1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
--------------------- -------------------
Commission file number 333-75849
OXFORD AUTOMOTIVE, INC.
(Exact name of Registrant as specified in its charter)
MICHIGAN 38-3262809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 STEPHENSON HIGHWAY, TROY MICHIGAN 48083
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code: (248) 577-1400
Former Name, Former Address and Former Fiscal Year, if changed Since Last
Report:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
309,750 shares of the registrant's Common Stock
were outstanding as of October 31, 1999
1
2
PART I. FINANCIAL INFORMATION
OXFORD AUTOMOTIVE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
Net sales $201,086 $118,508 $407,447 $258,410
Cost of sales 177,349 109,296 362,381 237,559
-------------------- -------------------- -------------------- ---------------------
Gross profit 23,737 9,212 45,066 20,851
Selling, general and
administrative expenses 11,279 7,007 23,802 14,806
Restructuring reserve 1,176 1,176
Loss (gain) on sale of equipment 208 (297)
-------------------- -------------------- -------------------- ---------------------
Operating income 12,250 1,029 21,561 4,869
Other income (expense):
Interest expense (8,126) (4,724) (15,241) (9,137)
Other (183) 71 132 394
-------------------- -------------------- -------------------- ---------------------
Income (loss) before income taxes 3,941 (3,624) 6,452 (3,874)
Income taxes (1,668) 1,450 (2,757) 1,550
-------------------- -------------------- -------------------- ---------------------
Net income (loss) 2,273 (2,174) 3,695 (2,324)
Accrued dividends and accretion on
redeemable preferred stock 330 330 660 660
-------------------- -------------------- -------------------- ---------------------
Net income (loss) applicable to
common stock $1,943 ($2,504) $3,035 ($2,984)
==================== ==================== ==================== =====================
Net income (loss) per share
(basic and diluted) $6.27 ($8.08) 9.80 ($9.63)
==================== ==================== ==================== =====================
Weighted average shares outstanding 309,750 309,750 309,750 309,750
==================== ==================== ==================== =====================
See accompanying Notes to Consolidated Financial Statements.
2
3
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, March 31,
1999 1999
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 24,932 $ 19,008
Accounts receivable, trade 138,140 152,281
Inventory 55,406 48,104
Reimbursable tooling 27,849 23,201
Deferred income taxes 2,262 3,669
Prepaid expenses and other
current assets 20,340 18,225
------------------- --------------------
Total Current Assets 268,929 264,488
Other noncurrent assets 27,788 29,677
Deferred income taxes 25,684 25,366
Property, plant and equipment, net 260,578 223,399
------------------- --------------------
Total Assets $582,979 $542,930
=================== ====================
LIABILITIES SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $117,357 $109,343
Restructuring reserve 8,832 8,747
Other current liabilities 51,816 54,444
Current portion of long-term debt 11,233 11,504
------------------- --------------------
Total Current Liabilities 189,238 184,038
LONG TERM LIABILITIES
Pension liability 9,697 7,069
Post retirement medical benefits 44,355 42,703
Deferred taxes 9,994 11,867
Other noncurrent 7,461 3,648
Long term debt 276,883 252,358
------------------- --------------------
Total Liabilities 537,628 501,683
3
4
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, March 31,
1999 1999
(unaudited)
Redeemable Series A $3.00
Cumulative preferred stock,
$100 stated value - 457,541
shares authorized, 397,539 shares
issued and outstanding at
September 30, 1999, and
March 31, 1999 40,383 40,319
SHAREHOLDERS' EQUITY
Common stock 1,050 1,050
Accumulated other
comprehensive income (loss) (5,700) (6,705)
Retained earnings 9,618 6,583
------------ -------------
4,968 928
------------ -------------
Total liabilities &
shareholders' equity $582,979 $542,930
============ =============
See accompanying Notes to Consolidated Financial Statements.
4
5
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Six For the Six
Months Ended Months Ended
September 30, September 30,
1999 1998
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net income $ 3,695 ($ 2,324)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Depreciation and amortization 15,784 13,169
Deferred income taxes (553) (1,916)
Gain on sale of equipment (297)
Changes in operating assets and
liabilities affecting cash
Accounts receivable, trade 21,608 (1,920)
Inventories (200) (1,476)
Reimbursable tooling (4,680) (3,580)
Prepaid expenses and other assets (8,793) (1,806)
Accounts payable 4,369 (8,853)
Restructuring reserve (3,602) (1,053)
Accrued expenses and other liabilities (7,794) 818
Income taxes payable/refundable (787)
Other noncurrent liabilities 3,073 890
------------ ------------
Net cash provided by (used in) operating
activities 22,610 (8,838)
------------ ------------
INVESTING ACTIVITIES
Purchase of business, net of cash acquired 59 (53,465)
Purchase of property, plant
and equipment (19,770) (15,291)
Proceeds from sale of equipment 3,743
Purchase of marketable securities (887)
------------ ------------
Net cash used in investing activities (15,968) (69,643)
------------ ------------
FINANCING ACTIVITIES
Net proceeds (payments) on borrowings (50) 28,178
Proceeds from borrowing arrangements 37,044
Debt financing costs (647)
Payment of preferred dividends (596) (596)
------------ ------------
Net cash provided by (used in) financing activities (646) 63,979
------------ ------------
5
6
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the Six For the Six
Months Ended Months Ended
September 30, September 30,
1999 1998
(unaudited) (unaudited)
Effect of exchange rate
changes on cash (72) (398)
---------------- ----------------
Net increase (decrease) in cash
and cash equivalents 5,924 (14,900)
Cash and cash equivalents
at beginning of period 19,008 18,321
---------------- ----------------
Cash and cash equivalents
at end of period $24,932 $ 3,421
================ ================
See accompanying notes of Consolidated Financial Statements.
6
7
Oxford Automotive, Inc.
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Oxford
Automotive, Inc. (the "Company") have been prepared in accordance with Rule
10-01 of Regulation S-X and do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. All adjustments, which include only normal recurring adjustments
that are, in the opinion of management, necessary for a fair presentation of the
results of the interim periods have been made. The results of operations for
such interim periods are not necessarily indicative of results of operations for
a full year. The unaudited condensed financial statements should be read in
conjunction with the Company's consolidated audited financial statements and
notes thereto for the year ended March 31, 1999.
2. INVENTORIES (Dollars in thousands)
September 30, March 31,
1999 1999
Raw materials $26,015 $23,154
Finished goods and work-in-process 33,327 28,646
---------------- ----------------
59,342 51,800
LIFO and other reserves (3,936) (3,696)
---------------- ----------------
$55,406 $48,104
================ ================
The Company does not separately identify finished goods from work-in-process.
3. SENIOR SUBORDINATED NOTES
On April 1, 1998 we issued $35.0 million of unsecured 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Series B Notes"). On December 8,
1998, we issued $40.0 million of unsecured 10 1/8% Senior Subordinated Notes due
2007, Series C (the "Series C Notes"). The Series B Notes and Series C Notes are
substantially identical to and rank pari passu in right of payment with the
$125.0 million of unsecured 10 1/8% Senior Subordinated Notes due 2007 issued by
us on June 24, 1997 (the "Series A Notes"). The Series A Notes, the Series B
Notes and the Series C Notes are collectively referred to as the "Notes". The
Notes pay interest semi-annually on June 15 and December 15. The Notes provide
for certain covenants, including limitations on: indebtedness, restricted
payments, distributions, sale of assets, affiliate transactions and merger and
consolidation. We have optional redemption rights beginning June 15, 2002. The
Notes are limited to $250.0 million aggregate principal amount.
On June 9, 1999 we completed an exchange offer for our outstanding Notes.
Pursuant to the exchange offer, all of the Series C Notes and $159.6 million
aggregate principal amount of the Series A and Series B Notes were exchanged for
our registered 10 1/8% Senior Subordinated Notes due 2007, Series D, which are
substantially identical to, and rank pari passu in right of payment with the
Notes.
4. ACQUISITION
On June 28, 1999 we acquired, through a wholly owned, indirect subsidiary, 100%
of the shares of Gebr. Wackenhut GmbH Karosserie-und Fahrzeugfabrik
("Wackenhut"). Wackenhut is a supplier of complex pressings, welded assemblies,
complete truck cabs, cataphoretic coatings and finish paint applications and
operates three facilities in Germany located in the Nagold area near Stuttgart.
Wackenhut is an unrestricted subsidiary under our debt agreements. Pursuant to
the terms of the acquisition, we agreed to pay DM 1 for the Wackenhut shares,
provide DM 5 million in additional paid in capital, restructure approximately DM
63.4 million in
7
8
bank debt, and purchase approximately DM 18.6 million in bank and shareholder
debt for DM 1. The acquisition agreement provides for the restructuring of
Wackenhut's credit facilities and provides additional financing of
approximately DM 16.6 million under a line of credit and up to DM 45.0
million to fund capital expenditures to support plant expansion and
modernization. The purchase price plus direct cost of the acquisition will be
allocated to the assets acquired and liabilities assumed based on their
estimated fair market values at the date of acquisition. The unaudited financial
statements reflect the preliminary allocation of purchase price, as the
allocation has not been finalized.
5. SHAREHOLDERS' EQUITY (In Thousands, Except Per Share Amounts)
Accumulated
Other
Common Comprehensive Retained
Stock Income Earnings Total
------------ -------------------- --------------- --------------
Balances at March 31, 1999 $1,050 ($6,705) $6,583 $ 928
Net income 3,695 3,695
Foreign currency
translation adjustments 1,005 1,005
Accrued dividends and
accretion of redeemable
preferred stock (660) (660)
------------ -------------------- --------------- --------------
Balances at September 30, 1999 $1,050 ($5,700) $9,618 $4,968
============ ==================== =============== ==============
6. COMPREHENSIVE INCOME
The Company's total comprehensive income was as follows:
8
9
Three Months Three months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
Net income (loss) $2,273 ($2,174) 3,695 (2,324)
-------------- -------------- -------------- --------------
Other comprehensive income
(loss), net of tax:
Foreign currency translation adjustment (1,240) (2,983) 1,005 (5,249)
Net unrealized loss on marketable securities 0 (488) (2,406)
-------------- -------------- -------------- --------------
Other comprehensive
income (loss) (1,240) (3,471) 1,005 (7,655)
-------------- -------------- -------------- --------------
Total comprehensive income (loss) $1,033 ($5,645) 3,278 (9,979)
============== ============== ============== ==============
7. CONDENSED CONSOLIDATING INFORMATION
The Notes are guaranteed by certain of our wholly-owned subsidiaries, including
BMG Holdings Inc., Howell Industries, Inc., Lobdell Emery Corporation, Oxford
Suspension, Inc., Oxford Suspension Ltd., and RPI Holdings, Inc. (the "Guarantor
Subsidiaries"). As of September 30, 1999 the Notes were not guaranteed by
certain of our other consolidated subsidiaries, including Oxford Automotive
Europe, Oxford Automotriz de Mexico S.A. de C.V., Oxford Automotive France,
Cofimeta S.A. and Wackenhut (the "Non-Guarantor Subsidiaries"). As of September
30, 1998 the Notes were not guaranteed by Oxford Automotriz de Mexico S.A. de
C.V. Cofimeta was acquired in February 1999, therefore, while it is included in
the consolidated balance sheet ended March 31, 1999, it is excluded from the
reporting for the six and three months ended September 30, 1998. Wackenhut was
acquired June 28,1999, therefore it is excluded from the reporting for the
period ended March 31, 1999 and is included only for the period post acquisition
for the six months ended September 30, 1999.
The guarantee of the Notes by the Guarantor Subsidiaries is full and
unconditional, joint and several. The following unaudited condensed consolidated
financial information presents the financial position, results of operations and
cash flows of (i) the Company as if it accounted for its subsidiaries on the
equity method, (ii) the Guarantor Subsidiaries on a combined basis and (iii) the
Non-Guarantor Subsidiaries. Management does not believe that separate financial
statements of the Guarantor Subsidiaries are material to investors in the Notes.
9
10
CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
ASSETS
Current Assets
Cash and cash
equivalents $12,941 $9,994 $1,997 $ $24,932
Receivables (net) 81 41,773 96,286 138,140
Inventories 20,194 35,212 55,406
Reimbursable tooling 13,970 8,720 5,159 27,849
Deferred income taxes 536 1,726 2,262
Prepaid expenses and
other current assets 1,051 15,023 4,266 20,340
--------------- ----------------- --------------- ---------------- --------------
Total current assets 28,579 95,704 144,646 0 268,929
Other noncurrent assets 10,349 (3,237) 14,693 21,805
Deferred taxes 830 10,602 14,252 25,684
Property, plant and
equipment, net 5,367 67,036 188,175 260,578
Investment in
subsidiaries 93,559 51,149 (138,725) 5,983
--------------- ----------------- --------------- ---------------- --------------
Total assets $138,684 $170,105 $412,915 ($138,725) $582,979
=============== ================= =============== ================ ==============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable 5,130 28,282 83,945 117,357
Intercompany accounts (108,849) (806) 109,655
Restructuring reserve 8,464 368 8,832
Accrued expenses and
other current
liabilities (678) 31,845 20,649 51,816
Current portion
of borrowings 3,250 6,236 1,747 11,233
--------------- ----------------- --------------- ---------------- --------------
Total current liabilities (101,147) 74,021 216,364 0 189,238
10
11
CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Pension liability 2,491 7,206 9,697
Post retirement 44,355 44,355
medical benefits
liability
Deferred income taxes 9,994 9,994
Other non-current
liabilities (10) 5,826 1,645 7,461
Long-term borrowings
less current portion 229,173 47,282 428 276,883
--------------- ------------- --------------- -------------- ---------------
Total liabilities 128,016 129,620 279,992 537,628
Redeemable preferred
stock 40,383 40,383
Shareholder's equity
common stock 1,050 39,882 91,002 (130,884) 1,050
Accumulated other
comprehensive
income (loss) (2,308) (3,392) (5,700)
Retained earnings 9,618 2,911 4,930 (7,841) 9,618
--------------- ------------- --------------- -------------- ---------------
Total shareholders' equity 10,668 40,485 92,540 (138,725) 4,968
Total liabilities and
shareholder's equity $138,684 $170,105 $412,915 ($138,725) $582,979
=============== ============= =============== ============== ===============
11
12
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
Non-guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
ASSETS
Current assets
Cash and cash
equivalents $9,741 $9,158 $109 $ $19,008
Receivables (net) 114 45,345 106,822 152,281
Inventories 14,402 33,702 48,104
Reimbursable tooling 3,010 8,766 11,425 23,201
Deferred income taxes 536 3,133 3,669
Prepaid expenses and
other current assets 2,151 13,174 2,900 18,225
--------------- ----------------- --------------- ---------------- --------------
Total current assets 15,552 90,845 158,091 0 264,488
Other noncurrent assets 10,898 13,572 30,573 55,043
Property, plant and
equipment, net 4,003 28,259 191,137 223,399
Investment in
consolidation
subsidiaries 87,546 45,166 (132,712) 0
--------------- ----------------- --------------- ---------------- --------------
Total assets $117,999 $132,676 $424,967 ($132,712) $542,930
=============== ================= =============== ================ ==============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable 2,046 34,906 72,391 109,343
Intercompany accounts (130,223) 4,573 125,650 0
Restructuring reserve 6,676 2,071 8,747
Accrued expenses and
other current
liabilities 5,432 24,596 24,416 54,444
Current portion
of borrowings 1,877 6,301 3,326 11,504
--------------- ----------------- --------------- ---------------- --------------
Total current liabilities (120,868) 77,052 227,854 0 184,038
12
13
CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED)
MARCH 31, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
Non-guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Pension liability 7,069 7,069
Post retirement
medical benefits
liability 42,703 42,703
Deferred income taxes and other 1,975 13,540 15,515
Long-term borrowings
less current portion 231,234 20,070 1,054 252,358
--------------- ------------- --------------- -------------- ---------------
Total liabilities 110,366 99,097 292,220 501,683
Redeemable preferred
stock 40,319 40,319
Shareholder's equity
common stock 1,050 37,045 91,002 (128,047) 1,050
Accumulated other
comprehensive 0
income (loss) (1,955) (4,750) (6,705)
Retained earnings 6,583 (1,511) 6,176 (4,665) 6,583
--------------- ------------- --------------- -------------- ---------------
Total shareholders' equity 7,633 33,579 92,428 (132,712) 928
Total liabilities and
shareholder's equity $117,999 $132,676 $424,967 ($132,712) $542,930
=============== ============= =============== ============== ===============
13
14
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Sales $ $57,942 $143,144 $201,086
Cost of sales 48,016 129,333 177,349
-------------- -------------------- ---------------- ------------------ ------------------
9,926 13,811 23,737
Gross profit
Selling, general and
administrative
expenses (1,554) 3,380 9,453 11,279
Gain on sale of assets 23 185 208
-------------- -------------------- ---------------- ------------------ ------------------
Operating income 1,554 6,523 4,173 0 12,250
Other income
(expense) 58 (12) (229) (183)
Interest expense (1,292) (1,375) (5,459) (8,126)
-------------- -------------------- ---------------- ------------------ ------------------
Income before
income taxes 320 5,136 (1,515) 0 3,941
Income taxes (128) (2,035) 495 (1,668)
-------------- -------------------- ---------------- ------------------ ------------------
Income before equity
in income of
consolidated
subsidiaries 192 3,101 (1,020) 0 2,273
Equity in income of
consolidated
subsidiaries 2,081 (2,081)
-------------- -------------------- ---------------- ------------------ ------------------
Net income $2,273 $3,101 ($1,020) ($2,081) $2,273
============== ==================== ================ ================== ==================
14
15
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
Sales $ $112,431 $295,016 $407,447
Cost of sales 95,792 266,589 362,381
-------------- -------------------- ---------------- ------------------ ------------------
16,639 28,427 45,066
Gross profit
Selling, general and
administrative
expenses (2,276) 7,306 18,772 23,802
Gain on sale of assets (482) 185 (297)
-------------- -------------------- ---------------- ------------------ ------------------
Operating income 2,276 9,815 9,470 0 21,561
Other income
(expense) 58 16 58 132
Interest expense (2,569) (2,468) (10,204) (15,241)
-------------- -------------------- ---------------- ------------------ ------------------
Income before
income taxes (235) 7,363 (676) 0 6,452
Income taxes 94 (2,941) 90 (2,757)
-------------- -------------------- ---------------- ------------------ ------------------
Income before equity
in income of
consolidated
subsidiaries (141) 4,422 (586) 0 3,695
Equity in income of
consolidated
subsidiaries 3,836 (3,836) 0
-------------- -------------------- ---------------- ------------------ ------------------
Net income $3,695 $4,422 ($586) ($3,836) $3,695
============== ==================== ================ ================== ==================
15
16
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiary Subsidiaries Eliminations Consolidated
Sales $ $2,319 $116,189 $118,508
Cost of sales 2,420 106,876 109,296
-------------- -------------------- ---------------- ------------------ ------------------
(101) 9,313 9,212
Gross profit
Selling, general and
administrative
expenses (1,104) 8,111 7,007
Restructuring provision 1,176 1,176
Gain on sale of assets 0 0
-------------- -------------------- ---------------- ------------------ ------------------
Operating income 1,104 (101) 26 0 1,029
Other income
(expense) 257 (78) (108) 71
Interest expense (1) (4,723) (4,724)
-------------- -------------------- ---------------- ------------------ ------------------
Income before
income taxes 1,361 (180) (4,805) 0 (3,624)
Income taxes (544) 72 1,922 1,450
-------------- -------------------- ---------------- ------------------ ------------------
Income before equity
in income of
consolidated
subsidiaries 817 (108) (2,883) 0 (2,174)
Equity in income of
consolidated
subsidiaries (2,991) 2,991 0
-------------- -------------------- ---------------- ------------------ ------------------
Net income ($2,174) ($108) ($2,883) $2,991 ($2,174)
============== ==================== ================ ================== ==================
16
17
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non-Guarantor Guarantor
Parent Subsidiary Subsidiaries Eliminations Consolidated
Sales $ $2,650 $255,760 $258,410
Cost of sales 3,175 234,384 237,559
-------------- -------------------- ---------------- ------------------ ------------------
(525) 21,376 20,851
Gross profit
Selling, general and
administrative
expenses (1,286) 16,092 14,806
Restructuring provision 1,176 1,176
Gain on sale of assets 0 0
-------------- -------------------- ---------------- ------------------ ------------------
Operating income 1,286 (525) 4,108 0 4,869
Other income
(expense) 257 (69) 206 394
Interest expense (1) (9,136) (9,137)
-------------- -------------------- ---------------- ------------------ ------------------
Income before
income taxes 1,543 (595) (4,822) 0 (3,874)
Income taxes (617) 213 1,954 1,550
-------------- -------------------- ---------------- ------------------ ------------------
Income before equity
in income of
consolidated
subsidiaries 926 (382) (2,868) 0 (2,324)
Equity in income of
consolidated
subsidiaries (3,250) 3,250 0
-------------- -------------------- ---------------- ------------------ ------------------
Net income ($2,324) ($382) ($2,868) $3,250 ($2,324)
============== ==================== ================ ================== ==================
17
18
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non Guarantor Guarantor
Parent Subsidiaries Subsidiaries Consolidated
Net cash provided by
(used in)
operating activities $5,516 $5,185 $11,909 $22,610
--------------- -------------------- ------------------- -------------------
INVESTING ACTIVITIES
Purchase of businesses,
net of cash acquired 59 59
Purchase of property,
plant and equipment (1,628) (7,950) (10,192) (19,770)
Proceeds from sale
of equipment 744 2,999 3,743
--------------- -------------------- ------------------- -------------------
Net cash used in
investing activities (1,628) (7,147) (7,193) (15,968)
--------------- -------------------- ------------------- -------------------
FINANCING ACTIVITIES
Net proceeds (payments)
on borrowings (688) 2,883 (2,245) (50)
Payment of preferred stock dividends (596) (596)
--------------- -------------------- ------------------- -------------------
Net cash provided by
(used in)
financing activities (688) 2,883 (2,841) (646)
--------------- -------------------- ------------------- -------------------
Effect of foreign
currency rate
fluctuation on cash (85) 13 (72)
--------------- -------------------- ------------------- -------------------
Net increase (decrease)
in cash 3,200 836 1,888 5,924
Cash at beginning
of period 9,741 9,158 109 19,008
--------------- -------------------- ------------------- -------------------
Cash at end of period $12,941 $9,994 $1,997 $24,932
=============== ==================== =================== ===================
18
19
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
Non Guarantor Guarantor
Parent subsidiary subsidiaries Consolidated
Net cash provided by
(used in)
operating activities ($18,756) $1,018 $8,900 ($8,838)
---------------- -------------------- -------------------- --------------------
INVESTING ACTIVITIES
Purchase of businesses,
net of cash acquired (53,465) (53,465)
Purchase of property,
plant and equipment (1,434) (961) (12,896) (15,291)
Purchase of Marketable Securities (887) (887)
---------------- -------------------- -------------------- --------------------
Net cash used in
investing activities (55,786) (961) (12,896) (69,643)
---------------- -------------------- -------------------- --------------------
FINANCING ACTIVITIES
Net proceeds (payments)
on borrowings 27,124 1,054 28,178
Principal repayments
on borrowing
arrangements 37,044 37,044
Payment of deferred dividend (596) (596)
Debt financing costs (647) (647)
---------------- -------------------- -------------------- --------------------
Net cash provided by
financing activities 62,925 0 1,054 63,979
---------------- -------------------- -------------------- --------------------
Effect of foreign
currency rate
fluctuation on cash (332) (66) (398)
---------------- -------------------- -------------------- --------------------
Net increase (decrease)
in cash (11,617) (275) (3,008) (14,900)
Cash at beginning
of period 13,673 322 4,326 18,321
---------------- -------------------- -------------------- --------------------
Cash at end of period $2,056 $47 $1,318 $3,421
================ ==================== ==================== ====================
8. RECLASSIFICATIONS Certain amounts in the prior periods' statements have been
reclassified to conform to the current periods' presentation.
19
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three and six months ended September 30, 1999
As compared to the three and six months ended September 30, 1998
Results of Operations
The three and six months ended September 30, 1999 statements of operations for
Oxford Automotive, Inc. (the "Company") include the results of operations for
substantially all subsidiaries, including the following principal operating
subsidiaries, BMG North America Limited, Lobdell Emery Corporation ("Lobdell"),
Howell Industries, Inc. ("Howell"), RPI Holdings, Inc. ("RPIH"), and Oxford
Suspension, Inc. and Oxford Suspension Ltd. (collectively the "Suspension
Division"), Cofimeta S.A. ("Cofimeta"),and Wackenhut GmbH ("Wackenhut"). Lobdell
was acquired on January 10, 1997, Howell was acquired August 13, 1997, RPIH was
acquired on November 25, 1997, the Suspension Division was acquired on April 1,
1998, Cofimeta was acquired on February 5, 1999 and Wackenhut GmbH was acquired
on June 28, 1999. Each was accounted for using the purchase method of
accounting. Based on its acquisition date, the six month statement of operations
for the period ended September 30, 1999 includes operating results for Wackenhut
only for the period following the acquisition. In addition, the three and six
month statement of operations for the period ended September 30, 1998 does not
include the operating results of Cofimeta or Wackenhut.
The following table sets forth, for the periods indicated, certain accounts from
the Company's statement of operations and should be read in conjunction with the
unaudited condensed consolidated financial statements and related notes included
elsewhere herein.
(Dollars in millions)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
Sept 30, 1999 Sept 30, 1998 Sept 30, 1999 Sept 30, 1998
Net sales $201.1 100.0% $118.5 100.0% 407.4 100.0% $258.4 100.0%
Gross profit 23.7 11.8% 9.2 7.8% 45.1 11.1% 20.9 8.1%
Selling, general
and administrative 11.3 5.6% 7.0 5.9% 23.8 5.8% 14.8 5.7%
Operating income 12.3 6.1% 1.0 0.8% 21.6 5.3% 4.9 1.9%
Net interest expense 8.1 4.0% 4.7 4.0% 15.2 3.7% 9.1 3.5%
Net income (loss) 2.3 1.1% (2.2) (1.9)% 3.7 0.9% (2.3) (0.9%)
Memo: EBITDA 20.3 10.1% 7.7 6.5% 37.5 9.2% 18.4 7.1%
NET SALES -- Net sales for the three months ended September 30, 1999 were $201.1
million. This represents an increase of $82.6 million as compared to net sales
for the three months ended September 30, 1998 of $118.5 million. The overall
increase is primarily the result of the European acquisitions made since the
prior year ($53.0 million). The balance of the increase is a result of the start
up of the Saturn LS program, the Windstar mini-van full production schedule, the
continued production strength of the industry-wide light truck and sport utility
20
21
vehicle platforms including strong suspension component sales for the full size
vans. A portion of the increase is due to the negative impact on net sales for
the three months ended September 30, 1998 resulting from the General Motors
strike ($9.6 million). European sales were strong on multi-platform vehicles
such as the Renault Megane and Laguna.
For the year to date period, net sales were $407.4 million, an increase of
$149.0 million as compared to $258.4 million for the same period last year.
Again, the increase is primarily related to the European acquisitions made
during the period ($103.4 million), the impact of the General Motors strike
($18.3 million) and strength of the sport utility, light truck and van segments
of the industry.
GROSS PROFIT -- For the three months ended September 30, 1999, gross profit
increased to $23.7 million or 11.8% of net sales as compared to $9.2 million or
7.8% of net sales for the prior year. The gross profit and gross margin
increases are related to successful product launches, higher achieved gross
margins on value-added product mix, fixed cost reductions achieved as a result
of plant rationalization and gross profit related to the European acquisitions.
In addition, the increase includes the profit impact of the General Motors sales
rebound from the prior year strike. The gross profit and gross margin increases
also reflect the year over year reduction in launch costs and other productivity
improvement efforts such as automation, quick die change and press utilization
improvements.
For the year to date period, gross profit was $45.1 million, an increase of
$24.2 million as compared to $20.9 million for the same period last year. As
explained above, the increase is primarily a result of productivity
improvements, plant fixed cost reduction, incremental profit related to
acquisitions and recovery from the impact of the General Motors strike.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") -- For the three months
ended September 30, 1999, SG&A expenses increased to $11.3 million (5.6% of net
sales), compared to $7.0 million (5.9% of net sales) for the prior year. The
increase in spending can be directly associated with the recent European
acquisitions, including the establishment and staffing of a European technical
center. In addition, we continue to support ongoing and new customer program
launches. Although expenditures have risen, as a percentage of sales they have
declined. This is a reflection of our ability to utilize global engineering
support staff to meet our customers worldwide needs.
For the year to date period, SG&A expenses increased to $23.8 million or 5.8% of
net sales as compared to $14.8 million or 5.7% of net sales for the prior year.
As explained above, the increase is primarily related to the European
acquisitions and global support for customer programs.
OPERATING INCOME - For the three months ended September 30, 1999, operating
income increased to $12.3 million or 6.1% of net sales as compared to $1.0
million or 0.8% of net sales for the prior year. For the year to date period,
operating income was $21.6 million, an increase of $16.7 million as compared to
$4.9 million for the same period last year. The increase is a result of
operating income related to gross margin improvements, SG&A variances as
explained above as well as acquisitions made during the period.
INTEREST EXPENSE - For the three months ended September 30, 1999, net interest
expense was $8.1 million, an increase of $3.4 million, as compared to $4.7
million for the same period last year. The increase can be attributed to
acquisitions during the period, the Series C Senior Subordinated Notes due 2007,
which were issued in December 1998, and the interim financing of customer
tooling.
For the year to date period, net interest expense was $15.2 million, an increase
of $6.1 million as compared to the same period last year. Similar to the three
month period ended September 30, the increase can be attributed to acquisitions
during the period, the Series C Senior Subordinated Notes due 2007 and the
interim financing of customer tooling and new and ongoing customer program
launches.
NET INCOME - For the three months ended September 30, 1999, the Company reported
net income of $2.3 million, an increase of $4.5 million as compared to a prior
year net loss of $2.2 million. The increase in earnings was the result of
overall plant profitability initiatives, the impact of the prior year
General Motors strike and net income generated by acquisitions.
For the year to date period, the Company reported net income of $3.7 million, an
increase of $6.0 million as compared to the prior year. As explained above, the
increase relates primarily to plant operational improvements, net income related
to acquisitions and the impact of the prior year General Motors strike.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
21
22
Net income adjusted for non-cash charges (depreciation and amortization and
deferred taxes) generated approximately $18.9 million of cash for the six months
ended September 30, 1999. Cash increased by $21.1 million during the period
based on a decrease in accounts receivable, inventories and reimbursable
tooling, as well as an increase in accounts payable. The cash increase was
offset by an overall decrease ($17.4 million) in accrued expenses and other
liabilities, gain on sale of equipment, other assets and cash payments related
to restructuring reserves. During the six months ended September 30, 1999, the
Company used approximately $16.0 million for investing activities, including the
acquisition of Wackenhut. These investing activities were supported
substantially by operating cash flows. The cash used in financing activities was
for payments of line of credit borrowings and preferred shareholder dividends.
At September 30, 1999 we had approximately $140.8 million available under our
credit facility with Bank One on behalf of itself and as agent for a syndicate
of other lenders (the "Senior Credit Facility"). At September 30, 1999, we had
no amount outstanding under the line of credit and $4.2 million in outstanding
letters of credit to support certain Industrial Development Revenue Bonds and
workers compensation commitments. The remaining amount of Industrial Revenue
Bonds of $1.4 million will be redeemed in November 1999.
As of the date of its acquisition, Wackenhut carried indebtedness with a face
value of DM 63.4 million. The debt includes a DM 40.0 million term note and a DM
35.0 million revolving line of credit ( DM 23.4 million outstanding at close).
The term note calls for semi-annual principal payments of DM 2.5 million
beginning in March 2004 and has been discounted at a market rate of 10%. For
US GAAP purposes, Wackenhut had outstanding indebtedness of US $24.2 million at
acquisition. We have also secured DM 45.0 million of additional financing to
assist with capital expenditures and future growth. This indebtedness is
nonrecourse with respect to the Company.
We believe the application of the proceeds from our 10 1/8% Senior Subordinated
Notes due 2007 has enhanced our ability to meet our growth and business
objectives. However, interest payments on the notes will represent a significant
liquidity requirement for us. We will be required to make scheduled semi-annual
interest payments on the notes of approximately $10.1 million on June 15 and
December 15 each year until their maturity on June 15, 2007 or until the notes
are redeemed.
Capital expenditures were $19.8 million, or 4.9% of net sales for the six months
ended September 30, 1999 as compared to $15.3 million or 5.9% of net sales for
the six months ended September 30, 1998. The increase of $4.5 million was due
primarily to support customer programs and cost reduction and productivity
improvement projects. Other capital expenditures included health and safety
items, computer and network upgrades and Y2K support.
For fiscal 2000, our capital expenditures are expected to be $39.6 million,
consisting of $24.3 million to support new business and increase capacity, $12.3
million for maintenance, rebuilds and improvements and $3.0 million in other
expenditures, including health, safety and environmental.
We believe that cash generated from operations, together with amounts available
under the Senior Credit Facility will be adequate to meet our debt service
requirements, capital expenditures and working capital needs for the foreseeable
future, although no assurance can be given in this regard. Our future operating
performance and ability to service or refinance our 10 1/8% Senior Subordinated
Notes due 2007 and to extend or refinance our other indebtedness will be subject
to future economic conditions and to financial, business and other factors that
are beyond our control.
RAMOS ARIZPE - MEXICO FACILITY
On March 31, 1999, we entered into a cross-border asset usage facility through a
wholly-owned Mexican subsidiary for the acquisition of new equipment for and
construction of a new facility being built in Ramos Arizpe, Mexico. Under U.S.
Generally Accepted Accounting Principles, this transaction is classified as an
operating lease. The approximately 330,000 sq. ft. facility will support a
General Motors hood, door and underbody assembly program (SUV/ Hybrid vehicle)
slated to begin production in April 2000. The program is expected to generate
approximately $90.0 million of annual sales when in full production. We were
awarded substantially all closure panels and rear underbody components for the
program. Plant rationalization has allowed for the transfer of equipment already
owned to the facility. The lease payments for the facility will be approximately
$6 million per year. The award of the program is in line with our expected
growth into Mexico and is seen as key to our future success in that country.
YEAR 2000
We are aware of the potential impact of the millennium change on business. In
response, we have created a Year 2000 project team to perform inventory,
remediation, and testing of possibly affected systems. The Year 2000 project
team is coordinated at the corporate
22
23
level with support from senior management. Key individuals at the facility level
are executing the Year 2000 efforts. We have also employed some external Year
2000 contractors to assist with compliance in some areas. We are following the
Year 2000 guidelines set forth by the Automotive Industry Action Group ("AIAG")
and are reporting Year 2000 status quarterly to the AIAG.
We have broken the Year 2000 program into the following assessment areas:
business computer systems, desktop computing, network infrastructure, voice
systems, shop floor systems, non-information technology items, and
suppliers/business partners. As it relates to the AIAG areas for evaluation, we
do not have dedicated product-testing facilities nor do our products contain any
computer chips. We have completed Year 2000 remediation in North America and
Europe. We will continue Year 2000 compliance testing throughout 1999 to ensure
that regression does not occur.
We have completed a thorough assessment of all manufacturing, administrative and
management software. We have begun to upgrade certain software modules and/or
code to comply with AIAG Year 2000 guidelines and timing. At the same time, we
are implementing new software in North America and Europe where compliance
through upgrade could not be achieved in either a timely or cost effective
manner. Further, we initiated the move to a common software system as we
continue the implementation effort across all facilities. We recently completed
Year 2000 compliance testing for all of our North American and European
software.
We continue to assess the Year 2000 readiness of our external suppliers,
business partners, and service providers to ensure that business associations
will not be negatively impacted by the Year 2000 date. We will use alternate
sourcing and contingency planning in situations that threaten our ability to
deliver products or conduct business. Since these other companies are in various
stages of Year 2000 readiness, we will be monitoring their progress throughout
1999, assessing associated risks, and taking a course of action to ensure
business continuity.
In addition to efforts of our internal staff, we are using external resources to
complete the project. The cost of external resources for fiscal 1998 totaled
$0.3 million and the total capital spending for fiscal 1998 was $1.4 million, of
which approximately $0.4 million relates to software projects. In fiscal 1999,
the external costs were $0.4 million, which related to remediation activities
derived from Year 2000 testing, and capital expenditures were $0.5 million. For
the year ending March 31, 2000, the external costs for Europe will approximate
$0.5 million, which will relate to any remediation activities derived from Year
2000 testing, and the remaining capital expenditures will approximate $0.5
million.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, we are exposed to market risk
associated with fluctuations in foreign exchange rates and interest rates. We
conservatively manage these risks through the use of derivative financial
instruments in accordance with management's guidelines.
We enter into all hedging transactions for periods consistent with the
underlying exposures. We do not enter into derivative instruments for trading
purposes.
Foreign Exchange. We enter into foreign currency forward contracts to
protect ourselves from adverse currency rate fluctuations on foreign currency
commitments. These commitments are generally for terms of less than one year.
The foreign currency contracts are executed with banks that we believe are
creditworthy and are denominated in currencies of major industrialized
countries. The gains and losses relating to the foreign currency forward and
option contracts are deferred and included in the measurement of the foreign
currency transaction subject to the hedge. We believe that any gain or loss
incurred on foreign currency forward contracts is offset by the direct effects
of currency movements on the underlying transactions.
We have performed a quantitative analysis of our overall currency rate
exposure at September 30, 1999. Based on this analysis, a 10% change in currency
rates would not have a material effect on our earnings.
Interest Rates. We generally manage risk associated with interest rate
movements through the use of or combination of variable and fixed rate debt. Our
exposure as a result of variable interest rates relates primarily to outstanding
floating rate debt instruments that are indexed to U.S. or European Monetary
Union short-term money market rates.
We have performed a quantitative analysis of our overall interest rate
exposure at September 30, 1999. Based on this analysis, a 10% change in the
average cost of our variable rate debt would not have a material effect on our
earnings.
23
24
FORWARD-LOOKING STATEMENTS
This report contains statements relating to such matters as anticipated
financial performance, business prospects, year 2000 issues and other matters
that may be construed as forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. In addition, the
Company may from time to time publish or communicate other statements that could
also be construed to be forward-looking statements. These statements are, or
will be, based on the Company's estimates, assumptions and projections, and are
subject to risks and uncertainties, including those specifically listed below,
that could cause actual results to differ materially from those included in the
forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of operations of the Company include the following: (1)
the original equipment manufacturer ("OEM") supplier industry is highly cyclical
and, in large part, impacted by the strength of the economy generally, by
prevailing interest rates and by other factors which may have an effect on the
level of sales of automotive vehicles; (2) future price reductions, increased
quality standards or additional engineering capabilities may be required by the
OEMs, which are able to exert considerable pressure on their suppliers; (3) the
OEMs may decide to in-source some of the work currently performed by the
Company; (4) work stoppages and slowdowns may be experienced by OEMs and their
Tier 1 suppliers, as a result of labor disputes; (5) there may be a significant
decrease in sales of vehicles using the Company's products or the loss by the
Company of the right to supply any of such products to its major customers; (6)
increased competition could arise in the OEM supplier industry; (7) changing
federal, state, local and foreign laws, regulations and ordinances relating to
environmental matters could affect the Company's operations; and (8) there may
be unfavorable currency exchange rates relative to the U.S. dollar, which could
impact the Company's operations.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders.
Pursuant to a shareholder consent, dated August 9, 1999, in lieu of an
annual shareholder meeting, the existing board of directors of the
registrant was re-elected in its entirety. The written consents of
shareholders holding 239,284 of the registrant's 309,750 shares of
common stock outstanding were received and voted in favor of each
member of the board.
Item 6. Exhibits and Reports on Form 8-K.
(a) A list of Exhibits included as part of this report is set forth in the
Exhibit Index, which immediately precedes such exhibits and is
incorporated herein by reference.
(b) No reports on Form 8-K were filed by the registrant during the three
months ended September 30, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 5, 1999 OXFORD AUTOMOTIVE, INC.
By: /s/ AURELIAN BUKATKO
Aurelian Bukatko
Senior Vice President and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
24
25
EXHIBIT INDEX
EXHIBIT NO DESCRIPTION
4.1 Form of Amended and Restated Pledge Agreement and Irrevocable Proxy in
favor of NBD Bank (now known as Bank One, Michigan)
4.2 Form of Amended and Restated Security Agreement in favor of NBD Bank
(now known as Bank One, Michigan)
4.3 Form of Amended and Restated Security Agreement in favor of First Chicago
NBD Bank, Canada
4.4 Form of Amended and Restated Guaranty Agreement in favor of NBD Bank
(now known as Bank One, Michigan)
4.5 Form of Amended and Restated Guarantee in favor of NBD Bank (now known as
Bank One, Michigan)
27 Financial Data Schedule