UNITED STATES
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 March 31, 2000
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: 333-34061
CAMBRIDGE, INDUSTRIES, INC.
CE AUTOMOTIVE TRIM SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Cambridge - DELAWARE Cambridge - 38-3188000
CE-Michigan CE-38-2173408
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
555 Horace Brown Drive 48071
Madison Heights, MI (ZipCode)
(Address of principal executive offices)
(248) 616-0500 None
(Registrant's telephone number, including area code) (Name of exchange on
which registered)
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 the
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.
Number of shares of Common Stock, $0.01 par value per share, outstanding at
March 31, 2000: 1,000
CAMBRIDGE INDUSTRIES, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
PAGE NO.
--------
Part I - Financial Information:
Item 1 -- Financial Statements
Condensed Consolidated Balance Sheets - March 31, 2000 and
December 31, 1999 3
Condensed Consolidated Statements of Operations-- Three Months
ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows - Three Months
ended March 31, 2000 and 1999 5
Notes to the Unaudited Consolidated Financial Statements 6
Item 2 - Management's discussion and analysis of financial condition
and results of operations 16
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31,
2000 1999
----------- ----------
(UNAUDITED)
ASSETS
Current assets:
Cash .............................................. $ 10,031 $ 12,214
Receivables ....................................... 75,094 76,399
Inventories (Note 5) .............................. 26,604 27,330
Reimbursable tooling costs ........................ 10,461 6,908
Other current assets .............................. 4,043 1,514
--------- ---------
Total current assets ....................................... 126,233 124,365
Property, plant and equipment, net of accumulated
depreciation of $124,380 and $117,476 respectively ....... 195,367 192,321
Other assets ............................................... 28,458 27,082
--------- ---------
Total assets ............................................... $ 350,058 $ 343,768
========= =========
LIABILITIES AND STOCKHOLDER'S (DEFICIT)
Current liabilities:
Current portion of long-term debt ................. $ 350,488 $ 236,086
Accounts payable .................................. 62,555 69,958
Accrued liabilities ............................... 31,664 27,153
--------- ---------
Total current liabilities .................................. 444,707 333,197
Non-current liabilities:
Long-term debt .................................... 2,966 102,836
Post-retirement health care benefits .............. 27,275 26,484
Other liabilities ................................. 1,629 1,646
--------- ---------
Total liabilities .......................................... 476,577 464,163
Commitments and contingencies (Note 6)
Stockholder's (deficit):
Common stock, $.01 par value, 3,000 shares
authorized, 1,000 shares issued and
outstanding ..................................... -- --
Paid-in capital ................................... 17,712 17,737
Accumulated other comprehensive income ............ 372 357
Accumulated deficit ............................... (144,603) (138,489)
--------- ---------
Total stockholder's (deficit) .............................. (126,519) (120,395)
--------- ---------
Total liabilities and stockholder's (deficit) .............. $ 350,058 $ 343,768
========= =========
See accompanying Notes to Condensed Unaudited Consolidated Financial Statements
3
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
2000 1999
--------- ---------
Sales .......................................... $ 158,164 $ 126,030
Cost of sales .................................. 138,033 112,137
--------- ---------
Gross profit ................................... 20,131 13,893
Selling, general and administrative expenses ... 14,892 10,274
--------- ---------
Income from operations ......................... 5,239 3,619
Other expense (income):
Interest expense .......................... 9,751 8,687
Equity loss in joint venture .............. 1,728 400
Other, net ................................ (167) 124
--------- ---------
Loss before income tax and
change in accounting method ................ (6,073) (5,592)
Income tax (benefit) / expense ................. 41 (1,510)
Cumulative effect of change in accounting method
(net of tax benefit of $112) ............... -- 199
--------- ---------
Net loss ....................................... $ (6,114) $ (4,281)
========= =========
See accompanying Notes to Condensed Unaudited Consolidated Financial Statements
4
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
2000 1999
---------- --------
Cash flows from operating activities:
Net (loss) ...................................................... $ (6,114) $ (4,281)
Adjustments to reconcile net (loss) to net cash provided by (used for)
operating activities:
Depreciation and amortization ................................... 7,617 7,772
Post-retirement benefit expenses, net of cash payments .......... 791 725
Deferred income tax benefit ..................................... -- (1,668)
Equity loss in joint venture .................................... 1,728 400
Cumulative effect of accounting change .......................... -- 311
Changes in assets and liabilities
Receivables ..................................................... 1,191 9,963
Inventories ..................................................... 726 1,386
Reimbursable tooling costs ...................................... (3,714) 3,801
Accounts payable and accrued liabilities ........................ (6,593) (17,102)
Other ........................................................... (2,258) 102
-------- --------
Net cash provided by (used for) operating activities ................. (6,626) 1,409
Cash flows from investing activities:
Sales of property, plant and equipment .......................... -- 262
Purchase of property, plant and equipment ....................... (9,937) (5,462)
-------- --------
Net cash used in investing activities ................................ (9,937) (5,200)
Cash flows from financing activities:
Net change in revolving debt .................................... 15,000 14,500
Repayment of long-term debt and capital lease obligations ....... (657) (14,700)
Other............................................................ (25) --
-------- --------
Net cash provided by (used in) financing activities .................. 14,318 (200)
-------- --------
Effect of foreign currency rate fluctuations on cash ................. 62 (338)
-------- --------
Net (decrease) in cash ............................................... (2,183) (4,329)
Cash at beginning of period .......................................... 12,214 4,474
-------- --------
Cash at end of period ................................................ $ 10,031 $ 145
======== ========
See accompanying Notes to Condensed Unaudited Consolidated Financial Statements.
5
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with Rule 10-01 of Regulation S-X and, in the opinion of
management, contain all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial position of Cambridge
Industries, Inc. and its subsidiaries (the "Company") as of March 31, 2000, and
the results of its operations for the three months ended March 31, 2000 and
1999, and its cash flows for the three months ended March 31, 2000 and 1999.
Segment information for 1999 has been reclassified to conform to the
presentation adopted by management for 2000. All corporate expenses have been
allocated to operating segments based on relative sales, except for
restructuring related professional expenses, retention costs and the Company's
equity losses in its joint venture investment in Dos Manos Technologies.
The condensed unaudited consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements and Form 10-K
as of December 31, 1999 and for each of the three years ended December 31, 1999,
1998 and 1997. The results of operations for the three months ended March 31,
2000 are not necessarily indicative of the operating results for the full year.
2. CHANGE IN ACCOUNTING PRINCIPLES
The Company adopted Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities", in the first quarter of 1999. This statement requires
companies to expense all previously capitalized start up costs upon adoption and
requires all future start up costs to be treated as period costs. In accordance
with the provisions of the statement, in the first quarter of 1999 the Company
wrote off $0.3 million ($0.2 million, net of tax) of start up costs associated
with its joint venture with Dos Manos Technologies.
3. GOING CONCERN
The Company's consolidated financial statements for the three month period ended
March 31, 2000 have been prepared on a going concern basis, which contemplates
the realization of assets and the settlement of liabilities and commitments in
the normal course of business. The Company has been unable to comply with its
debt covenants and has been unable to secure sufficient long-term financing to
meet its operating needs. At March 31, 2000, current liabilities exceeded
current assets by $318,474, which included the impact of the reclassification of
substantially all long-term debt to current. The aforementioned conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
On May 9, 2000 the Company's Board of Directors approved a definitive agreement
to sell
6
substantially all of the Company's assets and business operations to Meridian
Automotive Systems, Inc. (the "Sale Agreement"). To consummate the Sale
Agreement and pursuant to its terms the Company filed a voluntary petition under
Chapter 11 in the United States Bankruptcy Court for the District of Delaware.
The Company has received $50 million of debtor-in-possession ("DIP") financing
of which the debtor has $41.5 million currently available and the remainder is
subject to Bankruptcy Court approval. The DIP facility, secured by substantially
all of the Company's assets bears interest at a variable interest rate as
defined in the DIP agreement, which expires on December 15, 2000. The DIP
financing in conjunction with the ongoing cash flows is expected to provide
adequate funding for payments of post-petition liabilities to suppliers,
employee and capital spending obligations, as well as the costs associated with
the sale and liquidation process. The sale of the Company is subject to
Bankruptcy Court approval and other customary conditions.
4. COMPREHENSIVE INCOME (LOSS)
The Company's total comprehensive income (loss) was as follows:
THREE MONTHS ENDED MARCH 31,
2000 1999
---- ----
Net loss .................................... $(6,114) $(4,281)
Other comprehensive income:
Unrealized foreign currency
translation ......................... 15 438
------- -------
Total comprehensive loss .................... $(6,099) $(3,843)
======= =======
5. INVENTORIES
At March 31, 2000 (unaudited) and December 31, 1999, inventories consist of the
following:
MARCH 31, DECEMBER 31,
2000 1999
--------- -----------
Finished goods .................................................... $ 4,701 $ 4,079
Work-in-process ................................................... 6,541 8,764
Raw materials ..................................................... 14,794 14,277
Supplies .......................................................... 1,631 1,670
-------- --------
Total .................................................... 27,667 28,790
Less allowance for obsolescence and lower
of cost or market reserve ...................................... (1,063) (1,460)
-------- --------
Inventories, net ......................................... $ 26,604 $ 27,330
======== ========
6. COMMITMENTS AND CONTINGENCIES
The Company has letters of credit outstanding of $5,670 at March 31, 2000.
The Company is subject to lawsuits and claims pending or asserted with respect
to matters in the ordinary course of business. The Company does not believe that
the outcome of these uncertainties will have a material impact on the Company's
financial position, results of operations, or cash flows.
7
7. BUSINESS SEGMENTS
The Company's businesses are organized, managed, and internally reported as
three segments. The segments, which are based on differences in customers and
products, technologies and services, as determined by the primary product of the
related facility, are Automotive and Light Truck, Commercial Truck and
Industrial and Non-Automotive. The Automotive and Light Truck Industry Segment
produces molded engineered plastic components for automotive original equipment
manufacturers. This segment primarily supplies components for automotive
interiors, exteriors, and power trains. The Commercial Truck Industry Segment
produces molded-engineered plastics for the commercial transportation industry.
The segment primarily supplies external body panel components for class 4
through class 8 commercial trucks. The Industrial and Non-Automotive Segment
produces various plastic components for the agricultural, appliance, commercial
construction, and recreational transportation industries. Net sales by segment
exclude inter-segment sales. Operating income consists of net sales less
applicable operating costs and expenses related to those sales. The Company's
general corporate expenses are allocated to the operating segments based on
sales volume. Earnings before interest, taxes, depreciation and amortization
("EBITDA") by segment consists of operating income, other expense (income) net,
adjusted for interest, taxes, depreciation, and amortization. The Company is not
dependent on any single product or market. As shown below, EBITDA for the 2000
period was $11.3 million. During the period, the Company has engaged several
professional service firms to assist the Company with the sale process and
restructuring activities. The cost of these professional services were $2.8
million during this period. Also, to insure retaining key employees the Company
implemented a retention plan, which increased expense by $0.6 million.
BUSINESS SEGMENT INFORMATION
THREE MONTHS ENDED MARCH 31
Commercial Corporate & Total
Year Automotive Truck Industrial Unallocated* Company
---- ---------- ----- ---------- ----------- -------
Net Sales 2000 $97,195 $55,320 $5,649 $158,164
1999 $64,800 $55,575 $5,655 $126,030
Operating Income 2000 6,466 2,935 (717) $(3,445) 5,239
1999 2,315 1,980 (676) - 3,619
EBITDA** 2000 10,983 5,804 (399) (5,093) 11,295
1999 6,432 5,303 (468) (400) 10,867
* Corporate and unallocated includes restructuring-related professional fees,
employee retension expenses and the Company's 48% share of losses in Dos Manos,
the joint venture with Mexican Industries.
** EBITDA includes operating income, equity loss in joint venture, other expense
(income) net, adjusted for interest, taxes, depreciation and amortization.
The following table reconciles EBITDA to pretax income (loss):
8
2000 1999
---- ----
EBITDA .............................. $ 11,295 $ 10,867
Less:
Depreciation and amortization ....... 7,617 7,772
Interest expense .................... 9,751 8,687
-------- --------
Pretax loss, before cumulative effect
of change in accounting method ...... $ (6,073) $ (5,592)
======== ========
8. EMPLOYEE BENEFITS
During the quarter ended March 31, 2000 the Company implemented an employee
Retention Bonus and Severance Program to facilitate the retention of critical
employees during the sale and transition period. Pursuant to this program,
amounts charged to expense approximated $644,000 during the quarter ended March
31, 2000.
In addition, pursuant to negotiated benefit changes at certain facilities,
pension benefits were enhanced. Considering these enhanced benefits, estimated
benefit obligations for the Company's pension plans approximated $10 million at
March 31, 2000. The Company has recorded an intangible asset and additional
minimum pension liability of $3.7 million at March 31, 2000.
9. CONSOLIDATING INFORMATION
The Company's senior subordinated notes (the "Notes") are guaranteed by CE
Automotive Trim Systems, Inc. ("CE"), a wholly owned consolidated subsidiary of
the Company, but are not guaranteed by the Company's other consolidated
subsidiaries, Voplex of Canada and its Brazilian subsidiary, Cambridge
Industrial do Brasil, Ltd. The following condensed consolidating financial
information presents the financial position, results of operations and cash
flows of (i) the Company, as parent, as if it accounted for its subsidiaries on
the equity method; (ii) CE, the guarantor subsidiary, and (iii) Voplex of Canada
and the Brazilian subsidiary, as non-guarantor subsidiaries. Separate financial
statements of CE are not presented herein as management does not believe that
such statements are material. CE had no revenues or operations during the
periods presented. The financial position and operating results of the
non-guarantor subsidiaries do not include any allocation of overhead or similar
charges for 1999.
9
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2000
(DOLLARS IN THOUSANDS)
NON-
GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
------ ------------ ---------- ----------- ------------
ASSETS
Current Assets
Cash ...................................... $ 8,782 $ 1,249 $ -- $ -- $ 10,031
Receivables ............................... 73,114 5,235 -- (3,255) 75,094
Inventories ............................... 25,124 1,480 -- -- 26,604
Reimbursable tooling costs ................ 9,741 720 -- -- 10,461
Deferred income taxes and other ........... 3,960 83 -- -- 4,043
--------- --------- ------------ --------- ---------
Total current assets .................. 120,721 8,767 -- (3,255) 126,233
Property, plant and equipment, net ............. 192,982 2,385 -- -- 195,367
Other long-term assets ......................... 28,407 51 -- -- 28,458
Investment in consolidated subsidiaries ........ 5,560 -- -- (5,560) --
--------- --------- ------------ --------- ---------
Total assets .......................... $ 347,670 $ 11,203 $ -- $ (8,815) $ 350,058
========= ========= ============ ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current Liabilities
Current portion of long-term debt ......... $ 349,756 $ 732 $ -- $ -- $ 350,488
Accounts payable .......................... 64,461 1,349 -- (3,255) 62,555
Accrued liabilities ....................... 31,352 312 -- -- 31,664
--------- --------- ------------ --------- ---------
Total current liabilities ............. 445,569 2,393 -- (3,255) 444,707
Non-current liabilities
Long-term debt ............................ 88 2,878 -- -- 2,966
Post-retirement healthcare benefits ....... 27,275 -- -- -- 27,275
Deferred income taxes and other
liabilities.............................. 1,665 1,665
Other non-current liabilites .............. (36) (36)
--------- --------- ------------ --------- ---------
Total liabilities ..................... 474,561 5,271 -- (3,255) 476,577
--------- --------- ------------ --------- ---------
Stockholder's equity (deficit)
Common stock .............................. -- -- -- -- --
Paid-in capital ........................... 17,712 5,257 -- (5,257) 17,712
Accumulated other comprehensive
income ................................... -- 372 -- -- 372
Retained earnings (accumulated deficit) ... (144,603) 303 -- (303) (144,603)
--------- --------- ------------ --------- ---------
Total stockholder's equity (deficit) .. (126,891) 5,932 -- (5,560) (126,519)
--------- --------- ------------ --------- ---------
Total liabilities and stockholder's
equity (deficit) ...................... $ 347,670 $ 11,203 $ -- $ (8,815) $ 350,058
========= ========= ============ ========= =========
10
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
NON-
GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
------ ------------ ---------- ----------- ------------
ASSETS
Current assets
Cash ......................................... $ 10,793 $ 1,421 $ -- $ -- $ 12,214
Receivables .................................. 74,672 5,033 -- (3,306) 76,399
Inventories .................................. 25,723 1,607 -- -- 27,330
Reimbursable tooling costs ................... 6,388 520 -- -- 6,908
Deferred income taxes and other .............. 1,430 84 -- -- 1,514
--------- --------- --------- --------- ---------
Total current assets .................... 119,006 8,665 -- (3,306) 124,365
Property, plant and equipment, net ................ 189,831 2,490 -- -- 192,321
Other long-term assets ............................ 27,018 64 -- -- 27,082
Investment in consolidated subsidiaries ........... 5,675 -- -- (5,675) --
--------- --------- --------- --------- ---------
Total assets ............................ $ 341,530 $ 11,219 $ -- $ (8,981) $ 343,768
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities
Current portion of long-term debt ............ $ 235,386 $ 700 $ -- $ -- $ 236,086
Accounts payable ............................. 71,964 1,300 -- (3,306) 69,958
Accrued liabilities .......................... 26,688 465 -- -- 27,153
--------- --------- --------- --------- ---------
Total current liabilities ............... 334,038 2,465 -- (3,306) 333,197
Noncurrent liabilities
Long-term debt ............................... 100,114 2,722 -- -- 102,836
Postretirement healthcare benefits ........... 26,484 -- -- -- 26,484
Other liabilities ............................ 1,646 -- -- -- 1,646
--------- --------- --------- --------- ---------
Total liabilities ....................... 462,282 5,187 -- (3,306) 464,163
--------- --------- --------- --------- ---------
Stockholder's equity (deficit)
Common stock ................................. -- -- -- -- --
Paid-in capital .............................. 17,737 5,257 -- (5,257) 17,737
Accumulated other comprehensive income ....... -- 357 -- -- 357
Retained earnings (accumulated deficit) ...... (138,489) 418 -- (418) (138,489)
--------- --------- --------- --------- ---------
Total stockholder's equity (deficit) .... (120,752) 6,032 -- (5,675) (120,395)
--------- --------- --------- --------- ---------
Total liabilities and equity (deficit) . $ 341,530 $ 11,219 $ -- $ (8,981) $ 343,768
========= ========= ========= ========= =========
11
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
NON-
GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
------ ------------ ---------- ----------- ------------
Sales .................................... $ 154,827 $ 3,337 $-- $ -- $ 158,164
Cost of sales ............................ 135,271 2,762 -- -- 138,033
--------- --------- ----- --------- ---------
Gross profit ............................. 19,556 575 -- -- 20,131
Selling, general and administrative
expenses .............................. 14,506 386 -- -- 14,892
--------- --------- ----- --------- ---------
Income from operations ................... 5,050 189 -- -- 5,239
Other expense (income)
Interest expense .................... 9,706 45 -- -- 9,751
Equity loss in joint venture ........ 1,728 1,728
Other, net .......................... (167) -- -- -- (167)
--------- --------- ----- --------- ---------
Profit / (loss) before income tax and
and equity in income (loss) of
consolidated subsidiaries.............. (6,217) 144 -- -- (6,073)
Income tax expense (benefit).............. -- 41 -- -- 41
--------- --------- ----- --------- ---------
Profit / (loss) before equity in income of
consolidated subsidiaries .............. (6,217) 103 -- -- (6,114)
Equity in income (loss) of consolidated
subsidiaries ........................... 103 -- -- (103) --
--------- --------- ----- --------- ---------
Net income / (loss) ...................... $ (6,114) $ 103 $-- $ (103) $ (6,114)
========= ========= ===== ========= =========
12
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
NON-
GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
------ ------------ ---------- ----------- ------------
Sales ................................... $ 123,711 $ 2,319 $ -- $ -- $ 126,030
Cost of sales ........................... 109,635 2,502 -- -- 112,137
--------- --------- ------- --------- ---------
Gross profit ............................ 14,076 (183) -- -- 13,893
Selling, general and administrative
expenses ............................. 9,981 293 -- -- 10,274
--------- --------- ------- --------- ---------
Income from operations .................. 4,095 (476) -- -- 3,619
Other expense (income)
Interest expense ................... 8,633 54 -- -- 8,687
Other, net ......................... 524 -- -- -- 524
--------- --------- ------- --------- ---------
Loss before income tax,
change in accounting method and equity
in income (loss)of consolidated
subsidiaries.......................... (5,062) (530) -- -- (5,592)
Income tax expense (benefit) ............ (1,560) 50 -- -- (1,510)
--------- --------- ------- --------- ---------
Loss before equity in income of
consolidated subsidiaries ............. (3,502) (580) -- -- (4,082)
Cumulative effect of change in accounting
method (net of tax benefit of $112) ... (199) -- -- -- (199)
Equity in income (loss) of consolidated
subsidiaries .......................... (580) -- -- 580 --
--------- --------- ------- --------- ---------
Net loss ................................ $ (4,281) $ (580) $ -- $ 580 $ (4,281)
========= ========= ======= ========= =========
13
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARY CONSOLIDATED
------ ------------ ---------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES..... $ (6,392) $ (234) $ -- $ (6,626)
-------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment, net ......... (9,937) 0 -- (9,937)
-------- -------- ------- --------
NET CASH USED IN INVESTING ACTIVITIES .............. (9,937) 0 -- (9,937)
-------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings from revolving debt ...................... 15,000 -- -- 15,000
Repayment of long-term debt ............................. (624) -- -- (624)
Other ................................................... (58) (58)
-------- -------- ------- --------
NET CASH FROM FINANCING ACTIVITIES ................. 14,318 -- -- 14,318
-------- -------- ------- --------
Effect of foreign currency rate fluctuations on cash .... -- 62 -- 62
-------- -------- ------- --------
Net increase(decrease) in cash .......................... (2,011) (172) -- (2,183)
Cash at beginning of period ............................. 10,793 1,421 -- 12,214
-------- -------- ------- --------
Cash at end of period ................................... $ 8,782 $ 1,249 $ -- $ 10,031
======== ======== ======= ========
14
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
NON-
GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARY CONSOLIDATED
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 1,250 $ 159 $ -- $ 1,409
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment ......... (5,191) (9) -- (5,200)
-------- -------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES ......... (5,191) (9) -- (5,200)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings from revolving debt ................. 14,500 -- -- 14,500
Repayment of long-term debt ........................ (14,700) -- -- (14,700)
-------- -------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES ......... (200) -- -- (200)
-------- -------- -------- --------
Effect of foreign currency rate fluctuations on cash -- (338) -- (338)
-------- -------- -------- --------
Net decrease in cash ............................... (4,141) (188) -- (4,329)
Cash at beginning of period ........................ 4,141 333 -- 4,474
-------- -------- -------- --------
Cash at end of period .............................. $ -- $ 145 $ -- $ 145
======== ======== ======== ========
15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING INFORMATION
This Quarterly Report contains, and from time to time the Company expects to
make, certain forward-looking statements regarding its business, financial
condition and results of operations. In connection with the "Safe Harbor"
provisions of the Private Securities Reform Act of 1995 (the "Reform Act"), the
Company intends to caution readers that there are several important factors that
could cause the Company's actual results to differ materially from those
projected in its forward-looking statements, whether written or oral, made
herein or that may be made from time to time by or on behalf of the Company.
Readers are cautioned that such forward-looking statements are only predictions
and that actual events or results may differ materially. The Company undertakes
no obligation to publicly release the results of any revisions to the
forward-looking statements to reflect events or circumstances or to reflect the
occurrence of unanticipated events.
The Company wishes to ensure that meaningful cautionary statements accompany any
forward-looking statements in order to comply with the terms of the safe harbor
provided by the Reform Act. Accordingly, the Company has set forth a list of
important factors that could cause the Company's actual results to differ
materially from those expressed in forward-looking statements or predictions
made herein and from time to time by the Company. Specifically, the Company's
business, financial condition and results of operations could be materially
different from such forward-looking statements and predictions as a result of
(i) customer pressures that could impact sales levels and product mix, including
customer sourcing decisions, customer evaluation of market pricing on products
produced by the Company and customer cost-cutting programs; (ii) the impact on
the Company's operations and cash flows caused by labor strikes or work
stoppages at the Company's OEM customers; (iii) operational difficulties
encountered during the launch of major new OEM programs; (iv) the ability of the
Company to achieve expected cost savings; (v) the availability of funds to the
Company for strategic acquisitions and capital investments to enhance existing
production and distribution capabilities; (vi) the ability of the Company to
consummate the Sale Agreement, discussed below, and (vii) the ability of the
Company to operate pursuant to a Chapter 11 proceeding.
RECENT EVENTS
Subsequent to March 31, 2000 the Company's Board of Directors approved a
definitive agreement to sell substantially all of the Company's assets and
business operations to Meridian Automotive Systems, Inc. (the "Sale Agreement").
To consummate the Sale Agreement and pursuant to its terms the Company filed a
voluntary petition under Chapter 11 in the United States Bankruptcy Court for
the District of Delaware. The Company has received $50 million of
debtor-in-possession ("DIP") financing. The DIP financing in conjunction with
the ongoing cash flows is expected to provide adequate funding for payments of
post-petition liabilities to suppliers, employee and capital spending
obligations, as well as the costs associated with the sale and liquidation
process. The sale of the Company is subject to Bankruptcy Court approval and
other customary conditions. The purchase price for Cambridge's assets includes
$363.1 million in cash and the assumption by the purchaser of certain current
and accrued liabilities and other employee-related obligations, including
certain adjustments. The purchase price will fund costs of the sales, including
a sales commission of 1% of the sales price, taxes and other costs of bankruptcy
and liquidation of the Company.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
2000 1999
----------- ----------
% OF SALES % OF SALES
Sales ...................................... 100% 100.0%
Gross profit ............................... 12.7% 11.0%
Selling, general and administrative
expenses ................................. 9.4% 8.2%
Loss before income tax ..................... (3.8)% (4.4)%
Net loss ................................... (3.9)% (3.4)%
THREE MONTHS ENDED MARCH 31, 2000 VS. THREE MONTHS ENDED MARCH 31, 1999
SALES
The Company's sales increased $32.1 million, or 25.5% to $158.2 million in the
three month period ended March 31, 2000, compared to $126.0 million in the three
month period ended March 31, 1999. The increase primarily reflects increased
volumes in the automotive market and new product launches during 1999. Overall,
automotive segment sales increased $32.4 million or 50.0% over the same quarter
of the prior year, reflecting sales on the following platforms: Chevy Suburban
($7.7 million), Cadillac Deville ($4.2 million), Ford 150 pickup ($3.7 million),
Buick LeSabre ($3.6 million), Chevy Impala ($3.0 million), and Ford Taurus ($2.5
million), all of which were launched after March 1999.
Sales in the commercial truck segment were $55.3 million in the three months
ended March 31, 2000, compared to $55.6 million in the three months ended March
31, 1999. The slight decrease reflects the impact of lower unit sales to
commercial truck customers due a downturn in the heavy-duty commercial truck
market.
Sales in the industrial segment were $5.6 million in the three months ended
March 31, 2000, substantially the same as for the three months ended March 31,
1999. Sales to customers in the agriculture business were lower than the
comparable period last year, while sales in the Company's Brazilian subsidiary
were ahead of last year for the three months ended March 31, 2000.
GROSS PROFIT
The Company's gross profit increased $6.2 million, or 44.9% to $20.1 million in
the three month period ended March 31, 2000, compared to $13.9 million in the
three month period ended March 31, 1999. Gross margin as a percent of sales
increased by 15.5% to 12.7% in 2000 up from 11.0% in 1999. The gross profit
increase resulted from productivity improvements and the increase in sales in
the automotive segment. The automotive segment's gross profit increased by
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$4.8 million or 57.8% from $8.3 million in 1999 to $13.1 million in 2000. The
increase in gross profit resulted from higher sales volumes ($6.9 million),
improved labor productivity and overhead efficiency ($3.9 million), the impacts
of which were partially offset by lower tooling profits ($1.8 million) and an
unfavorable product mix ($4.2 million).
Gross profit in the commercial truck segment increased by $0.8 million or 15.4%
from $5.2 million in 1999 to $6.0 million in 2000. Gross margin as a percent of
sales increased by 14.1% to 10.5% in 2000 up from 9.2% in 1999. This increase in
gross profit was due to unit price increases, improved plant operating
efficiencies, and higher tooling profits. The industrial segment's gross profit
increased in 2000 due to increased sales volumes, primarily in Brazil.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") of $14.9 million increased
to 9.4% of sales for the three months ended March 31, 2000, compared to $10.3
million or 8.2% of sales for the same period in 1999. The $4.6 million increase
reflects restructuring related professional fees of $2.8 million and
retention bonuses of $644,000 incurred by the Company in 2000.
OPERATING INCOME
Operating income increased by $1.6 million or 44.8% from $3.6 million in 1999 to
$5.2 million in 2000. Operating income as a percentage of sales increased from
2.9% in 1999 to 3.3% in 2000. Excluding the impact of restructuring-related
professional fees and retention bonus expenses, operating income for the 2000
period would have been $8.6 million, or 5.4% of sales. The automotive segment's
operating income increased by $4.2 million or 182.5% from $2.3 million in 1999
to $6.5 million in 2000. This increase is primarily attributable to higher sales
volumes in the first three months of 2000, compared with the same period a year
ago. Operating income in the commercial truck segment increased by $1.0 million
from $2.0 million in the first three months of 1999 to $2.9 million in 2000.
This increase is due to unit price increases and improved plant efficiencies.
Operating losses in the industrial products division remained constant at (.7)
million. Corporate and unallocated costs increased by $3.4 million from 0 in
1999 to $3.4 million in 2000. This increase is primarily attributable to
increased professional fees and retention expenses.
NET LOSS
The Company recorded a net loss of $6.1 million in the first quarter of 2000,
compared to a net loss of $4.3 million in 1999. This $1.8 million increase in
net loss was primarily the result of the $1.6 million increase in operating
income offset by an increase in interest expense of $1.1 million, increased
losses of $1.3 million from the Company's joint venture, and a decrease in the
income
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tax benefit of $1.5 million. The $1.1 million increase in interest expense was
primarily attributable to an increase in the outstanding balance on the
revolving credit debt and higher interest rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs historically have been for operating expenses,
working capital and capital expenditures. Acquisitions have been financed
through debt facilities collateralized by the Company's assets and cash flows.
Management expects future cash will be required for capital expenditures for
customer programs and as contemplated by the Sale Agreement.
On May 10, 2000, as required pursuant to its agreement with Meridian
Automotive Systems, Inc. the Company filed voluntary petitions under Chapter 11
in the United States Bankruptcy Court for Delaware. The Company also received
approval to draw funds under the debtor-in-possession financing.
The Company believes that the $50 million DIP facility (of which the Company has
$41.5 million currently available and the remainder is subject to bankrupcy
court approval) and the ongoing accelerated customer payment arrangements will
provide adequate funding of post-petition suppliers, employee and capital
spending obligations, as well as the costs associated with the sale and
restructuring of the Company.
The Company's credit agreement (prior to the Fourth Waiver and Amendment)
allowed the Company to borrow up to $280.0 million. The credit agreement
consisted of $205.0 million in aggregate principal amount of term loans and a
$75.0 million revolving credit facility available for working capital and
general corporate purposes. The A Term Loans and B Term Loans of the credit
agreement mature on the fifth and eighth anniversary of the initial borrowing,
respectively, and will require annual principal payments (payable in quarterly
installments) totaling approximately $13.9 million in 1999, $16.4 million in
2000, $21.4 million in 2001, $34.0 million in 2002, $35.0 million in 2003, $40.0
million in 2004, and $37.1 million in 2005. The revolving credit portion of the
credit agreement matures on the fifth anniversary of the initial borrowing. The
interest rate under the credit agreement is based on the Eurodollar rate plus
the applicable Eurodollar margin. In July 1997, the Company issued $100 million
face amount of its 10 1/4% senior subordinated notes (the "Notes") due in 2007.
In September 1998, the Company entered into a Second Waiver and Amendment and in
January 1999 the Company entered into a Third Waiver and Amendment pursuant to
which certain restrictive covenants contained in the credit agreement were
waived and amended. On February 23, 1999, the Company entered into a Fourth
Waiver and Amendment to the credit agreement with the Agent and other
institutions, which is effective as of December 31, 1998 through and including
March 31, 2000. Under the Fourth Waiver and Amendment, the aggregate outstanding
principal amount of the revolving credit facility shall not at any time exceed
$65 million, and shall not exceed $50 million on the last day of the month. The
amendments in 1999 required the Company to prepay $13.9 million of term loans
during the first quarter of 1999 and pay a $1.4 million amendment fee. The
Fourth Waiver and Amendment also increased the interest rate by 1.0 % on the
term loans and the revolving credit facility. In addition, certain restrictive
covenants were waived and amended. The credit agreement, together with the
Second, Third, and Fourth Waivers and Amendments, is referred to as the ("Credit
Agreement"). Letters of Credit outstanding under the Credit Agreement are
limited to $5.3 million.
The amended Credit Agreement eliminated covenant requirements at December 31,
1998, and amended the covenants for periods through March 31, 2000. The Company
was in compliance with the amended covenants as of March 31, 1999, June 30, 1999
and September 30, 1999.
At various times during 1999, the Company entered into the Fifth and Sixth
Waivers and Amendments to the Credit Agreement pursuant to which certain
restrictive covenants contained in the Credit Agreement were waived and amended.
As an inducement to the Banks agreeing to the
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Sixth Waiver and Amendment, Holdings and the Company agreed to engage Morgan
Stanley Dean Witter & Co. ("MSDW") for purposes of assisting Holdings and the
Company with the sale of all or a portion of the Company's business or assets
and to pay certain amendment fees related to the outstanding balances of all
borrowings under the Credit Agreement.
During March 2000, the Company entered into the Seventh Waiver and Amendment
pursuant to which the Fourth Amendment requirement to reduce the month end
revolving line of credit to $50 million was waived for the month of February
2000. Also during March 2000, the Company entered into the Eighth Waiver and
Amendment to the Credit Agreement ("Eighth Amendment") pursuant to which the
Company and the Banks agreed to several waivers, revisions and amendments to
certain restrictive covenants under the Credit Agreement, including the deferral
of the Company's mandatory prepayments of principal. Certain restrictive
covenants contained in the Credit Agreement were waived and amended through June
30, 2000. As a condition to the Eighth Amendment becoming effective, the Company
agreed to negotiate for and enter into agreements with certain of its OEM
customers (the "Customer Agreements") whereby the OEMs agree as long as the
Company is in compliance with the Customer Agreements (i) to provide accelerated
payments of their accounts payable to the Company, (ii) to waive set-off or
payment abatement rights on certain of the OEM's accounts payable to the
Company. As a condition to entering into such Customer Agreements, the OEMs
required the Company to obtain a standby financing commitment for debtor-in
possession financing in the event of a Chapter 11 proceeding involving the
Company. The Company obtained such DIP financing.
It is probable that the Company will be unable to meet the restrictive covenants
subsequent to the waiver period, and accordingly, the outstanding debt under the
Credit Agreement has been classified as current in accompanying consolidated
balance sheet at December 31, 1999 and March 31, 2000. At March 31, 2000 the
Company had drawn $65 million under the revolving credit facility. In addition,
as a result of the Bankruptcy filing, the Company is in default under the Note
Indenture. Accordingly, the subordinated notes have been classified as current
as of March 31, 2000.
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CASH FLOWS
Three Months Ended
March 31,
Cash flow from: 2000 1999
--------- ---------
Operating activities ........... $ (6,626) $ 1,409
Investing activities ........... (9,937) (5,200)
Financing activities ........... 14,318 (200)
Foreign currency fluctuations .. 62 (338)
-------- --------
Net cash flow ........................ $ (2,183) $ (4,329)
======== ========
Net cash flow used for operating activities for the 2000 period was $6.6
million, reflecting the net loss for the 2000 period of $6.1 million. The non-
cash adjustments of $10.1 million primarily consisted of depreciation and
amortization of $7.6 million, a non-cash charge to income for postretirement
benefits of $0.8 million, and the impact of the $1.7 million equity loss in Dos
Manos. Changes in working capital components used $10.6 million; primarily the
result of timing of collections on trade accounts receivable and payments of
accounts payable and accrued interest.
The Company spent approximately $9.9 million on capital items for the
three-month period ended March 31, 2000, in comparison to approximately $5.5
million for the 1999 period. Items purchased in 2000 relate to the GMT 805
Avalanche program, GMT 800 Sierra program, Ford P225 F-150 pickup truck, other
programs and various equipment upgrades.
During the first quarter of 1999, the Company provided cash flow from operations
of $1.4 million. Cash generated from operations before changes in working
capital items was $3.3 million and consisted of non-cash adjustments of (1) $7.8
million of depreciation and amortization; (2) $.7 million charge to income for
post-retirement benefits; (3) $1.7 million deferred income tax benefit; (4) $0.3
million cumulative effect of accounting change; and (5) $0.4 million equity loss
in the Company's joint venture. Increases in working capital used cash of $1.9
million. The increases in working capital were primarily the result of the
timing of cash receipts and cash payments.
YEAR 2000 COMPLIANCE
The "Year 2000 Issue" is the result of computer programs that were written using
two digits rather than four to define the applicable year. This could result in
a system failure or
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miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
During 1998 and 1999, the company and each of its operating subsidiaries
implemented Year 2000 readiness programs with the objective of having all of
their significant business systems, including those that affect facilities and
manufacturing activities, functioning properly with respect to the Year 2000
Issue before December 31, 1999.
The Company's transition into the year 2000 has, to date, been considered
uneventful and successful and did not result in any noteworthy events with the
Company or its suppliers. However, the potential for future disruptions
resulting from Year 2000 issues exists. Accordingly, the Company will continue
to monitor its operations.
Prior to January 1, 2000, the Company completed extensive programs to assess and
address any "Year 2000" problems relating to its computer systems. This activity
covered manufacturing, applications software, production systems, bar coding
systems, plant floor equipment operations, financial and manufacturing reporting
systems, building and utility systems and systems of the Company's material
suppliers.
All remediation expenditures, totaling approximately $1.4 million ($0.8 million
of which was expended in 1999), were funded through normal operating cash flows.
The Company has not experienced nor does it anticipate experiencing any material
failures or disruptions with regard to any of the company's computer systems or
the systems of any material supplier to the company.
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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.
Cambridge Industries, Inc.
Date: May 15, 2000 /s/ Donald C. Campion
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Donald C. Campion
Chief Financial Officer
/s/ Donald Hutchins
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Donald Hutchins
Controller
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