FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 0-21139
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4508 IDS CENTER 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
(612) 342-2311
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the Registrant's Class A common stock, par
value $.01 per share, at April 30, 1998 was 4,175,095 shares. The number of
shares outstanding of the Registrant's Class B common stock, par value $.01 per
share, at April 30, 1998 was 4,654,380 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 March 31,
----------------------------
1998 1997
----------- -------------
Revenues $125,746 $107,367
Cost of sales 104,471 90,785
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Gross profit 21,275 16,582
Selling, general and administrative expenses 9,160 7,896
Amortization expense 1,251 883
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Operating income 10,864 7,803
Interest expense, net 2,938 1,896
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Income before provision for income taxes
and minority interest 7,926 5,907
Provision for income taxes 3,274 2,363
Minority interest 76 --
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Net income $ 4,576 $ 3,544
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Basic earnings per share $ 0.52 $ 0.40
-------- --------
-------- --------
Basic shares outstanding 8,826 8,801
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-------- --------
Diluted earnings per share $ 0.52 $ 0.40
-------- --------
-------- --------
Diluted shares outstanding 9,012 8,856
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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)
March 31, December 31,
Assets 1998 1997
- ---------------------------------------- ----------- ------------
(unaudited)
Current assets:
Cash and cash equivalents $ 46,938 $ 4,148
Accounts receivable 89,385 79,032
Inventories 32,404 30,301
Other current assets 24,943 24,800
--------- ---------
Total current assets 193,670 138,281
Property, plant and equipment, net 106,224 101,538
Goodwill, net 177,459 160,063
Other assets, net 23,253 19,382
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$ 500,606 $ 419,264
--------- ---------
--------- ---------
Liabilities and Stockholders' Investment
- ------------------------------------------
Current liabilities:
Current maturities of long-term debt $ 2,193 $ 2,241
Accounts payable 45,153 49,153
Accrued liabilities 43,258 36,583
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Total current liabilities 90,604 87,977
Long-term debt, net of current maturities 192,245 178,081
Other noncurrent liabilities 56,738 51,498
Mandatorily redeemable convertible trust
preferred securities 55,250 --
--------- ---------
Stockholders' investment:
Preferred stock -- --
Common stock - Class A 42 42
Common stock - Class B 46 46
Additional paid-in capital 63,754 63,402
Retained earnings 45,604 41,028
Cumulative translation adjustment (3,677) (2,810)
--------- ---------
Total stockholders' investment 105,769 101,708
--------- ---------
$ 500,606 $ 419,264
--------- ---------
--------- ---------
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)
Three Months Ended March 31,
----------------------------
1998 1997
------------ ------------
OPERATING ACTIVITIES:
Net income $ 4,576 $ 3,544
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities -
Depreciation and amortization 3,067 2,905
Changes in other operating items (9,785) 836
-------- --------
Net cash provided by (used in) operating
activities (2,142) 7,285
-------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (18,578) (18,610)
Capital expenditures, net (3,733) (1,965)
-------- --------
Net cash used in investing activities (22,311) (20,575)
-------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings 67,903 81,542
Repayment of debt (53,403) (64,018)
Proceeds from issuance of common stock 256 --
Proceeds from issuance of preferred securities 52,566 --
Other -- 127
-------- --------
Net cash provided by financing activities 67,322 17,651
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EFFECT OF EXCHANGE RATE ON CASH (79) --
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 42,790 4,360
CASH AND CASH EQUIVALENTS:
Beginning of period 4,148 1,667
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End of period $ 46,938 $ 6,027
-------- --------
-------- --------
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 1997 Annual Report to Stockholders.
Revenues and operating results for the three months ended March 31, 1998
are not necessarily indicative of the results to be expected for the
full year.
2. Inventories consisted of the following (in thousands):
Mar. 31, 1998 Dec. 31, 1997
------------- -------------
Raw materials $17,224 $15,562
Work in process 10,052 9,126
Finished goods 5,128 5,613
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$32,404 $30,301
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3. On March 20, 1998, Dura Automotive Systems Capital Trust (the "Issuer"), a
wholly owned statutory business trust of the Company, completed the
offering of $55.3 million of its 7 1/2% Convertible Trust Preferred
Securities ("Preferred Securities"), resulting in net proceeds of
approximately $52.6 million. The Preferred Securities are redeemable,
in whole or part, on or after March 31, 2001 and all Preferred
Securities must be redeemed no later than March 31, 2028. The Preferred
Securities are convertible, at the option of the holder into Class A
common stock of the Company at a rate of 0.5831 shares of Class A common
stock for each Preferred Security, which is equivalent to a conversion
price of $42 7/8 per share. The net proceeds of the offering were used
to repay outstanding indebtedness during April 1998.
No separate financial statements of the Issuer have been included
herein. The Company does not consider that such financial statements
would be material to holders of Preferred Securities because (i) all of
the voting securities of the Issuer will be owned, directly or
indirectly, by the Company, a reporting company under the Exchange Act,
(ii) the Issuer has no independent operations and exists for the sole
purpose of issuing securities representing undivided beneficial
interests in the assets of the Issuer and investing the proceeds thereof
in 7 1/2% Convertible Subordinated Debentures due March 31, 2028 issued
by the Company and
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(iii) the obligations of the Issuer under the Preferred Securities are fully
and unconditionally guaranteed by the Company.
4. Basic earnings per share were computed by dividing net income by the
weighted average number of Class A and Class B common shares outstanding
during the quarter. Diluted earnings per share include (i) the effects
of outstanding stock options using the treasury stock method and (ii)
the conversion of the Preferred Securities from their date of issuance
on March 20, 1998 as follows (in thousands, except per share data):
Three Months Ended March 31,
----------------------------
1998 1997
-------------- -----------
Net income $ 4,576 $ 3,544
Interest expense on mandatorily redeemable
convertible preferred securities, net of tax 76 --
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Net income applicable to common
stockholders -- diluted $ 4,652 $ 3,544
--------- ---------
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Weighted average number of Class A
common shares outstanding 4,172 3,814
Weighted average number of Class B
common shares outstanding 4,654 4,987
Dilutive effect of outstanding stock options
after application of the treasury stock method 28 55
Dilutive effect of mandatorily redeemable
convertible preferred securities, assuming
conversion 158 --
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Diluted shares outstanding 9,012 8,856
--------- ---------
--------- ---------
Basic earnings per share $ 0.52 $ 0.40
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--------- ---------
Diluted earnings per share $ 0.52 $ 0.40
--------- ---------
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5. Long-term debt consisted of the following (in thousands):
March 31, December 31,
1998 1997
--------- ------------
Revolving credit facility $ 180,193 $ 165,158
Other 14,245 15,164
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194,438 180,322
Less-current maturities (2,193) (2,241)
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Total long-term debt $ 192,245 $ 178,081
--------- ---------
--------- ---------
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As of March 31, 1998, the Company's bank credit agreement, as amended,
consisted of a revolving credit facility with a committed amount of $200
million, was collateralized by substantially all assets of the Company
and interest accrued at the lender's prevailing reference rate plus .5%
or the Eurocurrency rate plus .5%, at the discretion of the Company.
The agreement also provided 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 March 31, 1998, $170.8 million of borrowings outstanding under the
revolving credit facility were denominated in US dollars, $5.6 million
of borrowings were denominated in Canadian dollars and $3.8 million of
borrowings were denominated in Deutsche Marks. The bank credit
agreement required the Company to pay a facility fee on the commitment
amount of .25% and contained various restrictive covenants, which, among
other matters, required the Company to maintain certain financial
ratios, including minimum liquidity and interest coverage. The bank
credit agreement also limited additional indebtedness, investments,
rental obligations and cash dividends. The Company was in compliance
with all such covenants at March 31, 1998. In addition, the Company had
outstanding letters of credit in the amount of approximately $3.0
million expiring through July 2000.
In connection with the acquisition of Trident Automotive plc ("Trident")
discussed below, the Company entered into a new $402.5 million secured
credit facility. The facility provides for revolving credit facilities
of $225 million, term loans of $100 million, an acquisition facility of
$30 million and a twelve month interim loan of $47.5 million. The
interim loan must be repaid with the proceeds of an equity offering or a
debt offering that is junior in priority to the credit facility. The
remaining facilities have terms of five years and bear interest at the
lender's reference rate or Eurocurrency rate. The credit facilities
contain various restrictive covenants which limit additional
indebtedness, investments, rental obligations and cash dividends. The
credit facilities also require the Company to maintain certain financial
ratios including minimum liquidity and interest coverage. Borrowings
are collateralized by the assets of the Company.
6. In May 1997, the Company acquired the automotive parking brake business
from Excel Industries Inc. for approximately $2.9 million. The
acquisition increased the Company's penetration of the parking brake
market and expanded the Company's relationship with Chrysler. The pro
forma effects of this transaction are not material to the Company's
results of operations for the three months ended March 31, 1997.
In August 1997, the Company acquired GT Automotive Systems, Inc. ("GT
Automotive"), for approximately $45.0 million in cash and assumed
indebtedness, plus contingent payments. GT Automotive designs and
manufactures column-mounted shifter systems and turn signal and tilt
lever assemblies for North American OEMs. The acquisition of GT
Automotive, combined with the Company's existing position in
console-based shifter systems, increased the Company's share of the
North American shifter market. In addition, the acquisition added
Nissan as a customer.
In December 1997, the Company purchased approximately 19% of the
outstanding common stock of Thixotech Inc. ("Thixotech") for
approximately $0.5 million. The Company also loaned Thixotech an
additional $2.8 million pursuant to notes which are convertible into
additional common stock of Thixotech at the Company's option. If
exercised, the Company
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could own a majority of Thixotech. Thixotech is currently pursuing the
development of an alternative manufacturing technology for component
parts.
In December 1997, the Company acquired REOM Industries (Aust) Pty Ltd.
("REOM"), an Australian designer and manufacturer of jacks and parking
brakes, for approximately $3.7 million. The acquisition added market
penetration in parking brakes, added a new product (jacks) and
established a presence in the Pacific Rim. The pro forma effects of
this transaction are not material to the Company's results of operations
for the three months ended March 31, 1997.
In March 1998, the Company acquired Universal Tool & Stamping Co., Inc.
("Universal"), a manufacturer of jacks for the North American automotive
industry, for approximately $18.0 million. The acquisition provided the
Company with a market presence for jacks in North America and added
Honda as a significant new customer.
In April 1998, the Company completed its acquisition of Trident.
Trident had revenues of approximately $300 million in 1997, of which 69
percent was derived from sales of cable assemblies, principally to the
automotive OEM market, and the balance from door handle assemblies,
lighting and other products. Approximately 68 percent of Trident's
revenues were generated in North America, 27 percent in Europe and the
remainder in Latin America. Trident's operations are headquartered in
Michigan with manufacturing and technical facilities in Michigan,
Tennessee, Arkansas, Canada, the United Kingdom, Germany, France and
Brazil. Pursuant to the terms of the agreement, the Company acquired
all of the outstanding equity interests of Trident for total
consideration of $87.5 million in cash. In addition, the Company
assumed $75 million of Trident's outstanding 10% Senior Subordinated
Notes due 2005. The Company also repaid Trident's outstanding senior
indebtedness of approximately $53 million.
The acquisition of Trident has been accounted for as a purchase and,
accordingly, Trident's assets and liabilities have been recorded at fair
values as of the acquisition date. Following is an unaudited pro forma
balance sheet of the Company, based on a preliminary allocation of the
purchase price, as if the acquisition of Trident and the new credit
facility described above had been completed on March 31, 1998 (in
thousands):
ASSETS
Current assets $233,898
Property, plant and equipment, net 163,038
Other assets, net 364,660
--------
$761,596
--------
--------
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LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities $197,945
Long-term debt, net of current maturities 323,107
Other noncurrent liabilities 84,025
Preferred Securities 55,250
Stockholders' investment 101,269
--------
$761,596
--------
--------
The following unaudited condensed consolidated pro forma results of
operations for the three months ended March 31, 1998 give effect to the
acquisitions of Universal and Trident and the offering of the Preferred
Securities as if they had occurred at the beginning of the period. The
following unaudited condensed consolidated pro forma results of
operations for the three months ended March 31, 1997 give effect to the
transactions described above and the acquisition of GT Automotive as if
they had occurred 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 dates or to project the results of
future operations (in thousands, except per share data):
Three Months Ended March 31,
----------------------------
1998 1997
----------- --------
Revenues $ 211,662 $212,348
----------- --------
----------- --------
Operating income $ 17,817 $ 16,519
----------- --------
----------- --------
Net income $ 5,938 $ 5,667
----------- --------
----------- --------
Basic earnings per share $ 0.67 $ 0.64
----------- --------
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Diluted earnings per share $ 0.65 $ 0.62
----------- --------
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7. Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement established standards for reporting
and display of comprehensive income and its components. Comprehensive
income reflects the change in equity of a business enterprise during a
period from transactions and other events and circumstances from
non-owner sources. For the Company, comprehensive income represents net
income adjusted for foreign currency translation adjustments.
Comprehensive income was approximately $3.7 million for the three months
ended March 31, 1998 and approximately $3.5 million for the three months
ended March 31, 1997.
8. During February 1998, the Financial Accounting Standards Board issued SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," effective for fiscal years beginning after December 31, 1997.
SFAS No. 132 revises certain of the disclosure requirements, but does
not change the measurement or recognition of those plans.
-9-
SFAS No. 132 superceded SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The adoption of SFAS No.
132 will result in revised and additional disclosures, but will have no
effect on the financial position, results of operations, or liquidity of
the Company.
9. Supplemental cash flow information (in thousands):
Three Months Ended March 31,
----------------------------
1998 1997
----------- ----------
Cash paid for -
Interest $3,032 $1,273
Income taxes 2,410 275
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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 MARCH 31, 1998 TO THE THREE MONTHS ENDED
MARCH 31, 1997
REVENUES -- Revenues for the three months ended March 31, 1998 increased by
$18.3 million, or 17%, to $125.7 million from $107.4 million for the three
months ended March 31, 1997. The increase in revenues is primarily the result
of the acquisitions of GT Automotive in August 1997, REOM in December 1997 and
Universal in March 1998.
COST OF SALES -- Cost of sales for the three months ended March 31, 1998
increased by $13.7 million, or 15%, to $104.5 million from $90.8 million for the
three months ended March 31, 1997. Cost of sales as a percentage of revenues
for the three months ended March 31, 1998 was 83.1% compared to 84.6% for the
three months ended March 31, 1997. The improvement in gross margins is the
result of improved productivity at the Company's floor shifter operations, which
was acquired in December 1996, due to integration cost savings.
S, G & A EXPENSES -- Selling, general and administrative expenses were $9.2
million for the three months ended March 31, 1998 compared to $7.9 million for
the three months ended March 31, 1997. The increase was due to increased
support for worldwide engineering and marketing efforts partially offset by
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 March 31, 1998 compared to 7.4% for the three months ended March
31, 1997.
INTEREST EXPENSE -- Interest expense for the three months ended March 31,
1998 was $2.9 million compared to $1.9 for the three months ended March 31,
1997. The increase was due principally to borrowings incurred related to the
acquisitions of GT Automotive and Universal.
INCOME TAXES -- The effective income tax rate was 41.3% for the three
months ended March 31, 1998 and 40.0% for the three months ended March 31, 1997.
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.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company's bank credit agreement, as amended, consisted
of a $200 million revolving credit facility. The agreement also provided 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 March 31, 1998, there was $180.2 million outstanding
under this revolving credit facility, including $5.6 million denominated in
Canadian dollars and $3.8 million which was denominated in Deutsche Marks. The
bank credit agreement required the Company to pay a facility fee on the
commitment amount of .25% and contained various restrictive covenants, which,
among other matters, required the Company to maintain certain financial ratios,
including minimum liquidity and interest coverage. The bank credit agreement
also limited additional indebtedness, investments, rental obligations and cash
dividends. The Company was in compliance with all such covenants at March 31,
1998. In
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addition, the Company has outstanding letters of credit in the amount of
approximately $3.0 million expiring through July 2000.
In connection with the acquisition of Trident discussed below, the Company
entered into a new $402.5 million secured credit facility. The facility
provides for revolving credit facilities of $225 million, term loans of $100
million, an acquisition facility of $30 million and a twelve month interim
loan of $47.5 million. The interim loan must be repaid with the proceeds of
an equity offering or a debt offering that is junior in priority to the
credit facility. The remaining facilities have terms of five years and bear
interest at the lender's reference rate or Eurocurrency rate. The credit
facilities contain various restrictive covenants which limit additional
indebtedness, investments, rental obligations and cash dividends. The credit
facilities also require the Company to maintain certain financial ratios
including minimum liquidity and interest coverage. Borrowings are
collateralized by the assets of the Company.
In May 1997, the Company acquired the automotive parking brake business from
Excel Industries Inc. for approximately $2.9 million. The acquisition
increased the Company's penetration of the parking brake market and expanded
the Company's relationship with Chrysler.
In August 1997, the Company acquired GT Automotive for approximately $45.0
million in cash and assumed indebtedness, plus contingent payments. GT
Automotive designs and manufactures column-mounted shifter systems and turn
signal and tilt lever assemblies for North American OEMs. The acquisition of
GT Automotive, combined with the Company's existing position in console-based
shifter systems, increased the Company's share of the North American shifter
market. In addition, the acquisition added Nissan as a customer.
In December 1997, the Company purchased approximately 19% of the outstanding
common stock of Thixotech for approximately $0.5 million. The Company also
loaned Thixotech an additional $2.8 million pursuant to notes which are
convertible into additional common stock of Thixotech at the Company's
option. If exercised, the Company could own a majority of Thixotech.
Thixotech is currently pursuing the development of an alternative
manufacturing technology for component parts.
In December 1997, the Company acquired REOM, an Australian designer and
manufacturer of jacks and parking brakes, for approximately $3.7 million.
The acquisition added market penetration in parking brakes, added a new
product (jacks) and established a presence in the Pacific Rim.
In March 1998, the Company acquired Universal, a manufacturer of jacks for
the North American automotive industry, for approximately $18.0 million. The
acquisition provided the Company with a market presence for jacks in North
America and added Honda as a significant new customer.
On March 20, 1998, Dura Automotive Systems Capital Trust (the "Issuer"), a
wholly owned statutory business trust of the Company, completed the offering
of $55.3 million of its 7 1/2% Convertible Trust Preferred Securities
("Preferred Securities"), resulting in net proceeds of approximately $52.6
million. The Preferred Securities are redeemable, in whole or part, on or
after March 31, 2001 and all Preferred Securities must be redeemed no later
than March 31, 2028. The Preferred Securities are convertible, at the option
of the holder into Class A common stock of the Company at a rate of 0.5831
shares of Class A common stock for each Preferred
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Security, which is equivalent to a conversion price of $42 7/8 per share.
The net proceeds of the offering were used to repay outstanding indebtedness
during April 1998.
In April 1998, the Company completed its acquisition of Trident. Trident had
revenues of approximately $300 million in 1997, of which 69 percent was derived
from sales of cable assemblies, principally to the automotive OEM market, and
the balance from door handle assemblies, lighting and other products.
Approximately 68 percent of Trident's revenues were generated in North America,
27 percent in Europe and the remainder in Latin America. Trident's operations
are headquartered in Michigan with manufacturing and technical facilities in
Michigan, Tennessee, Arkansas, Canada, the United Kingdom, Germany, France and
Brazil. Trident is a wholly owned indirect subsidiary of the Company. Pursuant
to the terms of the agreement, the Company acquired all of the outstanding
equity interests of Trident for total consideration of $87.5 million in cash.
In addition, the Company assumed $75 million of Trident's outstanding 10% Senior
Subordinated Notes due 2005. The Company also repaid Trident's outstanding
senior indebtedness of approximately $53 million.
The Company believes borrowings under its new credit facility, together with
funds generated by the Company's operations, will provide sufficient liquidity
and capital resources for working capital, capital expenditures and other needs
through 1998. By April 30, 1999, the Company must repay a $47.5 million interim
loan, incurred in connection with the acquisition of Trident, with proceeds of
an equity offering or a debt offering that is junior in priority to the credit
facility. The Company anticipates it will complete an equity or debt offering
prior to April 30, 1999. However, there can be no assurances the Company will
be able to successfully complete such an offering.
The Company's principal source of funds has been, and is anticipated to be, its
cash flows from operations. During the three months ended March 31, 1998, the
Company generated cash from operations of $7.6 million, before the effects of
changes in working capital, compared to $6.4 million in 1997. The Company
estimates that it will fund approximately $27.0 million in capital expenditures
for the remaining months of 1998. These capital expenditures will be used
primarily for the purchase of machinery and equipment to support new business
awards, as well as to support continued cost reduction efforts.
EFFECTS OF INFLATION
Inflation potentially affects the Company in two principal ways. First, a
portion of the Company's debt is tied to prevailing short-term interest rates
which may change as a result of inflation rates, translating into changes in
interest expense. Second, general inflation can impact material purchases,
labor and other costs. In many cases, the Company has limited ability to pass
through inflation-related cost increases due to the competitive nature of the
markets that the Company serves. In the past few years, however, inflation has
not been a significant factor for the Company.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of the Company's revenues are derived from manufacturing
operations in Europe, Latin America and Canada. The results of operations and
the financial position of the Company's operations in these countries are
principally measured in their respective currency and translated into U.S.
dollars. The effects of foreign currency fluctuations in such countries
-13-
are somewhat mitigated by the fact that expenses are generally incurred in
the same currencies in which revenues are generated. The reported income of
these subsidiaries will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the respective foreign currency.
A significant portion of the Company's assets are also based in its foreign
operations and are translated into U.S. dollars at foreign currency exchange
rates in effect as of the end of each period, with the effect of such
translation reflected as a separate component of stockholders' investment.
Accordingly, the Company's consolidated stockholders' investment will
fluctuate depending upon the weakening or strengthening of the U.S. dollar
against the respective foreign currency.
The Company's strategy for management of currency risk relies primarily upon
conducting its operations in such countries' respective currency and the
Company may, from time to time, engage in hedging programs intended to reduce
its exposure to currency fluctuations.
YEAR 2000
The Company is in the process of replacing and upgrading its computer
systems, which, among other things, will accommodate the year 2000. The
Company currently expects its computer systems to be fully operational prior
to the year 2000 so as not to adversely affect its operations. During 1998
and 1999, the Company expects to incur costs of approximately $1.0 million
and $1.5 million, respectively, to make these replacements and upgrades.
Failure of the Company to make required modifications on a timely basis or
the inability of other companies with which the Company does business to
complete their year 2000 modifications on a timely basis, could adversely
affect the Company's operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During June 1997, the Financial Accounting Standards Board released SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 14, 1997. SFAS No. 131
requires disclosure of business and geographic segments in the consolidated
financial statements of the Company. The Company will adopt SFAS No. 131 in
1998 and is currently analyzing the impact it will have on the disclosures in
its financial statements.
During February 1998, the Financial Accounting Standards Board issued SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," effective for fiscal years beginning after December 31, 1997.
SFAS No. 132 revises certain of the disclosure requirements, but does not
change the measurement or recognition of those plans. SFAS No. 132
superceded SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." The adoption of SFAS No. 132 will result in revised and
additional disclosures, but will have no effect on the financial position,
results of operations, or liquidity of the Company.
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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 1997 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:
On March 20, 1998, Dura Automotive Systems Capital Trust, a wholly
owned statutory business trust of the Company, completed an offering of
2,210,000 shares of its 7 1/2% Convertible Trust Preferred Securities
("Preferred Securities"). The Preferred Securities are convertible at
any time, at the option of the holders, into approximately 1,289,000
shares of Class A common stock of the Company.
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:
(a) Exhibits:
None
(b)
None
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: May 15, 1998 By /s/ Stephen E.K. Graham
---------------------------------------
Stephen E.K. Graham
Vice President, Chief Financial Officer
(principal accounting and financial
officer)
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