Consolidated Statements of Cash Flows for period from July 1, 1996 to March 31, 1997, for the year ended
June 30, 1996, and the six months ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . F-64
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-65
F-1
101
SUSPENSION DIVISION OF EATON CORPORATION
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-72
Combined Balance Sheets as of December 31, 1997 and March 31, 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . . . F-73
Combined Statements of Operations for the year ended December 31, 1997, and for the three months
ended March 31, 1998 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-74
Combined Statements of Cash Flows for the year ended December 31, 1997, and for the three months
ended March 31, 1998 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-75
Notes to Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-76
F-2
102
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-3
103
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-4
104
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-5
105
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-6
106
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-7
107
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-8
108
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-9
109
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-10
110
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-11
111
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-12
112
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-13
113
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-14
114
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-15
115
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-16
116
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-17
117
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-18
118
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-19
119
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-20
120
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-21
121
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-22
122
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-23
123
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-24
124
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-25
125
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-26
126
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-27
127
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.
Condensed consolidated financial information for the periods prior to
March 31, 1998 are not presented because the non-guarantors during those
periods were inconsequential, individually and in the aggregate, to the
consolidated financial statements, and management has determined that
they would not be material to investors.
F-28
128
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-29
129
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-30
130
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-31
131
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Lobdell Emery Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in shareholders'
equity and of cash flows after the restatement discussed in Note 16 present
fairly, in all material respects, the financial position of Lobdell Emery
Corporation and its subsidiaries (the Corporation) at December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Corporation'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.
As described in Note 15, on January 10, 1997 all of the outstanding shares
of common stock of the Corporation were sold to L-E Acquisition, Inc.
Price Waterhouse LLP
Detroit, Michigan
May 19, 1997
F-32
132
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
DECEMBER 31,
--------------------
1996 1995
---- ----
ASSETS
Current assets
Cash and cash equivalents................................. $ 278 $ 716
Trade receivables -- less allowance of $1,254 and $500,
respectively........................................... 28,769 32,514
Inventories............................................... 6,083 10,212
Income taxes receivable................................... 1,282
Reimbursable tooling...................................... 47 407
Deferred income taxes..................................... 3,081 3,038
Prepaid expenses and other current assets................. 191 827
-------- --------
Total current assets................................... 39,731 47,714
-------- --------
Advance under shareholders' redemption agreement............ 1,542
Unexpended bond proceeds.................................... 3,886 4,508
Intangible pension asset.................................... 3,216 2,113
Other noncurrent assets..................................... 2,483 3,825
Deferred income taxes....................................... 2,531
Property, plant and equipment, net.......................... 72,804 72,503
-------- --------
Total Assets........................................... $126,193 $130,663
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable.................................... $ 15,114 $ 11,627
Employee compensation..................................... 5,156 4,614
Accrued expenses and other current liabilities............ 6,511 6,516
Current portion of long-term borrowings................... 2,200 7,169
-------- --------
Total current liabilities.............................. 28,981 29,926
-------- --------
Pension liability........................................... 1,855 1,627
Postretirement medical benefits liability................... 19,639 16,889
Deferred income taxes....................................... 1,180
Other noncurrent liabilities................................ 1,950 1,739
-------- --------
23,444 21,435
-------- --------
Long-term borrowings -- less current portion................ 41,134 39,097
-------- --------
Total liabilities...................................... 93,559 90,458
-------- --------
Commitments and contingent liabilities (Note 13) Redeemable
Common stock, Class B nonvoting, $1 par value, outstanding
137,112 shares (Note 11).................................. 1,800 1,297
-------- --------
Shareholders' equity
Common stock, Class A voting, $1 par value, authorized
540,000 shares, outstanding 478,255 shares............. 478 478
Common stock, Class B nonvoting, $1 par value authorized
5,400,000 shares; outstanding 3,430,623 shares......... 3,431 3,431
Retained earnings......................................... 27,376 35,730
Equity adjustment for minimum pension liability........... (451) (731)
-------- --------
30,834 38,908
-------- --------
Total liabilities and shareholders' equity............. $126,193 $130,663
======== ========
The accompanying notes are an integral part of the financial statements.
F-33
133
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------
1996 1995 1994
---- ---- ----
Net sales................................................... $253,997 $269,260 $270,062
Cost of sales............................................... 244,129 252,671 252,275
-------- -------- --------
Gross profit................................................ 9,868 16,589 17,787
Selling, general and administrative......................... 16,395 14,949 14,438
Equipment impairment........................................ 3,000
-------- -------- --------
Operating income (loss)................................... (9,527) 1,640 3,349
Other income (expense)
Interest expense............................................ (3,557) (3,448) (2,799)
Other income.............................................. 664 744 366
-------- -------- --------
Income (loss) before benefit (provision) for income taxes... (12,420) (1,064) 916
Benefit (provision) for income taxes........................ 4,569 264 (442)
-------- -------- --------
Income (loss) before cumulative effect of accounting
change.................................................... (7,851) (800) 474
Cumulative effect of accounting change -- post-employment
benefits, net of income tax benefit ($.12 per share)...... (510)
-------- -------- --------
Net loss.................................................... $ (7,851) $ (800) $ (36)
======== ======== ========
Net loss per share.......................................... $ (1.94) $ (.19) $ (.01)
======== ======== ========
The accompanying notes are an integral part of the financial statements.
F-34
134
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
EQUITY
ADJUSTMENT
FOR MINIMUM
CLASS A CLASS B RETAINED PENSION
VOTING NONVOTING EARNINGS LIABILITY TOTAL
------- --------- -------- ----------- -----
Balances at January 1, 1994.................. $478 $3,427 $36,715 $ -- $40,620
Net loss for 1994.......................... (36) (36)
Stock option activity...................... 4 70 74
Dividends ($.06 per share)................. (257) (257)
Accretion of redeemable common stock....... (63) (63)
Minimum pension liability adjustment....... (492) (492)
---- ------ ------- ----- -------
Balances at December 31, 1994................ 478 3,431 36,429 (492) 39,846
Net loss for 1995.......................... (800) (800)
Stock option activity...................... 213 213
Dividends ($.03 per share)................. (124) (124)
Accretion of redeemable common stock....... 12 12
Minimum pension liability adjustment....... (239) (239)
---- ------ ------- ----- -------
Balances at December 31, 1995................ 478 3,431 35,730 (731) 38,908
Net loss for 1996.......................... (7,851) (7,851)
Accretion of redeemable common stock....... (503) (503)
Minimum pension liability adjustment....... 280 280
---- ------ ------- ----- -------
Balances at December 31, 1996................ $478 $3,431 $27,376 $(451) $30,834
==== ====== ======= ===== =======
The accompanying notes are an integral part of the financial statements.
F-35
135
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
FOR THE YEAR ENDED
DECEMBER 31,
------------------
1996 1995 1994
---- ---- ----
Operating activities
Net loss.................................................... $ (7,851) $ (800) $ (36)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation........................................... 13,746 12,486 12,045
Deferred income taxes.................................. (3,922) (1,332) (1,395)
Pension liability...................................... (2,230) 657 159
Postretirement medical benefits liability.............. 2,750 2,245 2,923
Equipment impairment................................... 3,000
Loss (Gain) on sale of equipment....................... (23) (34) 68
Changes in operating assets and liabilities affecting cash
Trade receivables...................................... 3,745 (644) (4,397)
Inventories............................................ 4,129 (1,594) (66)
Income taxes receivable/payable........................ (1,601) 290 (1,569)
Reimbursable tooling................................... 360 (386) (483)
Prepaid expenses and other current assets.............. 635 (649) 60
Advance under shareholders' redemption agreement....... (1,542) 500 113
Other noncurrent assets................................ 3,456 (2,948) 1,619
Trade accounts payable................................. 3,487 (1,769) (961)
Employee compensation.................................. 542 554 72
Accrued expenses and other current liabilities......... (5) 1,241 219
Other noncurrent liabilities........................... 220 9 850
-------- -------- --------
Net cash provided by operating activities......... 18,896 7,826 9,221
-------- -------- --------
Investing activities
Acquisitions of property, plant and equipment............... (16,439) (14,917) (8,696)
Proceeds from sale of equipment............................. 37 276 175
-------- -------- --------
Net cash used in investing activities............. (16,402) (14,641) (8,521)
Financing activities
Proceeds from long-term borrowing arrangements.............. 25,000 8,500 27,020
Principal payments on long-term borrowing arrangements...... (23,932) (5,618) (32,831)
Net borrowings (payments) under lines of credit............. (4,000) 5,350 5,550
Proceeds from exercise of stock options..................... 213 74
Dividends................................................... (124) (257)
Redemption and retirement of redeemable common stock........ (1,581) (903)
-------- -------- --------
Net cash used in financing activities............. (2,932) 6,740 (1,347)
-------- -------- --------
Net decrease in cash and cash equivalents................... (438) (75) (647)
Cash and cash equivalents at beginning of year.............. 716 791 1,438
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 278 $ 716 $ 791
======== ======== ========
Cash paid for interest...................................... $ 3,774 $ 3,411 $ 2,732
======== ======== ========
Cash paid for income taxes.................................. $ 963 $ 291 $ 3,067
======== ======== ========
The accompanying notes are an integral part of the financial statements.
F-36
136
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(dollar amounts in thousands)
NOTE 1. NATURE OF OPERATIONS
Lobdell Emery Corporation (the Corporation) 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
Corporation's products are used in a wide variety of sport utility vehicles,
light and medium trucks, vans and passenger cars. The Corporation primarily
operates from five plants located in the Midwest which account for approximately
98% of the Corporation's sales for the year ended December 31, 1996. The
Corporation's hourly workforce is represented by various locals of the United
Auto Workers.
Sales to the Corporation's two primary customers as a percentage of total
sales approximated the following for the years ended December 31:
1996 1995 1994
---- ---- ----
Ford Motor Company.......................................... 43% 52% 64%
General Motors Corporation.................................. 49% 40% 29%
Accounts receivable from Ford Motor Company and General Motors Corporation
represent approximately 47% and 49%, respectively, of the December 31, 1996
accounts receivable balance.
Although the Corporation 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 December 31, 1996. The Corporation
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.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated balance sheets include the accounts of Lobdell Emery
Corporation and its wholly-owned subsidiaries, Lewis Emery Capital Corporation
(Lewis), Concept Management Corporation and subsidiaries (Concept), Laserweld
International (Laserweld) and Parallel Group International (Parallel). Concept
Management Corporation also includes the accounts of its wholly-owned
subsidiaries, Winchester Fabrication Corporation (Winchester) and Creative
Fabrication Corporation (Creative). 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 Corporation upon shipment of product to the
customer.
FINANCIAL INSTRUMENTS
At December 31, 1996, 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
F-37
137
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES -- Continued
amount of the long-term customer receivables and borrowings at December 31,
1996, approximated their fair values based on the variable interest rates
available to the Corporation for similar arrangements.
CASH EQUIVALENTS
The Corporation 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.
UNEXPENDED BOND PROCEEDS
Unexpended bond proceeds in the accompanying consolidated balance sheets
represent unexpended proceeds from the issuance of industrial development
revenue bonds by Creative as discussed in Note 6, 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 historical 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................................................... 30
Machinery and equipment..................................... 3-10
At December 31, 1996, the Corporation had a machine in process at a vendor
location. The aggregate cost of the machine will be $5,300, for which the
Corporation has recorded approximately $2,700 in the accompanying consolidated
balance sheet. The remaining $2,600 will be recorded by the Corporation upon
final technical approval of the machine.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," the Corporation established an impairment
reserve against certain of the assets of Laserweld in the amount of $3,000 at
December 31, 1996. The reserve represents the difference between the fair value
of the Laserweld assets, based primarily on a recent independent appraisal, and
the cost of such assets.
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
F-38
138
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES -- Continued
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.
REIMBURSABLE TOOLING
Reimbursable tooling represents net costs incurred on tooling projects for
which the Corporation expects to be reimbursed by customers. Ongoing estimates
of total costs to be incurred on each tooling project are made by management and
losses, if any, are recorded when known. Under certain tooling projects,
billings exceed costs incurred and the related tooling gain is recognized upon
acceptance of the tooling by the customer.
At December 31, 1996, approximately $2,800 of reimbursable tooling was in
process at various vendor locations. These amounts, which have not been recorded
in the accompanying consolidated balance sheet, will be recorded and paid upon
the Corporation's receipt of payment from the owners of the tooling.
NET LOSS PER SHARE
Net loss per share is determined by dividing net loss by the weighted
average number of common shares outstanding during the period.
RECLASSIFICATIONS
Certain amounts from the prior year have been reclassified to conform with
the current year presentation.
NOTE 3. INVENTORIES
Inventories are comprised of the following at December 31:
1996 1995
---- ----
Raw materials............................................... $ 3,851 $ 3,861
Finished goods and work-in-process.......................... 5,278 10,177
------- -------
9,129 14,038
LIFO reserve................................................ (3,046) (3,826)
------- -------
$ 6,083 $10,212
======= =======
The Corporation does not separately identify finished goods from
work-in-process.
During 1996, inventory quantities were reduced. This reduction resulted in
a liquidation of LIFO inventory quantities carried at lower costs prevailing in
prior years as compared with the cost of 1996 purchases, the effect of which
increased net income by approximately $300.
F-39
139
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at December
31:
1996 1995
---- ----
Land and land improvements.................................. $ 11,130 $ 10,760
Buildings................................................... 33,515 32,801
Machinery and equipment, net of impairment reserve of $3,000
in 1996................................................... 137,914 127,389
Construction-in-process..................................... 6,495 5,216
--------- ---------
189,054 176,166
Less -- accumulated depreciation............................ (116,250) (103,663)
--------- ---------
$ 72,804 $ 72,503
========= =========
NOTE 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following at December 31:
1996 1995
---- ----
Accrued workers' compensation............................... $2,438 $2,438
Accrued property taxes...................................... 1,950 1,622
Accrued medical benefits.................................... 1,816 1,615
Other....................................................... 307 841
------ ------
$6,511 $6,516
====== ======
NOTE 6. BORROWING ARRANGEMENTS
Borrowings consist of the following at December 31:
1996 1995
---- ----
BANK SYNDICATE -- TERM LOAN, LOBDELL EMERY CORPORATION
Interest at variable spread over prime (8.25% at December
31, 1996). Quarterly principal payments of $893 plus
interest, matures September 12, 1999...................... $24,107 $21,230
BANK -- TERM LOAN, LEWIS
Interest at .625% over 90-day LIBOR (6.19% at December 31,
1996). Quarterly principal payments of approximately $400,
matures October 1, 1998................................... 3,227 4,936
BANK SYNDICATE -- REVOLVING CREDIT LINE, LOBDELL EMERY
CORPORATION
Interest at variable spread over prime (8.25% at December
31, 1996)................................................. 7,600 11,600
INDUSTRIAL DEVELOPMENT REVENUE BONDS -- CREATIVE
$8,500 issued September 27, 1995, floating rate interest
(4.35% at December 31, 1996). Quarterly principal payments
based on graduated maturity schedule. Backed by NBD Bank
letter of credit.......................................... 8,400 8,500
------- -------
Total..................................................... 43,334 46,266
Less -- current portion of long-term borrowings............. (2,200) (7,169)
------- -------
Long-term borrowings -- less current portion................ $41,134 $39,097
======= =======
F-40
140
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 6. BORROWING ARRANGEMENTS -- Continued
Subsequent to December 31, 1996, the Bank syndicate term loan and revolving
credit line were paid in full, with accrued interest, in connection with the
merger described in Note 15. These borrowings were replaced with a $54,000 term
loan, $38,000 revolving line of credit and $3,000 swing line of credit, each
expiring on January 10, 2002. Accordingly, these amounts are classified as
long-term borrowings at December 31, 1996. The term loan bears interest at a
variable spread over 90-day LIBOR, and the revolving and swing lines of credit
bear interest at a variable spread over the prime rate. The Corporation also
entered into an $18,000 capital expenditure line of credit that expires on
January 10, 2002. The agreements contain various financial and other covenants.
Borrowings are secured by substantially all of the assets of the Corporation.
The proceeds of the Lewis term debt were used to finance customer tooling.
The debt is collateralized by a customer purchase order which allows for
recovery of the term-debt principal and interest, administrative cost and a
predetermined markup.
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 Bank letter of credit, which carries a rate of .8% 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.
NOTE 7. STOCK OPTION PLAN
The Corporation adopted a stock option plan in 1990 which provides for the
granting of discretionary and nondiscretionary options, alternative stock
appreciation rights, cash payment rights, incentive stock options, or a
combination thereof. Each option granted under the plan is for a unit consisting
of one share of Class A and ten shares of Class B common stock. During the years
ended December 31, 1995 and 1994 the Corporation recorded compensation expense
of $213 and $70, respectively. No options were granted or exercised during the
year ended December 31, 1996. Subsequent to December 31, 1996 and in connection
with the merger described in Note 15, all of the outstanding stock options were
canceled. The costs incurred by the Corporation in connection with the
cancellation of the outstanding stock options were reimbursed by L-E
Acquisition, Inc. at close. The Corporation has treated the reimbursement as a
credit to compensation expense recognized in connection with the cancellation of
the aforementioned stock options. The disclosures required under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," have been omitted as all outstanding stock options were canceled
subsequent to December 31, 1996. Because the acquiring company (see Note 15) has
no stock option plan, the Corporation's management does not believe such
disclosure to be relevant to the users of the consolidated financial statements.
F-41
141
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 8. INCOME TAXES
The Corporation's benefit for income taxes consists of the following for
the years ended December 31:
1996 1995 1994
---- ---- ----
Current
Federal................................................ $ (647) $ 399 $ 1,425
State.................................................. 371 375
------- ------- -------
(647) 770 1,800
------- ------- -------
Deferred
Federal................................................ (3,405) (869) (1,206)
State.................................................. (517) (165) (152)
------- ------- -------
(3,922) (1,034) (1,358)
------- ------- -------
$(4,569) $ (264) $ 442
======= ======= =======
A reconciliation between the Corporation's income tax provision (benefit)
and the amount computed by applying the statutory income tax rate to income
before income taxes is as follows for the years ended December 31:
1996 1995 1994
---- ---- ----
Statutory rate.............................................. $(4,223) $(362) $311
State taxes, net of federal benefit......................... (517) 136 147
Nondeductible items......................................... 212 104 76
Other....................................................... (41) (142) (92)
------- ----- ----
Provision (benefit) for income taxes........................ $(4,569) $(264) $442
======= ===== ====
Significant components of the Corporation's deferred tax assets and
(liabilities) are as follows at December 31:
1996 1995
---- ----
Deferred tax liabilities
Tax depreciation in excess of book........................ $(8,312) $(8,619)
Prepaid pension asset..................................... (427) (574)
------- -------
Gross deferred tax liabilities.............................. (8,739) (9,193)
------- -------
Deferred tax assets
Postretirement medical benefits........................... 7,463 6,418
Equipment impairment reserve.............................. 1,140
Workers' compensation..................................... 926 927
Medical benefits accrual.................................. 687 611
Allowance for bad debts................................... 477 190
Environmental reserves.................................... 334 334
Postemployment benefits................................... 323 323
AMT credit carryforward................................... 1,871 1,708
Other..................................................... 1,330 540
------- -------
Gross deferred tax assets................................... 14,551 11,051
------- -------
Valuation allowance......................................... (200)
------- -------
Net deferred tax asset...................................... $ 5,612 $ 1,858
======= =======
F-42
142
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 8. INCOME TAXES -- Continued
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 Corporation has net operating loss carryforwards for state income tax
purposes with potential future tax benefits of approximately $150 at December
31, 1996, which expire during the years 2010 and 2011.
The Corporation has Tennessee Jobs Tax Credit carryforwards of
approximately $200 at December 31, 1996, which expire during the years 2010 and
2011.
NOTE 9. BENEFIT PLANS
The Corporation sponsors six noncontributory-defined benefit pension 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 Corporation's hourly pension plans do not provide for increases in
future compensation levels. The Corporation's funding policy for this plan 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
Corporation'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 Corporation's balance sheet at December 31:
1996 1995
------------------------ ------------------------
OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED
PLANS PLANS PLANS PLANS
---------- ----------- ---------- -----------
Actuarial present value of benefit
obligation:
Vested benefits........................ $ 14,784 $ 21,270 $ 13,718 $ 18,926
Nonvested benefits..................... 1,174 1,468 1,143 1,597
-------- -------- -------- --------
15,958 22,738 14,861 20,523
Effect of projected future compensation
levels................................. 3,278 2,866
-------- -------- -------- --------
Projected benefit obligation for service
rendered............................... 19,236 22,738 17,727 20,523
Plan assets at fair value (primarily U.S.
government securities, bonds and notes
and mutual funds)...................... (18,857) (19,656) (17,092) (17,477)
-------- -------- -------- --------
Plan assets less than projected benefit
obligation............................. 379 3,082 635 3,046
Unrecognized net loss.................... (2,080) (865) (2,612) (1,353)
Unrecognized prior service cost.......... 174 (2,757) 227 (1,572)
Unrecognized net obligation being
recognized over 15-20 years............ 300 (346) 350 (426)
Adjustment required to recognize minimum
liability.............................. 3,968 3,332
-------- -------- -------- --------
(Prepaid) accrued pension cost........... $ (1,227) $ 3,082 $ (1,400) $ 3,027
======== ======== ======== ========
F-43
143
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 9. BENEFIT PLANS -- Continued
The minimum pension liability in excess of the allowable intangible asset
of $751 and $1,218 at December 31, 1996 and 1995, respectively, has been
recorded as a separate component of equity, net of tax.
Net periodic pension cost included the following components for the year
ended December 31:
1996 1995 1994
---- ---- ----
Service cost.............................................. $1,100 $ 857 $ 1,142
Interest cost............................................. 2,800 2,641 2,418
Actual return on plan assets.............................. (4,322) (5,867) (232)
Net amortization and deferral............................. 1,560 3,606 (1,993)
------ ------- -------
Net periodic pension cost................................. $1,138 $ 1,237 $ 1,335
====== ======= =======
Actuarial assumptions used in determining the projected benefit obligation
are as follows:
1996 1995 1994
---- ---- ----
Discount rate............................................... 7.5% 7.5% 8.5%
Rate of increase in future compensation..................... 4.5% 4.5% 4.5%
Expected long-term rate of return on assets................. 9.0% 9.0% 8.0%
The Corporation sponsors a Supplemental Employee Retirement Plan (SERP)
which covers three key officers of the Corporation. At December 31, 1996, the
Corporation has accrued a liability of $217 related to the SERP.
The Corporation sponsors five defined contribution 401(k) plans. The
Salaried Employees' Retirement Savings Plan covers all salaried employees of the
Corporation and Winchester. The Alma Hourly Employees' Retirement Savings Plan,
the Argos Hourly Employees' Retirement Savings Plan, the Creative Fabrication
Corporation and the Greencastle Hourly Employees' Plan cover all eligible hourly
employees at the respective locations. The Corporation generally contributes 25%
of the first 6% of the base compensation that a participant contributes to the
plans.
NOTE 10. POSTRETIREMENT MEDICAL BENEFITS
In addition to the Corporation's defined benefit pension plans, the
Corporation 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 Corporation 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 Corporation 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-44
144
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 10. POSTRETIREMENT MEDICAL BENEFITS -- Continued
The following table presents the plans' funded status reconciled with
amounts recognized in the Corporation's balance sheets at December 31:
1996 1995
---- ----
Accumulated postretirement benefit obligation
Retirees.................................................. $ 14,420 $ 13,132
Full eligible active plan participants.................... 4,767 4,408
Other active plan participants............................ 14,613 12,931
-------- --------
Total unfunded obligation.............................. 33,800 30,471
Unrecognized loss........................................... (2,618) (1,481)
Unrecognized transition obligation.......................... (11,543) (12,101)
-------- --------
Postretirement medical benefits liability................... $ 19,639 $ 16,889
======== ========
Net periodic postretirement benefit cost included the following components
for the year ended December 31:
1996 1995 1994
---- ---- ----
Service cost................................................ $ 947 $ 785 $1,088
Interest cost............................................... 2,216 2,010 2,238
Amortization of transition obligation prior losses.......... 722 643 997
------ ------ ------
Net periodic postretirement benefit cost.................... $3,885 $3,438 $4,323
====== ====== ======
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% in 1996 and 1995. The weighted
average annual assumed rate of increase in the per capita cost of covered
benefits (i.e., healthcare cost trend rate) is 9.2% in 1997 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 8.9% in 1997 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 December 31, 1996 and net periodic
postretirement benefit cost for the year then ended by approximately $4,861 and
$496, respectively.
NOTE 11. SHAREHOLDERS' REDEMPTION AGREEMENT AND REDEEMABLE COMMON STOCK
Due to the death of a major shareholder, the Corporation entered into an
agreement in December, 1988, providing for the redemption from the estate of any
class of common stock. The Corporation shall purchase for cash certain shares of
common stock as required each year, for the payment by the estate of federal and
state taxes and other miscellaneous expenses allowed by Internal Revenue Code
Section 6166. The redemption price is based upon the fair value, as previously
determined by an independent appraisal at the date of death, adjusted for
subsequent increases or decreases in book value as defined in the agreement.
Subsequent to December 31, 1996 and in connection with the merger as described
in Note 15, a portion of the common stock owned by the estate will be redeemed
to cover payment of remaining taxes and administrative expenses. Prior to the
merger, $1,542 was advanced to the estate to effectuate a release of an Internal
Revenue Service lien. Common shares that are redeemable under that terms of the
agreement have been recorded in the consolidated balance sheets as Redeemable
Common Stock. During the years ended December 31, 1995 and 1994, the Company
redeemed 165,555 shares and 96,597 shares, respectively, at a per share price of
$9.55 and
F-45
145
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 11. SHAREHOLDERS' REDEMPTION AGREEMENT AND REDEEMABLE COMMON STOCK --
Continued
$9.34, respectively. The redeemable common stock has been accreted to its
redemption value in each of the accompanying consolidated balance sheets.
NOTE 12. LEWIS EMERY CAPITAL CORPORATION
Lewis was established in order to facilitate the financing of a tooling
project for Ford Motor Company (Ford). In 1993, Lewis signed a contract to
finance $8,500 of tooling. The transaction was financed with proceeds from the
term loan described in Note 6. The receivable from Ford is due in 20 quarterly
installments through October 1998.
NOTE 13. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
As of December 31, 1996, the Corporation 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 December 31, 1996:
1997........................................................ $ 4,690
1998........................................................ 3,241
1999........................................................ 3,367
2000........................................................ 1,178
2001........................................................ 3,355
-------
$15,831
=======
ENVIRONMENTAL MATTERS
The Corporation 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 Corporation to remove or
mitigate the environmental effects of the disposal or release of petroleum or
chemical substances. The Corporation 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. At December 31, 1996 and 1995, the Corporation
has a liability of approximately $880 recorded for estimated costs of known
environmental matters.
GENERAL
The Corporation 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 of the Corporation.
NOTE 14. RELATED-PARTY TRANSACTION
During 1996, the Corporation paid sales commissions, based upon qualified
foreign sales to Grace Emery Sales Corporation, a Domestic International Sales
Corporation (DISC) owned by the shareholders of the
F-46
146
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements -- Continued
December 31, 1996, 1995 and 1994
NOTE 14. RELATED-PARTY TRANSACTION -- Continued
Corporation. Commissions payable to the DISC are subject to certain
restrictions. Commissions were $369, $521 and $772 in 1996, 1995 and 1994,
respectively.
NOTE 15. SUBSEQUENT EVENT
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, 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 L-E Acquisition, Inc. with a face value of approximately
$40,800. In addition, approximately $3,500 of expenses incurred by the
Corporation were reimbursed by L-E Acquisition, Inc. Subsequent to the exchange
of Oldco's common stock for preferred stock, L-E Acquisition, Inc. was merged
with and into Lobdell Emery Corporation (Newco).
NOTE 16. RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
The Corporation's management has restated the consolidated financial
statements for periods prior to December 31, 1996. The consolidated financial
statements have been restated to correct the misstatement of certain assets and
liabilities including accounts receivable, accrued employee benefit related
costs and accrued environmental costs, net of related tax benefits. The effect
of the restatement was to decrease retained earnings at January 1, 1994 by
$1,987, decrease net loss by $36 ($.01 per share) for the year ended December
31, 1995, and increase net loss by $647 ($.15 per share) for the year ended
December 31, 1994.
F-47
147
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Howell Industries, Inc.
In our opinion, the accompanying balance sheet and the related statement of
operations, of changes in stockholders' equity and of cash flows present fairly,
in all material respects, the financial position of Howell Industries, Inc. at
July 31, 1997, and the results of its operations and its cash flows for the year
then ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of management; our responsibility is
to express an opinion on these financial statements based on our audit. We
conducted our audit 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 from
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
audit provides a reasonable basis for the opinion expressed above.
As described in Note 11, on August 13, 1997 all of the outstanding shares of
common stock of Howell Industries, Inc. were acquired by Oxford Automotive, Inc.
PRICE WATERHOUSE LLP
Bloomfield Hills, Michigan
June 15, 1998
F-48
148
HOWELL INDUSTRIES, INC.
BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
JULY 31,
1997
ASSETS
Current assets
Cash and cash equivalents (including interest
bearing instruments of $1,167) $ 1,997
Accounts receivable 8,583
Income taxes refundable 522
Inventories, net of LIFO reserve of $1,354
Raw material 895
Work-in-process and finished goods 5,331
--------------
Total inventories 6,226
Unbilled die costs 957
Prepaid expenses and other assets 1,095
Deferred income taxes 1,229
--------------
Total current assets 20,609
Property, plant and equipment, net 10,214
--------------
TOTAL ASSETS $ 30,823
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,888
Accrued expenses and other liabilities 4,840
--------------
Total current liabilities 9,728
Pension liability 522
Other long-term liabilities 508
Deferred income taxes 851
--------------
Total liabilities 11,609
--------------
Stockholders' equity
Common stock, no par value, 2,500,000 shares
authorized, 622,738 issued and outstanding 594
Retained earnings 18,620
--------------
Total stockholders' equity 19,214
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 30,823
==============
The accompanying notes are an integral part of the financial statements.
F-49
149
HOWELL INDUSTRIES, INC.
STATEMENT OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- -------------------------------------------------------------------------------
YEAR ENDED
JULY 31, 1997
Net sales $ 95,240
Cost of sales 89,410
--------------
Gross profit 5,830
Selling and administrative expenses 4,748
--------------
Operating income 1,082
Other income 142
--------------
Income before provision for income taxes 1,224
Provision for income taxes 504
--------------
Net income $ 720
==============
Net income per common share $ 1.16
==============
The accompanying notes are an integral part of the financial statements.
F-50
150
HOWELL INDUSTRIES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- ------------------------------------------------------------------------------
COMMON STOCK ISSUED
AND OUTSTANDING
-------------------- RETAINED
SHARES AMOUNT EARNINGS
Balance, July 31, 1996 622,738 $ 594 $ 18,367
Cash dividends ($0.75 per share) (467)
Net income 720
---------- ------- ----------
Balance, July 31, 1997 622,738 $ 594 $ 18,620
========== ======= ==========
The accompanying notes are an integral part of the financial statements.
F-51
151
HOWELL INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED
JULY 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 720
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation 1,590
Gain on sale of equipment (2)
Provision for deferred taxes (442)
Change in operating assets and liabilities
Accounts receivable (2,728)
Income taxes refundable (522)
Unbilled die costs 6,689
Inventories (5,414)
Prepaid expenses 377
Accounts payable (733)
Accrued expenses 3,242
Pension liability 2
Other long-term liabilities (943)
--------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,836
--------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 63
Capital expenditures (4,095)
--------------
NET CASH USED IN INVESTING ACTIVITIES (4,032)
--------------
CASH FLOWS FOR FINANCING ACTIVITIES
Dividends paid (467)
--------------
NET CASH USED IN FINANCING ACTIVITIES (467)
--------------
Decrease in cash and cash equivalents (2,663)
Cash and cash equivalents at beginning of year 4,660
--------------
Cash and cash equivalents at end of year $ 1,997
==============
Cash paid for income taxes $ 1,429
==============
The accompanying notes are an integral part of the financial statements.
F-52
152
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- -------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Howell Industries, Inc. ("the Company"), specializes in the production of
stamped structural components for the automotive industry, with significant
sales within the light-duty truck segment. The Company primarily operates
from two plants which are located in Michigan and Ohio.
Net sales to the Company's two primary customers as a percentage of total
net sales for the year ended July 31, 1997 are as follows:
1997
Ford Motor Company 53%
Chrysler Corporation 47%
Accounts receivable from Ford Motor Company and Chrysler Corporation
represent approximately 68% and 31%, respectively, of the July 31, 1997
accounts receivable balance.
Although the Company is directly affected by the economic well being of the
North American automotive industry and customers referred to above,
management does not believe significant credit risk exists at July 31,
1997. 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.
The Company's primary raw material in the manufacture of structural
components is steel. Although steel is available in an adequate supply from
numerous vendors, a significant increase in the price of this raw material
could affect operating results adversely.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recognized by the Company upon shipment of product to the
customer.
CASH EQUIVALENTS
The Company considers all highly-liquid investments with a maturity of
three month or less when purchased to be cash equivalents.
UNBILLED DIE COSTS
Unbilled die costs 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 and losses, if any, are recorded when known. Tooling revenue is
recognized upon acceptance of the tooling by the customer.
F-53
153
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 using the straight-line method
over the following estimated useful lives:
YEARS
Buildings and improvements 10-25
Machinery and equipment 5-25
Furniture and fixtures 5-7
Automobiles and trucks 3-5
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
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
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
3. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets are comprised of the following:
JULY 31,
1997
Prepaid insurance $ 135
Prepaid pension costs 146
Intangible pension asset 477
Other 337
--------------
$ 1,095
==============
F-54
154
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- -------------------------------------------------------------------------------
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following:
JULY 31,
1997
Land $ 76
Buildings and improvements 4,210
Machinery and equipment 19,521
Furniture and fixtures 1,735
Automobiles and trucks 590
Construction in progress 629
--------------
26,761
Less - accumulated depreciation (16,547)
--------------
$ 10,214
==============
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are comprised of the following:
JULY 31,
1997
Income taxes payable $ 188
Accrued die maintenance costs 2,000
Accrued salaries and wages 1,610
Accrued workers' compensation 655
Accrued property and other taxes 221
Other 166
-----------
$ 4,840
===========
6. OTHER LONG-TERM LIABILITIES
Other long-term liabilities are comprised of the following:
JULY 31,
1997
Reserve for plant consolidation $ 120
Environmental reserve 388
-----------
Total $ 508
===========
F-55
155
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- -------------------------------------------------------------------------------
7. INCOME TAXES
The Company's income tax expense consists of the following:
YEAR ENDED
JULY 31, 1997
Current provision
Federal $ 795
State and local 112
Deferred provision (403)
---------
$ 504
=========
A reconciliation of the income tax provision to that which would result by
applying the United States statutory tax rate (34%) to earnings before
taxes follows:
YEAR ENDED
JULY 31, 1997
Tax based on statutory tax rate $ 416
Tax-exempt income (29)
Tax deductible ESOP dividend (21)
Non-deductible expenses 64
State and local income taxes, net of
federal income tax benefit 74
---------
Taxes on income $ 504
=========
Significant components of the Company's deferred tax assets and
(liabilities) are as follows:
YEAR ENDED
JULY 31, 1997
Deferred tax assets
Reserves recorded for financial accounting purposes, not
deductible for tax purposes until paid $ 901
Employee benefits and payroll-related deferrals 380
---------
Total deferred tax assets 1,281
---------
Deferred tax liabilities
Employee benefits and payroll-related deferrals (98)
Tax depreciation in excess of book (780)
Other (25)
---------
Total deferred tax liabilities (903)
---------
Net deferred tax asset $ 378
=========
F-56
156
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- -------------------------------------------------------------------------------
8. EMPLOYEE BENEFIT PLANS
The Company has three noncontributory defined benefit pension plans
covering substantially all of its employees and an unfunded noncontributory
defined contribution plan for certain officers. Benefits, which differ by
plan are based on years of service and/or the employee's five-year average
compensation. The Company's funding policy for its defined benefit plans is
to contribute annually an amount necessary to meet or exceed the Employee
Retirement Income Security Act's (ERISA) minimum funding standards.
The components of net pension cost are as follows:
YEAR ENDED
JULY 31, 1997
Defined benefit plans
Service cost - benefits earned during the year $ 226
Interest cost on projected benefit obligation 347
Actual return on plan assets (788)
Net amortization, deferral and other 517
--------
Total 302
Defined contribution plan 30
--------
Net pension costs $ 332
========
The following table sets forth the funded status and amounts recognized in
the balance sheets for the defined benefit plans as of July 31, 1997:
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
Actuarial present value of benefit obligation
Vested benefit obligation $ 1,255 $ 2,788
Nonvested benefit obligation 65 207
---------- --------
Accumulated benefit obligation 1,320 2,995
Effect of future salary increases 746
----------
Projected benefit obligation 2,066 2,995
Plan assets at fair value 2,584 2,473
---------- --------
Plan assets greater (less) than projected
benefit obligation 518 (522)
Unrecognized net gain (409) (12)
Unrecognized prior service cost 131 405
Unrecognized net transition (asset) obligation (94) 84
Adjustment required to recognize minimum liability (477)
---------- --------
Net prepaid pension cost (pension liability)
recognized in the balance sheet $ 146 $ (522)
========== ========
F-57
157
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- -------------------------------------------------------------------------------
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
The actuarial assumptions used in determining the present value of the
projected benefit obligations are:
YEAR ENDED
JULY 31, 1997
Weighted average discount rate 7.4%
Increase in future compensation levels 5.0%
The expected long-term rate of return on assets is 7.5%. Plan assets are
invested in a portfolio of cash, income and equity securities and a
diversified fund with guaranteed returns.
The Company also maintains an Employee Stock Ownership Plan (ESOP) and an
Employee Savings Plan (401(k) plan) covering substantially all employees
not covered by a collective bargaining agreement.
At July 31, 1997, the ESOP owned 60,005 shares of common stock, all of
which had been allocated to individual participants.
Contributions to the ESOP are authorized at the discretion of the Board of
Directors. No contributions were charged to expense during 1997. There were
no amounts accrued at July 31, 1997 for such contributions.
The Employee Savings Plan provides for participants to contribute up to 10%
of their annual compensation each year. In addition, the Company
contributes an amount equal to 25% of the first $1 contributed by the
employee, plus $0.2. Company contributions amounted to approximately $30 in
1997.
9. LINE OF CREDIT
The Company maintains a $4,000 unsecured line of credit with a 5%
compensating balance agreement. The Company did not borrow under this line
of credit in 1997.
10. OPERATING LEASES
The Company rents a warehouse under a noncancelable operating lease, and
certain facilities and equipment under cancelable leases. Total rent
expense under these leases was $361 in 1997.
11. SUBSEQUENT EVENTS
On August 13, 1997, Oxford Automotive, Inc., purchased all of the
outstanding common stock of the Company for approximately $23,000 in cash.
F-58
158
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
RPI Holdings, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in shareholders' equity and of cash flows present
fairly, in all material respects, the financial position of RPI Holdings, Inc.,
(the Company) at March 31, 1997 and the result of its operations and cash flows
for the period from July 1, 1996 to March 31, 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 audit. We conducted our
audit 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 audit provides a reasonable basis for the opinion expressed above.
The financial statements of the Company as of and for the year ended June 30,
1996 were audited by other accountants whose report dated February 4, 1998
expressed an unqualified opinion on those statements.
As described in Note 2, on November 25, 1997 all of the outstanding shares of
common stock of the Company were sold to Oxford Automotive, Inc.
Price Waterhouse LLP
Detroit, Michigan
February, 6, 1998
F-59
159
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
RPI Holdings, Inc.
We have audited the accompanying consolidated balance sheet of RPI Holdings,
Inc. and Subsidiaries as of June 30, 1996 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year
then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of RPI Holdings,
Inc. and Subsidiaries as of June 30, 1996, and the consolidated results of
their operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
February 4, 1998
F-60
160
RPI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, MARCH 31, JUNE 30,
1997 1997 1996
(UNAUDITED)
ASSETS
Current assets
Cash $ 32,086 $ 36,145 $ 60,568
Accounts receivable, less allowance for doubtful
accounts of $66,055 in 1997 and $80,000 in 1996 1,633,602 1,755,481 1,705,609
Accounts receivable, other 6,414 33,009
Notes receivable 25,000 31,159 10,585
Refundable income taxes 254,000 254,000 300,000
Inventories
Raw material 491,219 572,015 378,776
Work-in-process 707,434 671,224 248,934
Finished goods 311,162 347,894 200,672
------------- ------------- -------------
1,509,815 1,591,133 828,382
Prepaid expenses 92,022 162,246 292,082
Deferred income taxes 47,600 62,600 47,600
------------- ------------- -------------
Total current assets 3,594,125 3,899,178 3,277,835
Property, plant and equipment, net 2,965,362 3,024,876 2,764,259
Deferred income taxes 484,500
------------- ------------- -------------
TOTAL ASSETS $ 7,043,987 $ 6,924,054 $ 6,042,094
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 4,269,842 $ 2,937,611 $ 410,092
Accounts payable 2,340,402 2,482,615 1,435,794
Accrued expenses and other liabilities 333,296 416,520 437,939
------------- ------------- -------------
Total current liabilities 6,943,540 5,836,746 2,283,825
Long-term debt, less current maturities 474,337 509,720 2,504,550
Notes payable to shareholders 364,760 364,760 364,760
Deferred income taxes 63,200 150,300
------------- ------------- -------------
Total liabilities 7,782,637 6,774,426 5,303,435
Commitments and contingent liabilities (Note 6)
Shareholders' equity (deficit)
Common stock (no par value; 60,000
shares authorized, 752.8 shares issued
and outstanding) 373,295 373,295 373,295
Retained (deficit) earnings (1,111,945) (223,667) 365,364
------------- ------------- -------------
Total shareholders' equity (738,650) 149,628 738,659
------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 7,043,987 $ 6,924,054 $ 6,042,094
============= ============= =============
The accompanying notes are an integral part of the financial statements.
F-61
161
RPI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS FOR THE PERIOD FROM FOR THE YEAR
ENDED SEPTEMBER 30, JULY 1, 1996 TO ENDED
1997 1996 MARCH 31, 1997 JUNE 30, 1996
(UNAUDITED)
Net sales $ 6,938,452 $ 5,021,666 $ 8,823,948 $ 9,819,907
Cost of sales 7,985,430 4,620,341 9,037,409 8,826,609
------------ ----------- ----------- ------------
Gross profit (1,046,978) 401,325 (213,461) 993,298
Selling and administrative expenses 143,793 614,816 535,017 1,264,314
------------ ----------- ----------- ------------
Operating loss (1,190,771) (213,491) (748,478) (271,016)
Other income (expense)
Interest expense (203,081) (155,360) (251,585) (404,322)
Miscellaneous income (expense) (22,426) 63,911 54,932 (38,740)
------------ ----------- ----------- ------------
Loss before income taxes (1,416,278) (304,940) (945,131) (714,078)
Income tax benefit 528,000 128,000 356,100 300,000
------------ ----------- ----------- ------------
Net loss $ (888,278) $ (176,940) $ (589,031) $ (414,078)
============ ========== ========== ===========
The accompanying notes are an integral part of the financial statements.
F-62
162
RPI HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
COMMON COMMON RETAINED
STOCK STOCK EARNINGS TOTAL
Balances at July 1, 1995 770 $ 383,845 $ 779,442 $ 1,163,287
Net loss (414,078) (414,078)
Redemption of common stock (17) (10,550) (10,550)
--- ----------- ------------- ------------
Balances at June 30, 1996 753 373,295 365,364 738,659
Net loss (589,031) (589,031)
--- ----------- ------------- ------------
Balances at March 31, 1997 753 373,295 (223,667) 149,628
Net loss (unaudited) (888,278) (888,278)
--- ----------- ------------- ------------
Balances at September 30, 1997 (unaudited) 753 $ 373,295 $ (1,111,945) $ (738,650)
=== =========== ============= ===========
The accompanying notes are an integral part of the financial statements.
F-63
163
RPI HOLDINGS, INC.
Consolidated Statements of Cash Flows
FOR THE SIX MONTHS FOR THE PERIOD FROM FOR THE YEAR
ENDED SEPTEMBER 30, JULY 1, 1996 TO ENDED
1997 1996 MARCH 31, 1997 JUNE 30, 1996
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (888,278) $ (176,940) $ (589,031) $ (414,078)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 153,111 105,256 202,051 213,050
Loss on sale of property and equipment 4,800
Deferred income taxes (532,700) 164,410 (102,100) 12,700
Changes in operating assets and liabilities
Accounts receivable 128,293 (272,998) (49,872) 278,413
Accounts receivable, other 26,595 63,479
Notes receivable 6,159 (10,586) (20,574) 3,529
Refundable income taxes 46,000 (300,000)
Inventories 81,318 (45,306) (762,751) 290,684
Prepaid expenses and other current assets 75,463 157,560 129,836 (60,560)
Accounts payable (142,213) 260,756 1,046,821 33,095
Accrued expenses and other liabilities (88,463) (191,506) (21,419) (204,769)
----------- ---------- ---------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,207,310) (9,354) (89,644) (84,457)
----------- ---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (93,597) (224,814) (671,758) (250,007)
proceeds from sale of assets 204,290
----------- ---------- ---------- -----------
NET CASH USED IN INVESTING ACTIVITIES (93,597) (224,814) (467,468) (250,007)
----------- ---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal borrowings on revolving line of
credit, net (65,069) 157,575 515,049 390,475
Proceeds from debt obligations 58,303 792,252 274,757
Principal payments of debt obligations (223,677) (774,612) (350,775)
Advances from related party 1,585,594
Redemption of common stock (10,550)
----------- ---------- ---------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,296,848 215,878 532,689 303,907
----------- ---------- ---------- -----------
Net decrease in cash (4,059) (18,290) (24,423) (30,557)
Cash, beginning of year 36,145 78,575 60,568 91,125
----------- ---------- ---------- -----------
Cash, end of year $ 32,086 $ 60,285 $ 36,145 $ 60,568
=========== ========== ========== ===========
The accompanying notes are an integral part of the financial statements.
F-64
164
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
RPI Holdings, Inc. (the Company), specializes in the production of
roll-formed pieces, metal stampings with clinch or welded fasteners and
welded assemblies of functional and decorative trim for the automotive
industry. The Company primarily operates from two plants located in
Michigan.
Net sales to the Company's two primary customers as a percentage of total
sales are as follows:
FOR THE PERIOD
FROM JULY 1, 1996 FOR THE YEAR ENDED
TO MARCH 31, 1997 JUNE 30, 1996
General Motors Corporation 63% 46%
Johnson Controls International 19% 19%
Accounts receivable from General Motors Corporation and Johnson Controls
International represent approximately 53% and 23%, respectively, of the
March 31, 1997 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, 1997. 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. SUBSEQUENT EVENTS
Subsequent to March 31, 1997, the Company was advanced $1,500,000 in
various installments from Lobdell Emery Corporation, a wholly-owned
subsidiary of Oxford Automotive, Inc. (Oxford). The advances were used to
support the ongoing operations of the Company. The majority shareholder
of Oxford is also the majority shareholder of the Company.
On November 25, 1997, Oxford purchased all of the outstanding common stock
of the Company for $2,500,000 in cash. In connection with the
acquisition, the notes payable to shareholders of $364,760 and the RPI,
Inc. revolving credit, bank term, revolving equipment and revolving
tooling loans described in Note 4 were repaid.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
During the period ended March 31, 1997, the Company changed its fiscal
year end to March 31. Previously, the Company's fiscal year ended on June
30.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of RPI Holdings, Inc. and its wholly-owned subsidiaries, RPI, Inc. and
Prudenville Manufacturing, Inc. (PMI). RPI Holdings, Inc. and PMI had no
revenues or operations during the periods presented.
REVENUE RECOGNITION
Revenue is recognized by the Company upon shipment of product to the
customer.
F-65
165
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
with cost determined on a first-in, first-out basis ("FIFO").
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 and losses, if any, are recorded
when known. Generally, tooling revenue is recognized upon acceptance of
the tooling by the customer. At March 31, 1997 and June 30, 1996, all
reimbursable tooling is recorded in prepaid expenses.
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 using the straight-line method over
the following estimated useful lives:
YEARS
Land improvements 30
Buildings 30-40
Machinery and equipment 3-20
Furniture and fixtures 7-10
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.
NOTES PAYABLE TO SHAREHOLDERS The notes payable to shareholders
accrue interest at an annual rate of 6%, payable quarterly. As described
in Note 2, the notes payable to shareholders were repaid in connection
with the acquisition of the Company by Oxford.
F-66
166
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS At March 31, 1997 and June 30,
1996, the carrying amount of financial instruments such as cash and cash
equivalents and trade receivables and payables approximated their fair
values. Based upon the borrowing rates currently available to the
Company, the carrying value of debt approximates fair value.
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.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following:
MARCH 31, JUNE 30,
1997 1996
Land and land improvements $ 104,272 $ 113,243
Buildings 1,379,118 1,460,792
Machinery and equipment 2,167,939 1,654,716
Furniture and fixtures 203,748 216,545
------------ ------------
3,855,077 3,445,296
Less - accumulated depreciation (830,201) (681,037)
------------ ------------
$ 3,024,876 $ 2,764,259
============ ============
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are composed of the following:
MARCH 31, JUNE 30,
1997 1996
Accrued interest $ 67,919 $ 53,873
Accrued salaries and wages 91,172 68,595
Accrued professional fees 87,382 94,636
Accrued commissions 62,545 130,012
Other 107,502 90,823
----------- -----------
$ 416,520 $ 437,939
=========== ===========
F-67
167
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. BORROWING ARRANGEMENTS
MARCH 31, 1997 JUNE 30, 1996
REVOLVING CREDIT LOAN - RPI, INC.
Interest at prime rate plus .5% (9% at March_31, 1997),
matures December 31, 1997 $ 1,359,961 $ 844,912
BANK TERM LOAN - RPI, INC.
Interest at prime rate plus 1% (9.5% at March 31, 1997),
Monthly principal payments of $20,833, matures
December 31, 1997 598,011 885,508
REVOLVING EQUIPMENT LOAN - RPI, INC.
Interest at prime rate plus 1% (9.5% at March 31, 1997),
Monthly principal payments of $15,511, matures
December 31, 1997 707,192 347,510
REVOLVING TOOLING LOAN - RPI, INC.
Interest at prime rate plus 1% (9.5% at March 31, 1997),
matures December 31, 1997 151,787 222,280
TERM NOTE PAYABLE - PMI
Interest at 6% payable annually. Monthly principal
payments of $2,500, matures April_30, 1999 477,500 500,000
LAND CONTRACT - PMI
Interest at 8%. Monthly payments of $3,000, matures
May 31, 1999 77,766 104,766
OTHER 75,114 9,666
-------------- -------------
3,447,331 2,914,642
Less - current portion (2,937,611) (410,092)
-------------- -------------
$ 509,720 $ 2,504,550
============== =============
Borrowing under the revolving credit and bank term loan agreements are
subject to certain limitations determined by a formula based on 80% of
eligible accounts receivable and 35% of eligible inventories, or a
maximum of $500,000. Upon the occurrence of any default, interest
accrues on the unpaid principal balance at an annual rate of four
percent above the bank's prime rate. The financing is collateralized
by all assets of RPI, Inc.
The Company was in default of certain provisions of the revolving credit
loan, bank term loan, revolving equipment loan and revolving tooling
loan agreements as of March 31, 1997. The agreements were amended
subsequent to March 31, 1997. Under the new terms, the amount available
under the revolving credit loan decreased from $3,250,000 to $2,600,000,
additional advances under the revolving equipment loan and revolving
tooling loan were terminated, certain covenants were amended and the
balances of the revolving credit loan, bank term loan, revolving
equipment loan and revolving tooling loan were due October 15, 1997.
Subsequent to this amendment, the due date was extended to
December 31, 1997.
F-68
168
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. BORROWING ARRANGEMENTS (CONTINUED)
As described in Note 2, the revolving credit loan, bank term
loan, revolving equipment loan and revolving tooling loan were repaid in
full in connection with the acquisition of the Company on November 25,
1997.
Scheduled maturities of long-term debt, after giving effect to the
amendments described above, are as follows:
YEARS ENDING
MARCH 31
1998 $ 2,937,611
1999 71,844
2000 429,110
2001 5,844
2002 2,922
-------------
$ 3,447,331
=============
Cash paid for interest during the nine month period ended March 31, 1997
and for the year ended June 30, 1996 approximated $238,000 and $375,000,
respectively.
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain buildings and equipment under
operating lease agreements. The future minimum lease payments under these
operating leases are:
YEARS ENDING
MARCH 31
1998 $ 200,111
1999 154,030
2000 90,730
------------
Total minimum lease payments $ 444,871
============
Rental expense for the nine month period ended March 31, 1997 and for
the year ended June 30, 1996 approximated $178,000 and $218,000,
respectively.
GENERAL
The Company is subject to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of
business, including an audit of the Company's June 30, 1996 tax return by
the Internal Revenue Service. 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-69
169
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES
The Company's income tax benefit consists of the following:
FOR THE PERIOD FROM FOR THE YEAR
JULY 1, 1996 TO ENDED
MARCH 31, 1997 JUNE 30, 1996
Current benefit $ 254,000 $ 312,700
Deferred benefit (provision) 102,100 (12,700)
----------- ----------
$ 356,100 $ 300,000
=========== ===========
A reconciliation between the Company's income tax benefit and the amount
computed by applying the statutory income tax rate to income before income
taxes is as follows:
FOR THE PERIOD FROM FOR THE YEAR
JULY 1, 1996 TO ENDED
MARCH 31, 1997 JUNE 30, 1996
Statutory rate $ 321,300 $ 242,800
Net operating loss carryforward 71,800
Inventory adjustment (20,500)
Other (16,500) 57,200
---------- -----------
Income tax benefit $ 356,100 $ 300,000
=========== ===========
Significant components of the Company's deferred tax assets and
(liabilities) are as follows:
MARCH 31, JUNE 30,
1997 1996
Deferred tax liabilities
Tax depreciation in excess of book $ (161,000) $ (150,300)
----------- -----------
Deferred tax assets
Net operating loss carrryforward 71,800
Inventory 38,400
AMT credit carryforward 26,000
Allowance for doubtful accounts 22,500 27,200
Other 1,700 20,400
----------- -----------
Gross deferred tax assets 160,400 47,600
----------- -----------
Net deferred tax liability $ (600) $ (102,700)
=========== ============
F-70
170
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAXES (CONTINUED)
The Company has a net operating loss carryforward for federal income
tax purposes with potential future tax benefits of approximately $72,000,
which expires during 2012. In addition, the Company has Alternative
Minimum Tax credit carryforwards aggregating $26,000 at March 31,
1997 which can be carried forward indefinitely. Due to the subsequent
acquisition of the Company, as more fully described in Note 2, there are
annual limitations on the amount of the carryforwards which can be
utilized. Management believes that it is more likely than not that the
benefit of these tax benefits will be realized and, therefore, no
valuation allowance is provided at March 31, 1997.
The Company paid no income taxes for both the nine month period ended
March 31, 1997 and the year ended June 30, 1996.
9. RELATED PARTY TRANSACTIONS
The Company is charged fees by a related party, The Oxford Investment
Group, Inc., for consulting, finance and management services and a sales
representative agreement. These fees approximated $116,000 and $325,000
for the nine month period ended March 31, 1997 and for the year ended
June 30, 1996, respectively.
10. INTERIM DATA (UNAUDITED)
The accompanying unaudited balance sheet as of September 30, 1997 and the
unaudited consolidated statements of operations and cash flows for the
six-month periods ended September 30, 1997 and 1996 include all
adjustments, consisting of normal recurring adjustments, which in the
opinion of management are necessary for the fair presentation of the
financial position, results of operations and cash flows. The results of
operations for any interim period are not necessarily indicative of the
results of operations for a full year.
F-71
171
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Directors of Oxford Automotive, Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations and of cash flows present fairly, in all material
respects, the financial position of the Suspension Division (Suspension), a
Division of Eaton Corporation (Eaton), at December 31, 1997, and the results of
its operations and its cash flows for the year ended December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the management of Suspension; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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 audit provides a reasonable basis for the opinion expressed
above.
Our engagement as auditors of Suspension was subsequent to December 31, 1997.
Therefore, we were not present to observe physical inventories taken on or prior
to that date, the amounts of which entered into the determination of cost of
goods sold for the year ended December 31, 1997. However, we observed physical
inventories subsequent to December 31, 1997 and performed such other procedures
as we deemed appropriate.
Suspension, as disclosed in Note 2 to the accompanying financial statements, is
a division of Eaton and has extensive transactions and relationships with Eaton.
Because of these relationships, it is possible that the terms of these
transactions are not the same as those that would result from transactions among
wholly unrelated parties.
As discussed in Note 14, on April 1, 1998, Eaton sold certain net assets of
Suspension to Oxford Automotive, Inc. The accompanying financial statements do
not give effect to this purchase transaction.
Price Waterhouse LLP
Detroit, Michigan
June 11, 1998
F-72
172
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED)
ASSETS
Current assets
Cash $ 2 $ 7
Accounts receivable 11,784 13,115
Inventories 11,704 9,574
Prepaid expenses 30 21
----------- ------------
Total current assets 23,520 22,717
Property, plant and equipment, net 26,869 26,808
Prepaid pension asset 5,078 4,770
Other assets 3,575 3,346
----------- ------------
TOTAL ASSETS $ 59,042 $ 57,641
=========== ============
LIABILITIES AND EATON INVESTMENT
Current liabilities
Accounts payable $ 6,002 $ 7,164
Employee compensation 2,869 2,381
Accrued expenses and other current liabilities 1,750 1,798
----------- ------------
Total current liabilities 10,621 11,343
Deferred income taxes 2,059 2,059
Postretirement benefits liability 2,554 2,360
Environmental commitments and contingencies (Note 12) 1,557 1,557
----------- ------------
Total liabilities 16,791 17,319
Eaton investment 42,251 40,322
----------- ------------
TOTAL LIABILITIES AND EATON INVESTMENT $ 59,042 $ 57,641
=========== ============
See accompanying notes to combined financial statements.
F-73
173
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997 1997
(UNAUDITED)
Sales $ 30,261 $ 33,559 $ 125,776
Cost of goods sold 28,808 30,572 116,485
----------- ---------- -----------
Gross profit 1,453 2,987 9,291
Selling, general and administrative expense 1,740 1,799 7,214
----------- ---------- -----------
Operating income (loss) (287) 1,188 2,077
----------- ---------- -----------
Equity in income of Metalcar 226 39 741
Interest expense (291) (273) (1,015)
Other income (expense) (248) 100 280
----------- ---------- -----------
Income (loss) before provision (benefit)
for income taxes (600) 1,054 2,083
Provision (benefit) for income taxes (237) 416 827
----------- ---------- -----------
Net income (loss) $ (363) $ 638 $ 1,256
=========== ========== ===========
See accompanying notes to combined financial statements.
F-74
174
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (363) $ 638 $ 1,256
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities
Depreciation and amortization 957 1,024 4,317
Loss on disposal of fixed assets 8 49 451
Income of affiliate, net of dividend received (226) (59) (238)
Deferred income taxes 516
Changes in assets and liabilities
Accounts receivable 1,399 (2,228) 236
Inventories (2,067) 407 (1,158)
Prepaid expenses (9) (202) 1
Other noncurrent assets (308) (318) (1,243)
Accounts payable (1,198) (1,079) 1,907
Employee compensation 473 641 (287)
Accrued expenses and other current liabilities (93) 510 683
Postretirement benefits liability 194 (50) 355
Environmental commitments and contingencies 37 (23) (20)
--------- --------- ----------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (1,196) (690) 6,776
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (919) (152) (4,994)
--------- --------- ----------
NET CASH USED FOR INVESTING ACTIVITIES (919) (152) (4,994)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Intercompany activity 2,292 644 (3,024)
--------- --------- ----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 2,292 644 (3,024)
--------- --------- ----------
Effect of exchange rate changes on cash (182) 198 1,248
--------- --------- ----------
NET DECREASE IN CASH (5) - 6
--------- --------- ----------
Cash at beginning of the period 7 1 1
--------- --------- ----------
Cash at end of the period $ 2 $ 1 $ 7
========= ========= ==========
See accompanying notes to combined financial statements.
F-75
175
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
The Suspension Division (Suspension) of Eaton Corporation (Eaton) is a
leading tier one North American supplier of leaf spring suspension systems
for automotive applications. Suspension's products are primarily sold to
original equipment manufacturers (OEMs) of passenger cars, light trucks and
heavy trucks.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements present the historical financial position,
results of operations and cash flows of Suspension previously included in
the Eaton consolidated financial statements. Suspension's financial
information included herein is not necessarily indicative of the financial
position, results of operations and cash flows of Suspension in the future
or of the results which would have been reported if Suspension had operated
as an unaffiliated enterprise.
Transactions between Eaton and Suspension (and Eaton's other business units)
are herein referred to as "intercompany" or "related party" transactions.
If Suspension was operated as an independent, unaffiliated entity, it may
not be able to obtain raw material and other goods and services at
historical price levels obtained when purchasing as a part of Eaton's
worldwide purchasing process.
Suspension accounts for its investment in the Metalurgica Carabobo, S.A.
(Metalcar) joint venture under the equity method of accounting. Metalcar is
included in the combined financial statements on the basis of its September
30, 1997 fiscal year end.
CONCENTRATION OF CREDIT RISK
Suspension's customer base is primarily comprised of OEMs. Sales to
Suspension's three largest customers aggregated 71%, 14% and 8% of 1997
sales. Financial instruments which potentially expose Suspension to a
concentration of credit risk consist primarily of accounts receivable. At
December 31, 1997, the aforementioned customers represented approximately
50%, 24% and 21% of trade accounts receivable.
Although Suspension is directly affected by the economic well being of the
automotive industry, as well as its major customers, management does not
believe significant credit risk exists at December 31, 1997. Suspension does
not require collateral to reduce such credit risk and historically has not
experienced significant losses related to receivables.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Canadian operations is the local currency.
Financial statements for these operations are translated into United States
dollars at year-end exchange rates as to assets and liabilities and
weighted-average exchange rates as to revenues and expenses. The resulting
translation adjustments are recorded as a component of Eaton investment.
F-76
176
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are carried at lower of cost or market using the first-in,
first-out (FIFO) method.
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 repairs and maintenance are charged
to operations as incurred. For federal income tax purposes, depreciation is
computed using accelerated methods. For financial reporting purposes,
depreciation is computed principally using the straight-line method over the
following estimated useful lives:
YEARS
Land improvements 40
Buildings and building improvements 10-40
Machinery and equipment 3-10
VALUATION OF 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, Suspension periodically evaluates the carrying value of
long-lived assets to be held and used. The carrying value of a long-lived
asset is considered impaired when the anticipated undiscounted cash flow
from such asset is separately identifiable and is less than its carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved or independent
appraisal.
REVENUE RECOGNITION
Sales and related cost of sales are recognized when products are shipped.
INCOME TAXES
Suspension's United States and Canadian locations are included in the
consolidated federal income tax returns of Eaton Corporation and Eaton Yale
Limited, respectively. In preparing its combined financial statements,
Suspension has determined its tax provision on a separate return basis.
Income taxes payable and refundable income taxes are recorded as a component
of Eaton investment. Deferred tax liabilities or assets reflect the impact
of temporary differences between amounts of assets and liabilities for
financial and tax reporting. Such amounts are subsequently adjusted, as
appropriate, to reflect changes in tax rates expected to be in effect when
the temporary differences reverse. A valuation allowance on deferred tax
assets is provided if it is considered more likely than not that such
deferred tax assets will not be realized.
ESTIMATES
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
in certain circumstances that affect amounts reported in the accompanying
combined financial statements and notes. Actual results could differ from
these estimates.
F-77
177
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ENVIRONMENTAL
Suspension expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no
current or future benefit is discernible. Expenditures which extend the life
of the related property or mitigate or prevent future environmental
contamination are capitalized. Suspension records a liability for
remediation costs at the time when it is probable and can be reasonably
estimated. The estimated liability of Suspension is not discounted or
reduced for possible recoveries from insurance carriers.
3. ACCOUNTS RECEIVABLE
Accounts receivable comprises the following:
DECEMBER 31,
1997
Trade $ 12,811
Other 304
--------
$ 13,115
========
4. INVENTORIES
Inventories comprise the following:
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED)
Raw materials $ 7,694 $ 5,633
Work-in-process 3,141 2,768
Finished goods 1,298 1,600
------- -------
12,133 10,001
Less - inventory reserve (429) (427)
------- -------
$11,704 $ 9,574
======= =======
F-78
178
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise the following:
DECEMBER 31,
1997
Land and land improvements $ 503
Buildings and building improvements 10,817
Machinery and equipment 47,238
Construction-in-progress 3,562
---------
62,120
Less - Accumulated depreciation (35,312)
---------
$ 26,808
=========
6. OTHER ASSETS
Other assets comprise the following:
DECEMBER 31,
1997
Equity investment in Metalcar $ 3,284
Other 62
---------
$ 3,346
=========
The table below contains the summarized financial information of Metalcar
for the year ended September 30, 1997:
Net sales $ 15,737
=========
Operating income $ 2,581
=========
Net income $ 1,509
=========
Current assets $ 6,174
Non-current assets 4,336
---------
Total assets $ 10,510
=========
Current liabilities $ 3,725
Non-current liabilities 81
Shareholders equity 6,704
---------
Total liabilities and equity $ 10,510
=========
F-79
179
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
6. OTHER ASSETS (CONTINUED)
Suspension has a 49% joint venture interest in Metalcar, a Venezuelan
manufacturer of conventional leaf springs and coil springs for both light
and heavy trucks.
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities comprise the following:
DECEMBER 31,
1997
Utilities $ 561
Warranty 458
Other 779
-------
$ 1,798
=======
8. EMPLOYEE BENEFIT PLANS
PENSIONS
Substantially all salaried employees of Suspension participate in
defined benefit pension plans covering all Eaton salaried employees. Plan
benefits are generally based on years of service and the employee's
compensation. Solely for the purpose of these financial statements,
Suspension salaried employees are considered to have participated in
multi-employer pension plans. Suspension recorded net periodic pension
benefits of $30 for the year ended December 31, 1997, related to its
participation in the Eaton defined benefit pension plans.
In addition, Suspension sponsors two noncontributory defined benefit
pension plans covering substantially all hourly employees at Suspension's
two Canadian manufacturing facilities. These plans are subject to collective
bargaining agreements and provide pension benefits that are based on a fixed
rate applied to the hourly employees' years of credited service up to a
maximum of 30 years. The hourly plans do not provide for increases in future
compensation levels. Suspension's funding policy for these plans is to make
contributions in amounts sufficient to fund the plan's current service cost
and any going concern unfunded actuarial liabilities and/or solvency
deficiencies.
F-80
180
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the Canadian hourly plans' funded status and
amounts recognized on Suspension's combined balance sheet at December 31,
1997:
Actuarial present value of benefit obligation
Vested benefits $ 19,236
Nonvested benefits 724
--------
Projected benefit obligation 19,960
Plan assets at fair value (primarily U.S. government securities,
bonds, notes and mutual funds) 22,821
--------
Plan assets greater than projected benefit obligation 2,861
Unrecognized net gains (543)
Unrecognized prior service cost 2,902
Unrecognized net asset being recognized over 15-20 years (450)
--------
Prepaid pension cost $ 4,770
========
Net periodic pension cost for 1997 and the actuarial assumptions used in
determining the projected benefit obligation are as follows:
Service cost $ 636
Interest cost 1,367
Actual return on assets (3,589)
Net amortization and deferral 2,074
--------
Net periodic pension cost $ 488
========
Discount rate 7.25%
Expected return on assets 9.25%
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
U.S. retiree medical programs cover employees who retire with eligibility
for hospital, professional and other medical services. Most of the programs
require deductibles and copayments and virtually all are integrated with
Medicare. Retiree contributions are generally required based on length of
service, location, coverage type, plan and Medicare eligibility. For U.S.
salaried employees, Eaton also sponsors retiree life insurance programs
which generally provide a benefit as a percent of pay.
Solely for the purposes of these financial statements, Suspension's U.S.
salaried employees are considered to have participated in a multi-employer
postretirement benefit plan. Suspension charged $128 to expense for the year
ended December 31, 1997, related to its participation in this plan.
F-81
181
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
In addition to the aforementioned defined benefit plans, Suspension also
sponsors several defined benefit postretirement plans covering substantially
all Canadian salaried and hourly employees. These plans provide health care
and life insurance benefits for eligible retirees and are noncontributory.
Provisions of the benefit plans for hourly employees are subject to
collective bargaining agreements. Both Canadian salaried and hourly
postretirement medical benefits are supplements to Canadian government
sponsored benefits. Suspension's postretirement health care and life
insurance plans are unfunded.
The following table presents the Canadian salaried and hourly employee
funded status reconciled with amounts recognized in Suspension's December
31, 1997 combined balance sheet.
Accumulated postretirement benefit obligations
Retirees $ 1,449
Full eligible active plan participants 1,240
Non-eligible plan participants 2,339
-----------
Accumulated postretirement benefit obligation 5,028
Unrecognized prior service cost (2,673)
Unrecognized gain 5
-----------
Accrued postretirement medical benefit obligation $ 2,360
===========
Net periodic postretirement benefit cost for 1997 included the following
components:
Service cost benefits earned during the period $ 143
Amortization of prior service cost 155
Interest cost on the accumulated postretirement
benefit obligation 258
-----------
Net periodic postretirement benefit cost $ 556
===========
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0%. The weighted average annual
assumed rate of increase in the per capita cost of covered benefits (i.e.,
healthcare cost trend rate) is 10.0% in 1998 trending to 5.0% in 2003. 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 December 31, 1997 by approximately
$905 and net periodic postretirement benefit cost for the period from
January 1, 1997 to December 31, 1997 by approximately $147.
F-82
182
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
9. INCOME TAXES
The provision for income taxes comprises:
YEAR ENDED
DECEMBER 31,
1997
Income (loss) before taxes on income:
United States $ (3,916)
Canada 5,999
----------
$ 2,083
==========
Taxes (benefit) on income:
United States $ (1,332)
Canada 2,159
----------
$ 827
==========
Taxes (benefit) on income consist of:
Current
United States $ (1,417)
Canada 1,728
----------
$ 311
==========
Deferred
United States $ 85
Canada 431
----------
$ 516
==========
The principal items accounting for the difference in taxes on income
computed at the U.S. statutory rate and as recorded on an overall basis
are as follows:
YEAR ENDED
DECEMBER 31,
1997
Statutory U.S. federal income tax rate 35.0%
-----
Taxes on foreign earnings over
U.S. tax rate 2.9
Effect of U.S. graduated rates 1.8
-----
39.7%
=====
F-83
183
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
9. INCOME TAXES (CONTINUED)
The temporary differences which give rise to deferred tax assets and
(liabilities) are as follows:
DECEMBER 31,
1997
Deferred tax assets
Postretirement benefits $ 849
Environmental reserve 560
Other 215
----------
Gross deferred tax assets 1,624
----------
Deferred tax liabilities
Property, plant and equipment (1,966)
Pension benefits (1,717)
----------
Gross deferred tax liabilities (3,683)
----------
Net deferred tax liability $ (2,059)
==========
10. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS
CASH MANAGEMENT
Suspension utilizes Eaton's centralized cash management services. Under this
arrangement, Suspension's accounts receivable are collected and its cash
disbursements are funded by Eaton on a daily basis. Net activity between
Eaton and Suspension is reflected in Eaton's investment in Suspension.
CORPORATE SERVICES
Eaton allocates costs associated with certain corporate overhead, including
executive salaries, risk management, sales and marketing, human resources,
corporate finance and accounting, treasury and public affairs to its
divisions through a corporate assessment charge which is allocated based on
operating capital which consists primarily of current assets, capital assets
and current liabilities. Charges from Eaton for such costs aggregated $1,563
for the year ended December 31, 1997 and are included in selling, general
and administrative expenses in the accompanying combined statement of
operations.
Eaton charges its divisions interest expense based on Eaton's overall debt
structure as well as the net cash used or provided by the divisions.
Interest charges from Eaton aggregated $1,015 for the year ended December
31, 1997.
F-84
184
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
10. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS (CONTINUED)
Eaton provides various information systems assistance, employee payroll
processing, accounts receivable processing, accounts payable processing,
payment processing and fixed asset processing. These costs are allocated to
Suspension based on certain criteria, including invoices or checks
processed, headcount, fixed asset line items maintained, predetermined rates
or on actual services provided. Charges from Eaton for such costs aggregated
$423 for the year ended December 31, 1997 and are included in selling,
general and administrative expenses in the accompanying combined statement
of operations.
Eaton manages employee medical, dental, life insurance, pension,
postretirement and postemployment benefits on a consolidated basis. Eaton
charges Suspension for its share of such employee-related costs based upon
Suspension's estimated experience or headcount, depending on the nature of
the cost. Charges for such costs are disclosed in the related footnotes
herein with the exception of self insured medical charges for U.S. employees
which aggregated $454 in 1997.
Eaton provides certain research and development and manufacturing technology
services to its divisions. Eaton allocates these costs based on hours
applicable to the respective division. Charges from Eaton to Suspension for
such services aggregated $1,369 for the year ended December 31, 1997. Of
this amount, $271 is included in selling, general and administrative and
$1,098 is included in cost of goods sold in the accompanying statement of
operations.
Suspension shares certain facilities with other Eaton divisions. Eaton
allocates rent expense to Suspension based on square footage occupied. These
charges aggregated $150 in 1997.
Management believes that the methods utilized to allocate costs to
Suspension, as discussed above, are reasonable. However, the terms of
transactions between Eaton and Suspension, including allocated costs, may
differ from those that would result from transactions with unrelated
parties.
INTERCOMPANY PURCHASES
Suspension purchased approximately $471 of inventory from Eaton Japan, a
related party. This inventory is used in the leaf spring manufacturing
process from which the related products are sold to a Japanese transplant.
F-85
185
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
10. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS (CONTINUED)
EATON INVESTMENT
The Eaton investment balance represents the cumulative transaction
adjustment, cumulative intercompany activity from transactions, cost
allocations, cash management and other charges and credits, between
Suspension and Eaton (and its other business units). A summary of changes in
Eaton investment follows.
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, 1998 1997
(UNAUDITED)
Beginning Eaton investment $ 40,322 $ 42,090
Net (loss) income (363) 1,256
Intercompany activity 2,292 (3,024)
---------- ----------
Ending Eaton investment $ 42,251 $ 40,322
========== ==========
11. LEASE COMMITMENTS
Suspension leases certain buildings and equipment under operating lease
agreements. Future minimum lease payments under operating leases having
initial or remaining noncancellable lease terms in excess of one year are as
follows for the year ended December 31:
1998 $ 284
1999 117
2000 58
2001 53
-----
$ 512
=====
Rent expense for the year ended December 31, 1997 was $476.
12. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
Suspension is subject to federal, state and local regulations which govern
environmental matters. Suspension has recorded amounts aggregating $1,557
which, in management's best estimate, will be sufficient to provide for
anticipated costs of known environmental matters, which consist primarily of
remediation requirements at Suspension's Canadian facilities.
The effect of resolution of environmental matters on results of operations
cannot be predicted due to the uncertainty concerning both the amount and
timing of future expenditures and future results of operations. However,
management believes, on the basis of presently-available information, that
resolution of these matters will not materially affect the financial
condition of Suspension.
F-86
186
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
13. GEOGRAPHIC AREAS - FINANCIAL DATA
UNITED
STATES CANADA TOTAL
Net sales 1997 $ 15,941 $ 109,835 $ 125,776
Net income (loss) 1997 (2,584) 3,840 1,256
Assets 1997 14,536 43,105 57,641
Liabilities 1997 2,625 14,694 17,319
Sales between geographic areas approximate market and are not significant.
Suspension corporate office income, expenses, assets and liabilities are
included in the United States column.
14. SUBSEQUENT EVENTS
On April 1, 1998, Eaton sold substantially all of the net assets of
Suspension to Oxford Automotive, Inc. The accompanying financial statements
do not give effect to this transaction.
F-87
187
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS PAGE
----
Available Information.......................................
Summary.....................................................
Risk Factors................................................
Use of Proceeds.............................................
Capitalization..............................................
Pro Forma Combined Financial Data...........................
Selected Consolidated Historical
Financial Data............................................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................
The Exchange Offer..........................................
Business....................................................
Management..................................................
Principal Shareholders......................................
Certain Transactions........................................
Description of Certain Indebtedness and
Preferred Stock...........................................
Description of the Notes....................................
Certain Federal Income Tax Considerations...................
Plan of Distribution........................................
Legal Matters...............................................
Experts.....................................................
Index to Consolidated Financial Statements................ F-1
$35,000,000
OXFORD AUTOMOTIVE, INC.
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
----------------------------------------
OXFORD
AUTOMOTIVE
LOGO
----------------------------------------
OFFER TO EXCHANGE
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
PROSPECTUS
DATED , 1998
188
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 561 through 571 of the Michigan Business Corporation Act (the "MBCA")
set forth the conditions and limitations governing the indemnification of
officers, directors and other persons by Michigan corporations.
In general, the MBCA allows Michigan corporations to indemnify a person who was
or is a party or is threatened to be made a party to a threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative and whether formal or informal, other than an action by or in
the right of the corporation, by reason of the fact that such person is or was a
director, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, partner, trustee, employee,
or agent of another enterprise, against expenses, including attorneys' fees,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred in connection therewith, if such person acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders, and with respect to a criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful.
The MBCA also allows Michigan corporations to indemnify such a person who was or
is a party or is threatened to be made a party to a threatened, pending or
completed action or suit by or in the right of the corporation against expenses,
including actual and reasonable attorneys' fees, and amounts paid in settlement
actually and reasonably incurred by the person in connection with the action or
suit, if such person acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interests of the corporation or its
shareholders. However, indemnification shall not be made for a claim, issue or
matter in which the person is found liable to the corporation unless and only to
the extent that a court of competent jurisdiction has determined that, despite
the adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnification for the expenses
which the court considers proper.
The MBCA also allows Michigan corporations to indemnify a director without a
determination that the director has met the standard for conduct described
above, provided that no indemnification may be made (except by court order) if
the director received a financial benefit to which he or she is not entitled,
intentionally inflicted harm on the corporation or its shareholders, made an
unlawful distribution, or intentionally violated criminal law.
The Bylaws of Oxford Automotive require Oxford Automotive to indemnify directors
and officers to the extent permitted by the MBCA.
Oxford Automotive has entered into an agreement with each of its directors under
which Oxford Automotive agrees to indemnify the director against certain
liabilities and expenses incurred by the director by reason of serving as a
director of Oxford Automotive or in certain other capacities at the request of
Oxford Automotive. In general, under the agreements, Oxford Automotive agrees to
indemnify the director to the extent permitted by the MBCA subject to the
following: (a) Oxford Automotive agrees to reimburse the director for expenses
incurred prior to the final disposition of the matter or proceeding, subject to
certain limitations; and (b) the director may file a suit against Oxford
Automotive if Oxford Automotive refuses to indemnify the director, and the court
is authorized to determine whether the director is entitled to be indemnified
whether or not a determination in such respect has or has not been made by the
Board of Directors, independent legal counsel, or the shareholders of Oxford
Automotive.
The MBCA permits a corporation to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, or agent of the
corporation against liabilities arising out of such person's positions with the
corporation, whether or not the corporation would have the power to indemnify
such person against liability under the MBCA.
Oxford Automotive carries a directors and officers liability insurance policy
which insures directors and officers of Oxford Automotive against certain
liability by reason of certain acts or omissions in connection with their duties
for Oxford
II-1
189
Automotive and which insures Oxford Automotive against certain
amounts for which it is legally obligated to pay or for which it has agreed or
is required to indemnify the directors or officers. During each policy year, the
aggregate limit of liability under the policy is $10,000,000, and the insurer is
generally obligated to pay for any loss experienced by a director or officer and
for any loss in excess of $250,000 experienced by Oxford Automotive. The
insurance policy is in effect until October 25, 1998.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. A list of exhibits included as part of this Registration
Statement is set forth in the Exhibit Index which immediately precedes
such exhibits and is incorporated herein by reference.
(b) Financial Statement Schedules.
II -- Valuation and Qualifying Accounts.
ITEM 22. UNDERTAKINGS.
Each undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the provisions described under Item 20 or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a
co-registrant of expenses incurred or paid by a director, officer or controlling
person of such co-registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, such co-registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
II-2
190
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Each undersigned registrant hereby undertakes:
To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
To supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it became effective.
II-3
191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
OXFORD AUTOMOTIVE, INC.
By:/s/ Steven M. Abelman
----------------------------------
Steven M. Abelman
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons 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 Financial Officer)
Donald C. Campion
/s/ Manfred J. Walt Director
- ----------------------------------
Manfred J. Walt
1
II-4
192
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
LOBDELL EMERY CORPORATION
By: /s/ Steven M. Abelman
-------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steve M. Abelman President (Principal Executive Officer) and
- ---------------------------------- Director
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer
- ---------------------------------- (Principal Accounting and Financial Officer) and Director
Donald C. Campion
/s/ John H. Ferguson Director
- ----------------------------------
John H. Ferguson
Director
- ----------------------------------
D. Kennedy Fesenmyer
II-5
193
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
BMG NORTH AMERICA LIMITED
By:/s/ Steven M. Abelman
---------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steve M. Abelman President (Principal Executive Officer) and Director
- ---------------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer and Treasurer
- --------------------------------------- (Principal Accounting and Financial Officer)
Donald C. Campion
- --------------------------------------- Director
James W. Robinson
/s/ Manfred J. Walt Director
- ---------------------------------------
Manfred J. Walt
II-6
194
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
BMG HOLDINGS, INC.
By: /s/ Steven M. Abelman
--------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- ----------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer and Treasurer
- ---------------------------------- (Principal Accounting and Financial Officer)
Donald C. Campion
- ---------------------------------- Director
James W. Robinson
/s/ Manfred J. Walt Director
- ----------------------------------
Manfred J. Walt
II-7
195
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
WINCHESTER FABRICATION CORPORATION
By: /s/ Steven M. Abelman
-----------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- ------------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer (Principal
- ------------------------------------ Accounting and Financial Officer) and Director
Donald C. Campion
/s/ John H. Ferguson Director
- ------------------------------------
John H. Ferguson
II-8
196
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
CREATIVE FABRICATION CORPORATION
By: /s/ Steven M. Abelman
-------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- --------------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer (Principal
- -------------------------------------- Accounting and Financial Officer) and Director
Donald C. Campion
/s/ John H. Ferguson Director
- --------------------------------------
John H. Ferguson
II-9
197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
PARALLEL GROUP INTERNATIONAL, INC.
By: /s/ Steven M. Abelman
---------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- --------------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer (Principal
- -------------------------------------- Accounting and Financial Officer) and Director
Donald C. Campion
/s/ John H. Ferguson Director
- --------------------------------------
John H. Ferguson
II-10
198
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
LASERWELD INTERNATIONAL, L.L.C.
By: Lobdell Emery Corporation, its sole member
By: /s/ Steven M. Abelman
-------------------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- --------------------------------------
Lobdell
Steven M. Abelman Emery Corporation
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer (Principal
- -------------------------------------- Accounting and Financial Officer) and Director of Lobdell
Donald C. Campion Emery Corporation
/s/ John H. Ferguson Director of Lobdell Emery Corporation
- --------------------------------------
John H. Ferguson
II-11
199
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
CONCEPT MANAGEMENT CORPORATION
By: /s/ Steven M. Abelman
-------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- -------------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer
- ------------------------------------- (Principal Accounting and Financial Officer) and Director
Donald C. Campion
/s/ John H. Ferguson Director
- -------------------------------------
John H. Ferguson
II-12
200
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
LEWIS EMERY CAPITAL CORPORATION
By: /s/ Steven M. Abelman
-------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- -----------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer
- ----------------------------------- (Principal Accounting and Financial Officer) and Director
Donald C. Campion
/s/ John H. Ferguson Director
- -----------------------------------
John H. Ferguson
II-13
201
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
HOWELL INDUSTRIES, INC.
By: /s/ Steven M. Abelman
-------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- -----------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer
- ----------------------------------- (Principal Accounting and Financial Officer) and Director
Donald C. Campion
/s/ John H. Ferguson Director
- -----------------------------------
John H. Ferguson
II-14
202
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Troy and
State of Michigan on June 25, 1998.
RPI HOLDINGS, INC.
By: /s/ Steven M. Abelman
--------------------------------
Steven M. Abelman, President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Selwyn
Isakow and Rex E. Schlaybaugh, Jr., and each of them, his attorneys-in-fact for
him in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitute or substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 25, 1998.
SIGNATURE TITLE
--------- -----
/s/ Steven M. Abelman President (Principal Executive Officer) and Director
- -----------------------------------
Steven M. Abelman
/s/ Donald C. Campion Vice President-Chief Financial Officer, Treasurer
- ----------------------------------- (Principal Accounting and Financial Officer) and Director
Donald C. Campion
/s/ John H. Ferguson Director
- -----------------------------------
John H. Ferguson
II-15
203
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
======= ===== == ==
S-1
204
EXHIBIT INDEX
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 Articles of Incorporation of Lobdell Emery Corporation
(previously filed as Exhibit 3.2 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
3.3 Articles of Incorporation of BMG North America Limited
(previously filed as Exhibit 3.3 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
3.4 Articles of Incorporation of BMG Holdings, Inc. (previously
filed as Exhibit 3.4 to the Registrant's Registration
Statement on Form S-4, File No. 333-32975, and incorporated
herein by reference)
3.5 Articles of Incorporation of Winchester Fabrication
Corporation (previously filed as Exhibit 3.5 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
3.6 Articles of Incorporation of Creative Fabrication Corporation
(previously filed as Exhibit 3.6 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
3.7 Articles of Incorporation of Parallel Group International,
Inc. (previously filed as Exhibit 3.7 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
3.8 Articles of Organization of Laserweld International, L.L.C.
(previously filed as Exhibit 3.8 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
E-1
205
Exhibit No. Description
- ----------- -----------
3.9 Articles of Incorporation of Concept Management Corporation
(previously filed as Exhibit 3.9 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
3.10 Articles of Incorporation of Lewis Emery Capital Corporation
(previously filed as Exhibit 3.10 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
3.11 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)
3.12 Bylaws of Lobdell Emery Corporation (previously filed as
Exhibit 3.12 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
3.13 Bylaws of BMG North America Limited (previously filed as
Exhibit 3.13 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
3.14 Bylaws of BMG Holdings, Inc. (previously filed as Exhibit 3.14
to the Registrant's Registration Statement on Form S-4, File
No. 333-32975, and incorporated herein by reference)
3.15 Bylaws of Winchester Fabrication Corporation (previously filed
as Exhibit 3.15 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
3.16 Bylaws of Creative Fabrication Corporation (previously filed
as Exhibit 3.16 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
3.17 Bylaws of Parallel Group International, Inc. (previously filed
as Exhibit 3.17 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
3.18 Bylaws of Concept Management Corporation (previously filed as
Exhibit 3.18 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
3.19 Bylaws of Lewis Emery Capital Corporation (previously filed as
Exhibit 3.19 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
3.20 *Articles of Incorporation of RPI Holdings, Inc.
3.21 *Bylaws of RPI Holdings, Inc.
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 Security Agreement between the Company and NBD Bank, as agent,
dated June 24, 1997 (previously filed as Exhibit 4.3 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
4.4 Security Agreement between 829500 Ontario Limited and First
Chicago NBD Bank Canada dated June 24, 1997 (previously filed
as Exhibit 4.4 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
E-2
206
Exhibit No. Description
- ----------- -----------
4.5 Security Agreement between 976459 Ontario Limited and First
Chicago NBD Bank Canada dated June 24, 1997 (previously filed
as Exhibit 4.5 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.6 Security Agreement between BMG Holdings, Inc. and First
Chicago NBD Bank Canada dated June 24, 1997 (previously filed
as Exhibit 4.6 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.7 Security Agreement between BMG North America Limited and First
Chicago NBD Bank Canada dated June 24, 1997 (previously filed
as Exhibit 4.7 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.8 Security Agreement among Lobdell Emery and its subsidiaries
and NBD Bank, as agent, dated June 24, 1997 (previously filed
as Exhibit 4.8 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.9 Guarantee Agreement among 829500 Ontario Limited, 976459
Ontario Limited, BMG Holdings, Inc. and NBD Bank, as agent,
dated June 24, 1997 (previously filed as Exhibit 4.9 to the
Registrant's Registration Statement on Form S-4, File No.
333-32975, and incorporated herein by reference)
4.10 Guarantee Agreement between BMG North America Limited and NBD
Bank, as agent, dated June 24, 1997 (previously filed as
Exhibit 4.10 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.11 Guarantee Agreement among Lobdell Emery and its subsidiaries
and NBD Bank, as agent, dated June 24, 1997 (previously filed
as Exhibit 4.11 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.12 Pledge Agreement and Irrevocable Proxy between the Company and
NBD Bank, as agent, dated June 24, 1997 (previously filed as
Exhibit 4.12 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.13 Pledge Agreement and Irrevocable Proxy between Lobdell Emery
and NBD Bank, as agent, dated June 24, 1997 (previously filed
as Exhibit 4.13 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.14 Pledge Agreement and Irrevocable Proxy between Concept
Management Corporation and NBD Bank, as agent, dated June 24,
1997 (previously filed as Exhibit 4.14 to the Registrant's
Registration Statement on Form S-4, File No. 333-32975, and
incorporated herein by reference)
4.15 Subrogation and Contribution Agreement among the Company and
the Guarantors, dated June 24, 1997 (previously filed as
Exhibit 4.15 to the Registrant's Registration Statement on
Form S-4, File No. 333-32975, and incorporated herein by
reference)
4.16 Registration Rights Agreement dated April 1, 1998 by and among
the Company, the Subsidiary Guarantors and the Initial
Purchaser (previously filed as Exhibit 4.3 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended March 31,
1998, and incorporated herein by reference)
5.1 *Opinion of Dykema Gossett PLLC
5.2 *Opinion of Fasken Campbell Godfrey
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)
E-3
207
Exhibit No. Description
- ----------- -----------
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)
10.10 Amendment to Management Agreement, dated November 24, 1997
(previously filed as Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1998,
and incorporated herein by reference)
10.11 Form of Purchase Agreement among the Company and the Initial
Purchasers of the 10 1/8% Senior Subordinated Notes
(previously filed as Exhibit 10.11 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1998,
and incorporated herein by reference)
12 Statement regarding computation of ratios (previously filed as
Exhibit 12 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1998, and incorporated herein
by reference)
21 Subsidiaries of the Registrant (previously filed as Exhibit 21
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 1998, and incorporated herein by
reference)
23.1 *Consent of Price Waterhouse LLP
23.2 *Consent of Price Waterhouse LLP
23.3 *Consent of Price Waterhouse LLP
23.4 *Consent of Price Waterhouse LLP
23.5 *Consent of Deloitte & Touche
23.6 *Consent of Coopers & Lybrand L.L.P.
23.7 *Consent of Dykema Gossett PLLC (included in Exhibit 5.1
hereof)
23.8 *Consent of Fasken Campbell Godfrey (included in Exhibit 5.2
hereof)
E-4
208
Exhibit No. Description
- ----------- -----------
24 *Powers of Attorney (included on signature pages to this
Registration Statement)
25 Form T-1 Statement of Eligibility and Qualification on Form
T-1 of U.S. Bank Trust, National Association (formerly known
as First Trust National Association) (previously filed as
Exhibit 25 to the Registrant's Registration Statement on Form
S-4, File No. 333-32975, and incorporated herein by reference)
27 Financial Data Schedule (previously filed as Exhibit 27 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998, and incorporated herein by reference)
99.1 *Form of Letter of Transmittal
99.2 *Form of Notice of Guaranteed Delivery
- ----------
* Filed herewith
E-5