FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 0-21139
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4508 IDS CENTER 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
(612) 342-2311
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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The number of shares outstanding of the Registrant's Class A common stock, par
value $.01 per share, at October 16, 1997 was 3,881,720 shares. The number of
shares outstanding of the Registrant's Class B common stock, par value $.01 per
share, at October 16, 1997 was 4,926,992 shares.
ITEM 1 - FINANCIAL INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Three Months Ended September 30,
------------------------------
1997 1996
---------- ----------
(Note 3)
Revenues $ 101,862 $ 57,130
Cost of sales 86,605 50,010
--------- ---------
Gross profit 15,257 7,120
Selling, general and administrative expenses 7,305 3,651
Amortization expense 1,032 219
--------- ---------
Operating income 6,920 3,250
Interest expense, net 2,299 387
--------- ---------
Income before provision for income taxes 4,621 2,863
Provision for income taxes 1,964 1,117
--------- ---------
Net income $ 2,657 1,746
--------- ---------
--------- ---------
Net income per common and common
equivalent share $ 0.30 $ 0.25
--------- ---------
--------- ---------
Weighted average common and common
equivalent shares outstanding 8,874 6,955
--------- ---------
--------- ---------
The accompanying notes are an integral
part of these condensed consolidated statements.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Nine Months Ended September 30,
------------------------------
1997 1996
---------- ----------
(Note 3)
Revenues $ 324,579 $ 184,487
Cost of sales 275,147 159,151
--------- ---------
Gross profit 49,432 25,336
Selling, general and administrative expenses 21,134 11,237
Amortization expense 2,806 691
--------- ---------
Operating income 25,492 13,408
Interest expense, net 6,152 2,287
--------- ---------
Income before provision for income taxes 19,340 11,121
Provision for income taxes 8,039 4,421
--------- ---------
Net income $ 11,301 $ 6,700
--------- ---------
--------- ---------
Net income per common and common
equivalent share $ 1.27 $ 1.18
--------- ---------
--------- ---------
Weighted average common and common
equivalent shares outstanding 8,864 5,669
--------- ---------
--------- ---------
The accompanying notes are an integral
part of these condensed consolidated statements.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
September 30, December 31,
Assets 1997 1996
- ----------------------------------------- ------------- ------------
(unaudited)
Current assets:
Cash and cash equivalents $ 5,420 $ 1,667
Accounts receivable, net 83,921 49,490
Inventories 29,932 18,093
Other current assets 17,325 14,678
---------- ----------
Total current assets 136,598 83,928
Property, plant and equipment, net 75,295 47,347
Goodwill and other assets, net 183,094 114,854
---------- ----------
$ 394,987 $ 246,129
---------- ----------
---------- ----------
Liabilities and Stockholders' Investment
- -----------------------------------------
Current liabilities:
Current maturities of long-term debt $ 2,616 $ 80
Accounts payable 50,613 30,230
Accrued liabilities 34,752 26,090
---------- ----------
Total current liabilities 87,981 56,400
Long-term debt, net of current maturities 172,807 77,376
Other noncurrent liabilities 37,390 24,986
---------- ----------
Stockholders' investment:
Preferred stock -- --
Common stock - Class A 39 38
Common stock - Class B 49 50
Additional paid-in capital 63,375 63,061
Retained earnings 35,687 24,386
Cumulative translation adjustment (2,194) -
Subscriptions receivable (147) (168)
---------- ----------
Total stockholders' investment 96,809 87,367
---------- ----------
$ 394,987 $ 246,129
---------- ----------
---------- ----------
The accompanying notes are an integral
part of these condensed consolidated balance sheets.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS - UNAUDITED)
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- -----------
OPERATING ACTIVITIES:
Net income $ 11,301 $ 6,700
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 9,170 4,677
Deferred income tax provision -- 2,218
Changes in other operating items (24,379) (1,169)
--------- ---------
Net cash provided by (used in) operating activities (3,908) 12,426
--------- ---------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (64,273) -
Capital expenditures, net (6,157) (3,115)
Other, net - (3,211)
--------- ---------
Net cash used in investing activities (70,430) (6,326)
--------- ---------
FINANCING ACTIVITIES:
Net proceeds from Offering -- 49,576
Borrowings under revolving credit facility 234,770 71,250
Repayment of revolving credit facility (153,042) (81,000)
Repayments of debt (3,789) (41,557)
Other, net 343 (20)
--------- ---------
Net cash provided by (used in) financing activities 78,282 (1,751)
--------- ---------
EFFECT OF EXCHANGE RATE ON CASH (191) -
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,753 4,349
CASH AND CASH EQUIVALENTS:
Beginning of period 1,667 1,732
--------- ---------
End of period $ 5,420 $ 6,081
--------- ---------
--------- ---------
The accompanying notes are an integral
part of these condensed consolidated statements.
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DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed consolidated financial statements have been
prepared by Dura Automotive Systems, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of such financial statements. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Although the
Company believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these condensed consolidated
financial statements be read in conjunction with the audited financial
statements and the notes thereto included in the Company's 1996 Annual
Report to Stockholders.
Revenues and operating results for the three and nine months ended
September 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
2. Inventories consisted of the following (in thousands):
Sept. 30, 1997 Dec. 31, 1996
-------------- -------------
Raw materials $15,297 $ 9,384
Work in process 9,885 4,767
Finished goods 4,750 3,942
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$29,932 $18,093
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------- -------
3. In October 1996, the Company acquired the parking brake business of
Rockwell Light Vehicle Systems France S.A. (the French Operations). The
aggregate purchase price was approximately $3.75 million. The parking
brake business is operated from a facility in Cluses, France. The pro
forma effects of this transaction are not material to the Company's results
of operations for the three and nine months ended September 30, 1996.
In December 1996, the Company acquired all of the outstanding common stock
of KPI Automotive Group (KPI) from Sparton Corporation for approximately
$78.8 million in cash. KPI manufactures shifter systems, parking brake
mechanisms, brake pedals, underbody spare tire carriers and airbag
components for the North American automotive industry. The acquisition was
financed with proceeds from borrowings under the Company's bank credit
agreement.
In January 1997, the Company acquired all of the outstanding common stock
of the VOFA Group (VOFA) for approximately $38 million in cash and assumed
indebtedness. The purchase was financed with borrowings under the
Company's bank credit agreement. The
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Company will also make additional payments of up to approximately $6
million if certain operating targets are achieved by VOFA in the first
three years following the acquisition. VOFA manufactures shifter cables,
brake cables and other light duty cables for the European automotive and
industrial markets from facilities in Dusseldorf, Gehren and Daun, Germany
and Barcelona, Spain.
In May 1997, the Company acquired the automotive parking brake business
from Excel Industries, Inc. for approximately $2.9 million. The pro forma
effects of this transaction are not material to the Company's results of
operations for the three and nine months ended September 30, 1996 and the
nine months ended September 30, 1997.
In August 1997, the Company acquired GT Automotive Systems, Inc. (GT
Automotive), headquartered in Livonia, Michigan. GT Automotive has
manufacturing facilities in Livonia and Warren, Michigan and Windsor and
Brantford, Ontario, Canada, with annual revenues of approximately $70
million. Initial consideration for the acquisition of GT Automotive was
$45 million in cash and assumed indebtedness. The acquisition was financed
with proceeds from borrowings under the Company's bank credit agreement, as
amended.
The accompanying unaudited consolidated pro forma results of operations for
the nine months ended September 30, 1997 gives effect to the acquisition of
GT Automotive as if it was completed at the beginning of the period. The
unaudited consolidated pro forma results of operations for the nine months
ended September 30, 1996 give effect to the Company's August 1996 initial
public offering of 3,795,000 shares of Class A common stock and the
acquisitions of KPI, VOFA and GT Automotive as if they were completed at
the beginning of the period. The unaudited pro forma financial information
does not purport to represent what the Company's results of operations
would actually have been if such transactions had occurred at such date or
to project the Company's results of future operations (in thousands, except
per share data):
Nine Months Ended September 30,
------------------------------
1997 1996
-------- --------
Revenues $365,220 $359,307
-------- --------
-------- --------
Operating income $ 28,497 $ 25,138
-------- --------
-------- --------
Net income $ 11,520 $ 9,298
-------- --------
-------- --------
Weighted average common
and common equivalent
shares outstanding 8,864 8,811
-------- --------
-------- --------
Net income per common
and common equivalent
share $ 1.30 $ 1.06
-------- --------
-------- --------
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4. Long-term debt consisted of the following (in thousands):
Sept. 30, Dec. 31,
1997 1996
-------- --------
Revolving credit facility $158,728 $77,000
Other 16,695 456
-------- -------
175,423 77,456
Less-current maturities (2,616) (80)
-------- -------
$172,807 $77,376
-------- -------
-------- -------
The Company's bank credit agreement, as amended, consists of a revolving
credit facility with a committed amount of $200 million, is collateralized
by substantially all assets of the Company, matures in August 2002 and
bears interest at the lender's prevailing reference rate plus .5% or the
Eurocurrency rate plus .5%, at the discretion of the Company. The
agreement also provides the Company with the ability to denominate a
portion of its borrowings in foreign currencies up to an amount equivalent
to $50 million ($30 million sub-limit for Deutsche Marks). As of September
30, 1997, $154.7 million of borrowings outstanding under the revolving
credit facility are denominated in US dollars and $4.0 million of
borrowings are denominated in Deutsche Marks. The bank credit agreement
requires the Company to pay a facility fee on the commitment amount of .25%
and contains various restrictive covenants, which, among other matters,
require the Company to maintain certain financial ratios, including minimum
liquidity and interest coverage. The bank credit agreement also limits
additional indebtedness, investments, rental obligations and cash
dividends. The Company was in compliance with all such covenants at
September 30, 1997. In addition, the Company has outstanding letters of
credit in the amount of approximately $3.0 million expiring through July
2000.
5. During March 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings
per Share", which requires the disclosure of basic earnings per share and
diluted earnings per share. The Company expects to adopt SFAS 128 in
fiscal 1998 and anticipates it will not have a material impact on
previously reported earnings per share.
6. Supplemental cash flow information (in thousands):
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Cash paid for -
Interest $ 2,031 $ 759 $ 5,552 $ 2,908
Income taxes 1,680 910 3,974 1,962
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1996
REVENUES -- Revenues for the three months ended September 30, 1997 increased
by $44.8 million, or 78.5%, to $101.9 million from $57.1 million for the three
months ended September 30, 1996. The increase in revenues relates primarily to
the acquisitions of KPI Automotive Group (KPI) in December 1996, the VOFA Group
(VOFA) in January 1997 and GT Automotive Systems, Inc. (GT Automotive) in August
1997.
COST OF SALES -- Cost of sales for the three months ended September 30, 1997
increased by $36.6 million, or 73.2%, to $86.6 million from $50.0 million for
the three months ended September 30, 1996. Cost of sales as a percentage of
revenues for the three months ended September 30, 1997 was 85.0% compared to
87.6% for the three months ended September 30, 1996. Lower margins from the
KPI, VOFA and GT Automotive acquisitions were offset by higher incremental
margins on certain new business, continued cost reduction efforts, including
cellular manufacturing and plant consolidation, and the effects of cost
reduction opportunities at KPI, VOFA and GT Automotive.
S, G & A EXPENSES -- Selling, general and administrative expenses doubled from
1996 levels to $7.3 million for the three months ended September 30, 1997 from
$3.7 million for the three months ended September 30, 1996. The increase was
due to increased support for worldwide engineering and marketing efforts
partially offset by initial consolidation opportunities at KPI, VOFA and GT
Automotive. As a percentage of revenues, selling, general and administrative
expenses were 7.2% for the three months ended September 30, 1997 compared to
6.5% for the three months ended September 30, 1996.
INTEREST EXPENSE -- Interest expense for the three months ended September 30,
1997 was $2.3 million compared to $387,000 for the three months ended September
30, 1996. The increase was due principally to borrowings incurred related to
the acquisitions of KPI, VOFA and GT Automotive.
INCOME TAXES -- The effective income tax rate was 42.5% for the three months
ended September 30, 1997 and 39.0% for the three months ended September 30,
1996. The effective rates differed from the statutory rates as a result of
higher foreign tax rates and the effects of state taxes and non-deductible
goodwill amortization.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
REVENUES - Revenues for the nine months ended September 30, 1997 increased by
$140.1 million, or 75.9%, to $324.6 million from $184.5 million for the nine
months ended September 30, 1996. The increase in revenues relates primarily to
the acquisitions of KPI, VOFA and GT Automotive.
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COST OF SALES - Cost of sales for the nine months ended September 30, 1997
increased by $115.9 million, or 72.8%, to $275.1 million from $159.2 million for
the nine months ended September 30, 1996. Cost of sales as a percentage of
revenues for the nine months ended September 30, 1997 was 84.8% compared to
86.3% for the nine months ended September 30, 1996. Lower margins from the KPI,
VOFA and GT Automotive acquisitions were offset by higher incremental margins on
certain new business, continued cost reduction efforts, including cellular
manufacturing and plant consolidation, and the initial effects of cost reduction
opportunities at KPI, VOFA and GT Automotive.
S, G & A EXPENSES - Selling, general and administrative expenses increased by
$9.9 million, or 88.4%, to $21.1 million for the nine months ended September 30,
1997 from $11.2 million for the nine months ended September 30, 1996. The
increase is due primarily to incremental costs from the acquisitions of KPI,
VOFA and GT Automotive. As a percentage of revenues, selling, general and
administrative expenses were 6.5% for the nine months ended September 30, 1997
compared to 6.1% for the nine months ended September 30, 1996.
INTEREST EXPENSE - Interest expense for the nine months ended September 30, 1997
was $6.2 million compared to $2.3 million for the nine months ended September
30, 1996. The increase was due principally to borrowings incurred related to
the acquisitions of KPI, VOFA and GT Automotive.
INCOME TAXES - The effective income tax rate was 41.6% for the nine months ended
September 30, 1997 and 39.8% for the nine months ended September 30, 1996. The
effective rates differed from the statutory rates primarily as a result of
higher foreign tax rates, state taxes and non-deductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
The Company's bank credit agreement, as amended, consists of a $200 million
revolving credit facility which expires in August 2002. The agreement also
provides the Company with the ability to denominate a portion of its borrowings
in foreign currencies up to an amount equivalent to $50 million ($30 million
sub-limit for Deutsche marks). As of September 30, 1997, there was $158.7
million outstanding under this revolving credit facility, including $4.0 million
which is denominated in Duetsche Marks. The bank credit agreement requires the
Company to pay a facility fee on the commitment amount of .25% and contains
various restrictive covenants, which, among other matters, require the Company
to maintain certain financial ratios, including minimum liquidity and interest
coverage. The bank credit agreement also limits additional indebtedness,
investments, rental obligations and cash dividends. The Company was in
compliance with all such covenants at September 30, 1997. In addition, the
Company has outstanding letters of credit in the amount of approximately $3.0
million expiring through July 2000.
In October 1996, the Company acquired the parking brake business of Rockwell
Light Vehicle Systems France S.A. The aggregate purchase price was
approximately $3.75 million. The parking brake business is operated from a
facility in Cluses, France.
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In December 1996, the Company acquired all of the outstanding common stock of
KPI from Sparton Corporation for approximately $78.8 million in cash. KPI
manufactures shifter systems, parking brake mechanisms, brake pedals, underbody
spare tire carriers and airbag components for the North American automotive
industry from facilities in Indiana and Michigan. The acquisition was financed
with proceeds from borrowings under the Company's bank credit agreement.
In January 1997, the Company acquired all of the outstanding common stock of the
VOFA for approximately $38 million in cash and assumed indebtedness. The
Company will also make additional payments of up to approximately $6 million if
certain operating targets are achieved by VOFA in the first three years
following the acquisition. VOFA manufactures shifter cables, brake cables and
other light duty cables for the European automotive and industrial markets from
facilities in Dusseldorf, Gehren and Daun, Germany and Barcelona, Spain.
In May 1997, the Company acquired the automotive parking brake business from
Excel for approximately $2.9 million. The acquisition was financed with
proceeds from borrowings under the Company's bank credit agreement.
In August 1997, the Company acquired GT Automotive headquartered in Livonia,
Michigan. GT Automotive has manufacturing facilities in Livonia and Warren,
Michigan and Windsor and Brantford, Ontario, Canada, with annual revenues of
approximately $70 million. Initial consideration for GT Automotive was $45
million in cash and assumed indebtedness. The acquisition was financed with
proceeds from borrowings under the Company's bank credit agreement, as amended.
The Company believes borrowings under its bank credit agreement, as amended,
together with funds generated by the Company's operations, will provide the
Company with sufficient liquidity and capital resources for working capital,
capital expenditures and other needs. However, any additional significant
acquisitions may require additional debt or equity financing. The Company
believes additional financing will be available from bank lenders, through the
issuance of public or private debt securities or through additional offerings of
equity securities.
The Company's principal source of funds has been, and is anticipated to be, its
cash flows from operations. During the nine months ended September 30, 1997,
the Company generated cash from operations of $20.5 million before the effects
of changes in working capital compared to $13.6 million in 1996. The Company
estimates that it will fund approximately $6 million in capital expenditures for
the remaining months of 1997. These capital expenditures will be used primarily
for the purchase of machinery and equipment to support new business awards, as
well as to finance continued cost reduction efforts.
EFFECTS OF INFLATION
Inflation generally affects the Company by increasing the interest expense of
floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. Management believes that inflation has not significantly
effected the Company's business over the past 12 months. Prevailing industry
practices have not allowed the Company to pass such costs on to its customers.
Rather, the effects of inflation must be offset by productivity improvements and
volume from new business awards.
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PART II. OTHER INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
Other than as reported in the Company's 1996 Annual Report on Form
10-K under the caption "Legal Proceedings," the Company is not
currently a party to any material pending legal proceedings, other
than routine matters incidental to the business of the Company.
Item 2. Change in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
Sequential
(a) Exhibits: Page Number
-----------
4.1 Form of Amendment No. 1, dated July 1, 1997,
to the Dura Automotive Systems, Inc. Amended
and Restated Stockholders Agreement dated
August 13, 1996.
11 Statements of Computation of Earnings Per
Share For the Three and Nine Months Ended
September 30, 1997 and 1996.
27 Financial Data Schedule
(b) On September 12, 1997, the Company filed Form 8-K
reporting under Item 2 of that Report the
acquisition of GT Automotive Systems, Inc. on
August 29, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: November 12, 1997 By /s/ Stephen E.K. Graham
--------------------------
Stephen E.K. Graham
Vice President, Chief
Financial Officer
(principal accounting and
financial officer)
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