<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1996
REGISTRATION NO. 333-06601
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
DURA AUTOMOTIVE SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3465 38-2961431
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
4508 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 332-2335
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DAVID R. BOVEE
DURA AUTOMOTIVE SYSTEMS, INC.
2791 RESEARCH DRIVE, ROCHESTER HILLS, MICHIGAN 48309
TELEPHONE: (810) 299-7500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
H. KURT VON MOLTKE DEWEY B. CRAWFORD
KIRKLAND & ELLIS GARDNER, CARTON & DOUGLAS
200 EAST RANDOLPH DRIVE 321 NORTH CLARK STREET
CHICAGO, ILLINOIS 60601 CHICAGO, ILLINOIS 60610
(312) 861-2000 (312) 245-8422
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC.
Cross Reference Sheet Pursuant to Item 501(b) of Regulation S-K Showing
Location in Prospectus of Information Required by Items of Part I of Form S-1.
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER
AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
---------------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front Outside Front Cover Page of Registration
Cover Page of Prospectus...... Statement; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus;
Additional Information
3. Summary Information and Risk
Factors....................... Prospectus Summary; Risk Factors
4. Use of Proceeds................ Prospectus Summary; Use of Proceeds;
Management's Discussion and Analysis of
Results of Operations and Financial
Condition
5. Determination of Offering Outside Front Cover Page of Prospectus;
Price......................... Underwriting
6. Dilution....................... Dilution
7. Selling Security Holders....... Inapplicable
8. Plan of Distribution........... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be Prospectus Summary; Dividend Policy;
Registered.................... Description of Capital Stock
10. Interests of Named Experts and
Counsel....................... Legal Matters
11. Information with Respect to the Outside Front Cover Page of Prospectus;
Registrant.................... Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend Policy;
Dilution; Capitalization; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Results of
Operations and Financial Condition;
Business; Management; Principal
Stockholders; Certain Transactions;
Description of Capital Stock; Shares
Eligible for Future Sale
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Inapplicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 14, 1996
PROSPECTUS
, 1996
LOGO
2,700,000 SHARES
DURA AUTOMOTIVE SYSTEMS, INC.
CLASS A COMMON STOCK
All of the shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), offered hereby are being sold by Dura Automotive Systems, Inc.
(the "Company").
Prior to this offering, there has been no public market for other Class A
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $14.00 and $16.00 per share. See "Underwriting"
for information relating to the factors considered in determining the initial
public offering price.
Application has been made for quotation of the Class A Common Stock on the
Nasdaq National Market under the symbol "DRRA."
Upon completion of the offering contemplated hereby, the Company will have
2,700,000 shares of Class A Common Stock and 4,998,254 shares of Class B Common
Stock, par value $.01 per share ("Class B Common Stock"), outstanding. The
Company's Class A Common Stock and Class B Common Stock are substantially
identical except with respect to voting power and conversion rights. The Class
A Common Stock is entitled to one vote per share and the Class B Common Stock
is entitled to ten votes per share. The Class B Common Stock is convertible at
the option of the holder, and mandatorily convertible upon the transfer thereof
(except to affiliates) and upon the occurrence of certain other events, into
Class A Common Stock on a share-for-share basis. The Class A Common Stock and
Class B Common Stock will generally vote together as a single class on all
matters submitted to a vote of stockholders. Following the completion of the
offering, existing stockholders will retain approximately 97% of the voting
power. See "Description of Capital Stock." A portion of the proceeds from the
offering will be used to repay $4 million of subordinated promissory notes held
by the principal stockholders. See "Use of Proceeds" and "Certain
Transactions."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................................... $ $ $
Total(3)....................................... $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting estimated expenses of $600,000 which will be paid by the
Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
405,000 additional shares at the Price to the Public, less Underwriting
Discounts and Commissions, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to the Public, Underwriting
Discounts and Commissions and Proceeds to the Company will be $ , $
and $ , respectively. See "Underwriting."
The shares offered hereby are offered by the several Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
ROBERT W. BAIRD & CO.
INCORPORATED
<PAGE>
[Diagram of car]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING MAY BE EFFECTED ON THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements, and
the related notes thereto, included elsewhere in this Prospectus. As used in
this Prospectus, unless the context otherwise requires, the term "Company"
includes Dura Automotive Systems, Inc. and all of its subsidiaries and its and
their respective predecessors and subsidiaries. Except as otherwise indicated,
(a) all information in this Prospectus assumes (i) that the over-allotment
option granted to the Underwriters is not exercised and (ii) that the
conversion of the Company's existing classes of common stock into shares of
Class B Common Stock and a 17.625 to 1 stock split thereof have occurred and
(b) the information presented herein on a pro forma basis gives effect to the
sale of the net assets of the Company's window regulator business (the "Window
Regulator Business") as if such sale had occurred on January 1, 1995. See "The
Recapitalization" and "The Company." The Class A Common Stock and Class B
Common Stock to be outstanding immediately after completion of the Offering are
collectively referred to herein as the "Common Stock."
THE COMPANY
Dura Automotive Systems, Inc. (the "Company") is a leading designer and
manufacturer of mechanical assemblies and integrated systems for the global
automotive industry. The Company believes that it is the largest supplier of
both parking brake mechanisms and parking brake cables to original equipment
manufacturers ("OEMs") in North America, with market shares of over 60% and
over 40%, respectively. The Company supplies both parking brake mechanisms and
cables, as well as complete parking brake systems, which consist of parking
brake mechanisms and the cables that connect the brake mechanism to the brake
drum. In addition, the Company designs and manufactures a variety of automotive
cables, latches, transmission shifter mechanisms and other mechanical
assemblies. The Company's products are sold to almost every major North
American automotive OEM, including Ford Motor Company ("Ford"), General Motors
Corporation ("GM") and Chrysler Corp. ("Chrysler"), as well as to foreign OEMs
such as Toyota Motor Corp. ("Toyota"). On a pro forma basis, the Company had
revenues of $239.6 million, operating income of $17.2 million and net income of
$7.6 million in 1995.
The Company has supplied parking brake components and automotive cables to
OEMs since 1961 and 1970, respectively, and was granted its first parking brake
patent in 1967. The Company has continually increased its design capabilities,
allowing it to capitalize on the desire of its customers to shift total design
responsibilities to their suppliers. The Company believes it is the only North
American supplier with the capability to design, manufacture and assemble a
complete parking brake system for its customers. As a result of the Company's
significant design, engineering and project management capabilities, the
Company has been designated as the only Full Service Supplier of parking brake
systems to Ford and is the largest supplier of such systems to GM. In 1995, the
Company estimates that it supplied approximately 78% and 93%, respectively, of
Ford's and GM's parking brake mechanism purchases and approximately 88% and
56%, respectively, of Ford's and GM's parking brake cable purchases.
On a pro forma basis, the Company's four largest customers, Ford, GM,
Chrysler and Toyota, accounted for approximately 50%, 37%, 6% and 5%,
respectively, of the Company's 1995 revenues. The Company manufactures products
for many of the most popular car, light truck, sport utility and mini-van
models, including eight of the top ten selling vehicles in the United States
for 1995: the Ford Taurus, Escort, Explorer, Ranger and F-Series pickups, GM
C/K pickups, Saturn and Toyota Camry. The Company is generally the sole
supplier of the parts it sells to OEMs and will ordinarily continue to supply
parts for a particular model for the life of the model, which usually ranges
from three to seven years.
The automotive components supply industry is undergoing significant
consolidation and globalization as OEMs seek to reduce their supplier base. An
important factor in this trend is the OEMs' awarding of sole-source contracts
to full-service suppliers that are capable of manufacturing products in
multiple geographic markets.
3
<PAGE>
The principal objective of the Company is to capitalize on this trend through
both internal development and strategic acquisitions. From an internal
perspective, the Company seeks to utilize its design, engineering and project
management capabilities, as well as its advanced product technology and high-
quality, low-cost manufacturing capabilities, to compete for new business. The
Company competes for new business early in the development of new models and in
the redesign of existing models. The Company has become a long-term preferred
supplier to its major customers and believes that this status provides it with
a strategic advantage in securing new business.
The Company also believes that the continuing trend toward supplier
consolidation provides attractive opportunities to acquire high-quality
companies. The Company's acquisition strategy focuses on identifying companies
whose acquisition will allow the Company to expand into new geographic markets,
add new customers, provide new product, manufacturing and service capabilities
or increase model penetration with existing customers.
The Company was formed by an investor group organized by Hidden Creek
Industries ("Hidden Creek") to acquire the Dura Automotive Hardware and
Mechanical Components divisions (the "Dura Divisions") from Wickes
Manufacturing Company ("Wickes"). Following this acquisition in November 1990,
Hidden Creek hired a new management team that implemented a series of strategic
changes designed to improve product quality and reduce manufacturing costs
through, among other things, the introduction of cellular manufacturing
methods, consolidation of manufacturing facilities, improvement in inventory
management and reduction of scrap. The Company also embarked upon a strategic
acquisition program. In August 1994, the Company combined its operations with
the automotive parking brake cable and lever business and light duty cable
business (the "Brake and Cable Business") of Alkin Co., formerly known as
Orscheln Co. ("Alkin"), which significantly expanded the Company's size and
capabilities. Since that acquisition, the Company has achieved significant cost
savings through the consolidation of manufacturing facilities, sales,
engineering and design functions and the reduction of administrative personnel.
The Company has substantially completed the integration of the Brake and Cable
Business and is now positioned to further expand its capabilities.
The Company's leadership team has an average of 20 years of experience in the
automotive supply industry and has a significant stake in the Company's
success. The Company's management team will beneficially own approximately 13%
of the Common Stock after the Offering. The Company plans to provide further
ownership-related incentives to other managers and salaried and hourly
employees through grants under its 1996 Key Employee Stock Option Plan (the
"Stock Option Plan") and participation in its Employee Stock Discount Purchase
Plan (the "Employee Stock Purchase Plan").
4
<PAGE>
THE OFFERING(1)
<TABLE>
<S> <C>
Class A Common Stock Offered by
the Company...................... 2,700,000 shares
Total Common Stock to be
Outstanding after the Offering:
Class A Common Stock............ 2,700,000 shares
Class B Common Stock............ 4,998,254 shares
----------------
Total (2)..................... 7,698,254 shares
Use of Proceeds................... The net proceeds to be received by the
Company from the Offering will be used to
repay certain outstanding indebtedness of
the Company. See "Use of Proceeds."
Voting Rights..................... Upon completion of the Offering, the
Company will have two classes of
outstanding Common Stock. The Class A
Common Stock and Class B Common Stock are
substantially identical, except with
respect to voting power and conversion
rights. Each holder of Class A Common Stock
is entitled to one vote per share and each
holder of Class B Common Stock is entitled
to ten votes per share, on all matters
submitted to a vote of stockholders. Except
as required by law or in the Company's
Amended and Restated Certificate of
Incorporation (the "Restated Certificate"),
holders of the Class A Common Stock and
Class B Common Stock vote together as a
single class. See "Risk Factors--Control by
Existing Stockholders" and "Description of
Capital Stock."
Proposed Nasdaq National Market
symbol........................... DRRA
</TABLE>
- --------------------
(1) Does not include the Underwriters' over-allotment option granted by the
Company for an aggregate of 405,000 shares of Class A Common Stock.
(2) Does not include 32,045 shares of Class B Common Stock reserved for
issuance upon the exercise of outstanding options as of June 30, 1996 or
1,200,000 shares of Class A Common Stock reserved for issuance under the
Company's Stock Option Plan, Employee Stock Purchase Plan and the
Company's Independent Director Stock Option Plan (the "Director Option
Plan"). See "Management."
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------- ----------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(2) 1995 1995(2) 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Revenues............... $116,183 $125,412 $129,328 $189,675 $253,726 $239,598 $142,866 $128,738 $127,357
Gross profit........... 11,776 10,367 12,367 18,927 33,452 32,645 18,136 17,329 18,216
Operating income....... 1,876 2,824 3,587 7,875 17,560 17,172 10,843 10,455 10,158
Net income............. 238 415 1,118 2,580 10,126 7,602 7,426 4,905 4,954
Pro forma net income
per common and common
equivalent share(3)... $ 2.03 $ 1.52 $ .99
======== ======== ========
Pro forma weighted
average common and
common equivalent
shares
outstanding(3)........ 4,989 4,989 5,026
SUPPLEMENTAL INCOME PER
SHARE DATA(4):
Net income, as
adjusted(4)........... $ 11,830 $ 9,306 $ 5,806
======== ======== ========
Net income per common
and common equivalent
share, as
adjusted(4)........... $ 1.54 $ 1.21 $ .75
======== ======== ========
Weighted average common
and common equivalent
shares outstanding, as
adjusted(4)........... 7,689 7,689 7,726
OTHER DATA:
Net cash provided by
(used in) operating
activities............ $ 2,575 $ 190 $ 3,724 $ (6,156) $ 13,138 $ 16,856 $ 9,583
Net cash provided by
(used in) investing
activities............ (4,961) (5,602) (2,951) (46,878) 11,428 15,692 (2,381)
Net cash provided by
(used in) financing
activities............ 2,386 5,440 (787) 53,037 (22,851) (28,495) (5,695)
EBITDA(5).............. 3,821 5,024 5,996 11,600 23,138 13,809 13,231
Depreciation and
amortization.......... 1,945 2,200 2,409 3,725 5,578 2,966 3,073
Capital expenditures,
net................... 1,650 2,066 2,951 5,406 6,116 2,009 2,076
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------
AS
ACTUAL ADJUSTED(4)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital........................................... $ 14,000 $ 19,373
Total assets.............................................. 139,362 139,362
Long-term debt, net of current maturities................. 40,555 8,863
Total stockholders' investment............................ 32,627 69,692
</TABLE>
- --------------------
(1) In August 1994, the Company acquired the Brake and Cable Business of Alkin
for (i) 2,206,890 shares of Class B Common Stock, (ii) an option to
purchase up to 14,420 additional shares of Class B Common Stock at an
exercise price of $1.45 per share and (iii) cash consideration, net of
assumed indebtedness, of approximately $40 million. The results of
operations of the acquired business have been included in the consolidated
financial statements of the Company from August 31, 1994, the date of
acquisition. In April 1995, the Company sold the net assets of its Window
Regulator Business to Rockwell International Corporation ("Rockwell") for
$18.0 million in cash, resulting in a pretax gain of $4.2 million. The
results of operations of the Window Regulator Business have been included
in the consolidated financial statements of the Company through April 2,
1995, the date of divestiture.
(2) The pro forma statements of operations data for the year ended December 31,
1995 and the six months ended June 30, 1995 give effect to the sale of the
Window Regulator Business as if such sale had occurred on January 1, 1995
and exclude the pretax gain recorded in connection with this transaction.
6
<PAGE>
(3) Gives effect to the recapitalization of the Common Stock, contingent upon
and to occur immediately prior to the consummation of the Offering. See
"The Recapitalization."
(4) Supplemental income per share data has been adjusted to give effect to (i)
the transactions described under "The Recapitalization," and (ii) the
issuance and sale by the Company of 2,700,000 shares of Class A Common
Stock pursuant to the Offering (at an assumed initial public offering price
of $15.00 per share, the midpoint of the range set forth on the cover
hereof) and the application of the net proceeds therefrom as described
under "Use of Proceeds." Net income for the year ended December 31, 1995
was increased by $1,704,000 and net income for each of the six-month
periods ended June 30, 1995 and 1996 was increased by $852,000 to reflect
the reduction of interest expense, net of income taxes, resulting from the
application of the proceeds from the Offering to reduce outstanding
indebtedness.
(5) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles. The Company, however, believes it is generally
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness.
7
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
this Prospectus as a result of the risk factors set forth below and the
matters set forth in the Prospectus generally. The Company cautions the
reader, however, that this list of factors may not be exhaustive. In analyzing
an investment in the Class A Common Stock, prospective investors should
carefully consider, together with the other matters referred to herein, the
risk factors described below.
RELIANCE ON MAJOR CUSTOMERS
On a pro forma basis, the Company's net sales to Ford and GM represented
approximately 50% and 37%, respectively, of the Company's revenues in 1995 and
approximately 41% and 41%, respectively, of the Company's revenues in 1994. In
addition, the Company's top four customers accounted for approximately 98% and
97% of the Company's revenues on a pro forma basis in 1995 and 1994,
respectively. Thus, the loss of Ford, GM or any of the Company's other
significant customers could have a material adverse effect on the Company. See
"Business." The contracts the Company has entered into with many of its
customers provide for supplying the customers' requirements for a particular
model, rather than for manufacturing a specific quantity of products. Such
contracts range from one year to the life of the model, which is generally
three to seven years, and do not require the purchase by the customer of any
minimum number of parts. Therefore, the loss of any one of such customers or a
significant decrease in demand for certain key models or group of related
models sold by any of its major customers could have a material adverse effect
on the Company. The Company also competes to supply parts for successor models
and is subject to the risk that the OEM will not select the Company to produce
parts on a successor model, which could have a material adverse effect on the
Company. The Company is also involved in claims with Ford involving alleged
failures of certain self-adjust parking brakes originally manufactured by the
Brake and Cable Business of Alkin. Ford has maintained that the Company or
Alkin is responsible for all damages or liabilities incurred by Ford as a
result of these claims. As a result of these claims, it is possible that the
Company's relationship with Ford could be adversely affected. See "Business--
Legal Proceedings." There is substantial and continuing pressure from the
major OEMs to reduce costs, including the cost of products purchased from
outside suppliers such as the Company. If the Company were unable to generate
sufficient production cost savings in the future to offset price reductions,
the Company's gross margin could be adversely affected.
RISK OF CUSTOMER LABOR INTERRUPTIONS
Substantially all of the hourly employees of North American OEMs are
represented by the United Automobile, Aerospace and Agricultural Implement
Workers of America (the "UAW") under similar collective bargaining agreements.
The collective bargaining agreements applicable to Ford and GM are both
scheduled to expire in September 1996. The failure of Ford, GM or any other
significant customer of the Company to reach agreement with the UAW relating
to the terms of a new agreement resulting in either a work stoppage or strike
at any of their production facilities could have a material adverse effect on
the Company. In March 1996, GM experienced a 17-day work stoppage due to a
labor dispute between GM and the UAW, which negatively impacted the Company's
results of operations for the first half of 1996. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition."
INDUSTRY CYCLICALITY AND SEASONALITY
The automotive market is highly cyclical and is dependent on consumer
spending. Economic factors adversely affecting automotive production and
consumer spending could adversely impact the Company. In addition, the
Company's business is somewhat seasonal. The Company typically experiences
decreased revenues and operating income during the third calender quarter of
each year due to the impact of OEM plant shutdowns in July for vacations and
new model changeovers. For example, in 1995 the Company experienced a decrease
in revenues and operating income of 17.3% and 65.0%, respectively, between the
second and third quarters. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Quarterly Results of Operations
and Seasonality."
8
<PAGE>
FAILURE TO OBTAIN BUSINESS RELATED TO NEW AND REDESIGNED MODEL INTRODUCTIONS
The Company principally competes for new business both at the beginning of
the development of new models and upon the redesign of existing models by its
major customers. New model development generally begins two to five years
prior to the marketing of such models to the public. The failure of the
Company to obtain new business on new models or to retain or increase business
on redesigned existing models could adversely affect the Company.
PRODUCT LIABILITY EXPOSURE
The Company faces an inherent business risk of exposure to product liability
claims in the event that the failure of its products results in personal
injury or death, and there can be no assurance that the Company will not
experience any material product liability losses in the future. In addition,
if any of the Company's products prove to be defective, the Company may be
required to participate in a recall involving such products. In late 1994,
Ford issued a recall of a series of manual-transmission Ford F-Series pickups
to repair the self-adjust parking brakes originally manufactured by the Brake
and Cable Business of Alkin. The Company's share of such costs, which was
fully reserved at the time of the acquisition of the Brake and Cable Business
from Alkin, has reached the full $6.0 million limit agreed to by the Company
and Ford. The Company is also involved in a product recall relating to the
same issue with respect to the Ford Contour/Mystique in Europe. The Company
has agreed to pay 50% of the costs of that recall not to exceed $1 million,
which payments totalled $0.4 million at June 30, 1996. The types of alleged
failures that prompted the F-Series recall have also led to a number of claims
and lawsuits filed against Ford. Currently, two cases are pending directly
against the Company or Alkin relating to personal injury claims, and Ford has
received over 400 claims (generally for property damage) relating to alleged
defects in the self-adjust parking brakes. Ford has maintained that the
Company or Alkin is responsible for all damages or liabilities incurred by
Ford as a result of these claims, and by July 1996, Ford had tendered its
defense of 15 such claims to Dura and Alkin. Dura and Alkin have submitted
these claims to their insurance carriers. The Company maintains insurance
against product liability claims, but there can be no assurance that such
coverage will be adequate for liabilities ultimately incurred or that it will
continue to be available on terms acceptable to the Company. A successful
claim brought against the Company in excess of available insurance coverage or
a requirement to participate in any product recall may have a material adverse
effect on the Company's results of operations or financial condition. See
"Business--Legal Proceedings."
INDUSTRY CONSOLIDATION; RISKS ASSOCIATED WITH FUTURE ACQUISITIONS
The automotive component supply industry has undergone, and is likely to
continue to experience, consolidation, as OEMs seek to reduce costs and reduce
their supplier base. The Company intends to actively pursue acquisition
targets that will allow the Company to expand into new geographic markets, add
new customers, provide new product, manufacturing and service capabilities or
increase model penetration with existing customers. There can be no assurance
that the Company will find attractive acquisition candidates or successfully
integrate acquired businesses into the Company's existing business. If the
expected synergies from such transactions do not materialize or the Company
fails to successfully integrate new businesses into its existing businesses,
the Company's results of operations could be adversely affected. To the extent
that the Company may be considered as an acquisition candidate by a third
party, certain provisions in the Restated Certificate and the Amended and
Restated By-laws ("By-laws") described below may inhibit a change in control
of the Company. See "Anti-Takeover Effects of Certain Charter, By-law and
Statutory Provisions."
DEPENDENCE ON KEY PERSONNEL
The Company's continued success largely will depend on the efforts and
abilities of its executive officers and certain other key employees. The
Company currently does not have employment agreements with any of its
executive officers and other key employees. The Company's operations could be
adversely affected if, for any reason, such executive officers or key
employees do not remain with the Company. See "Management."
9
<PAGE>
COMPETITION
The automotive component supply industry is highly competitive. Some of the
Company's competitors are companies, or divisions or subsidiaries of
companies, that are larger and have greater financial and other resources than
the Company. In addition, with respect to certain of its products, some of the
Company's competitors are divisions of its OEM customers. There can be no
assurance that the Company's products will be able to compete successfully
with the products of these other companies. See "Business--Competition."
IMPACT OF ENVIRONMENTAL REGULATION
The Company is subject to the requirements of federal, state and local
environmental and occupational health and safety laws and regulations. There
can be no assurance that the Company is at all times in complete compliance
with all such requirements. The Company has made and will continue to make
capital and other expenditures to comply with environmental requirements. If a
release of hazardous substances occurs on or from the Company's properties or
any associated offsite disposal location, or if contamination is discovered at
any of the Company's current or former properties, the Company may be held
liable, and the amount of such liability could be material. The Company is
currently involved in environmental proceedings at its Mancelona facility, and
at two landfill sites in Toledo, Ohio. See "Business--Environmental Matters."
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of the Offering, Onex DHC LLC (together with its affiliates,
"Onex"), Alkin and the other existing stockholders will beneficially own all
of the outstanding shares of Class B Common Stock. Each share of Class B
Common Stock has ten votes as compared to one vote for each share of Class A
Common Stock, and thus this amount will represent 94.9% of the combined voting
power of the outstanding Common Stock after the completion of the Offering
(94.2% if the Underwriters' over-allotment option is exercised in full). In
addition, all of the Company's existing stockholders have entered into
agreements to vote their shares for the election of directors designated by
certain of the existing stockholders. As a result of such stock ownership and
voting agreements, the existing stockholders will be able to control the vote
on all matters submitted to a vote of the holders of Common Stock, including
the election of Directors, amendments to the Restated Certificate and the By-
laws and approval of significant corporate transactions. See "Description of
Capital Stock." Such consolidation of voting power could also have the effect
of delaying, deterring or preventing a change in control of the Company that
might be otherwise beneficial to stockholders. See "Principal Stockholders."
DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company currently intends to retain earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future.
As a holding company, the ability of the Company to pay dividends in the
future is dependent upon the receipt of dividends or other payments from its
principal operating subsidiary. The payment of dividends by such subsidiary to
the Company for the purpose of paying dividends to holders of Common Stock is
restricted by the Bank Credit Agreement (as defined). The Company expects that
the New Credit Agreement (as defined) will likewise restrict the payment of
dividends. See "Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
No prediction can be made as to the effect, if any, that future sales of
shares of Class A Common Stock or the availability of such shares for future
sale will have on the market price of the Class A Common Stock prevailing from
time to time. Sales of substantial amounts of Class A Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for the Class A Common Stock. Upon consummation of the Offering,
the Company will have 7,698,254 shares of Common Stock issued and outstanding.
The shares of Class A Common Stock sold in the Offering will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), unless such shares are acquired by
an "affiliate" of the Company as that term is defined under Rule 144 under the
Securities Act ("Rule 144"). Other than the shares of Class A Common Stock
being offered hereby, the
10
<PAGE>
currently outstanding shares of Common Stock have not been registered under
the Securities Act and may not be sold unless they are registered or unless an
exemption from registration, such as the exemption provided by Rule 144, is
available. Subject to the expiration of certain 180-day "lock up" agreements
described herein, 4,854,317 shares of Class B Common Stock convertible into
shares of Class A Common Stock will be eligible for sale beginning 90 days
from the date of this Prospectus, subject to certain limitations under Rule
144. Beginning 180 days after the date of this Prospectus, the holders of an
aggregate of 4,998,254 shares of Class B Common Stock convertible into shares
of Class A Common Stock will have certain rights to register their shares of
Class A Common Stock under the Securities Act at the Company's expense. See
"Shares Eligible for Future Sale."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Class A
Common Stock, and there can be no assurance given as to the liquidity of the
trading market for the Class A Common Stock, that an active public market will
develop for the Class A Common Stock or that the Class A Common Stock will
trade in the public market subsequent to the Offering at or above the initial
public offering price. If an active public market for the Class A Common Stock
does not develop, the market price and liquidity of the Class A Common Stock
may be materially adversely affected. The initial public offering price of the
Class A Common Stock will be determined by negotiations between the Company
and the Underwriters and may not be indicative of the market price for the
Class A Common Stock after the Offering. See "Underwriting." The trading price
of the Class A Common Stock could be subject to wide fluctuations in response
to variations in the Company's quarterly operating results, changes in
earnings estimates by analysts, conditions in the Company's businesses or
general market or economic conditions. In addition, in recent years the stock
market has experienced extreme price and volume fluctuations. These
fluctuations have had a substantial effect on the market prices for many
emerging growth companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could have a material adverse
effect on the market price for the Class A Common Stock.
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS
Certain provisions of the Restated Certificate and the By-laws, to be
effective upon consummation of the Offering, may inhibit changes in control of
the Company not approved by the Company's Board of Directors (the "Board").
These provisions include (i) disparate voting rights per share between the
Class A Common Stock and the Class B Common Stock, (ii) a prohibition on
stockholder action through written consents, (iii) a requirement that special
meetings of stockholders be called only by the Board, (iv) advance notice
requirements for stockholder proposals and nominations, (v) limitations on the
ability of stockholders to amend, alter or repeal the By-laws and (vi) the
authority of the Board to issue without stockholder approval preferred stock
with such terms as the Board may determine. The Company will also be afforded
the protections of Section 203 of the Delaware General Corporation Law, which
could have similar effects. See "Description of Capital Stock."
DILUTION TO NEW INVESTORS
Investors purchasing shares of Class A Common Stock in the Offering will
experience immediate and substantial dilution in net tangible book value. See
"Dilution."
11
<PAGE>
THE COMPANY
The Company is a holding company whose predecessor, MC Holding Corp.
("MCHC"), was formed by Hidden Creek, Onex, J2R Corporation ("J2R") and
certain others for the purpose of acquiring the Dura Divisions from Wickes in
November 1990. In August 1994, the Company entered into a transaction that
combined the operations of the Company's operating subsidiary, Dura Operating
Corp., with the Brake and Cable Business of Alkin. In April 1995, the Company
sold all of the assets and liabilities associated with the Window Regulator
Business to Rockwell for $18.0 million in cash, resulting in a pretax gain of
$4.2 million.
The Company was incorporated in Delaware in August 1994. The principal
executive offices of the Company are located at 4508 IDS Center, Minneapolis,
Minnesota 55402, and its telephone number is (612) 332-2335.
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of 2,700,000 shares
of Class A Common Stock in the Offering (at an assumed initial public offering
price of $15.00 per share), after deducting the estimated offering expenses
and the underwriting discounts, will be approximately $37 million. The Company
expects to use the net proceeds and $2.0 million of additional borrowings
under the revolving credit facility portion of the Credit Agreement dated as
of August 31, 1994, among the Company and certain commercial lending
institutions (the "Bank Credit Agreement"), to repay in full approximately $35
million of a term loan incurred by the Company under the Bank Credit Agreement
and $4.0 million to repay in full the Company's subordinated promissory notes
(the "Notes").
The term loan portion of the Bank Credit Agreement is due in quarterly
installments through June 30, 2001 and the revolving credit facility portion
expires on August 31, 2000. On June 30, 1996, the average interest rates for
borrowings under the term loan and revolving credit facility were 6.7% and
7.2%, respectively.
The Notes mature on December 31, 2001 and bear interest at a fixed rate of
6.93% per annum. The Notes are held by Onex, J2R and Alkin. See "Certain
Transactions."
Following the completion of the Offering, the Company expects to enter into
a new bank credit agreement (the "New Credit Agreement"), providing for
borrowings of up to $50.0 million on more favorable pricing terms than the
Bank Credit Agreement. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock in
the past and currently intends to retain its earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future.
As a holding company, the ability of the Company to pay dividends in the
future is dependent upon the receipt of dividends or other payments from its
subsidiaries. Any future payment of dividends is within the discretion of the
Board and will depend upon, among other factors, the capital requirements,
operating results and financial condition of the Company from time to time. In
addition, the Company expects that its ability to pay cash dividends will be
limited by the terms of its New Credit Agreement. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition--Liquidity and
Capital Resources."
12
<PAGE>
THE RECAPITALIZATION
The Company currently has four classes of Common Stock outstanding.
Immediately prior to and contingent upon the Offering, the Company's four
classes of Common Stock will be converted into Class B Common Stock (the
"Recapitalization"). The Class A Common Stock being offered hereby and the
Class B Common Stock will be identical except with respect to voting and
conversion rights. Each share of Class A Common Stock is entitled to one vote
and each share of Class B Common Stock is entitled to ten votes. Except as
otherwise required by law or the Restated Certificate, the Class A Common
Stock and the Class B Common Stock will vote together as a single class on all
matters submitted to a vote of the stockholders, including the election of
Directors. In addition, the Class B Common Stock is convertible at any time at
the option of any holder thereof, and is mandatorily convertible upon any
transfer thereof (except to affiliates) and at any time that the MC
Stockholders and their affiliates, in the aggregate, do not hold at least 10%
of the total outstanding shares of Common Stock, into shares of Class A Common
Stock on a share-for-share basis. All of the Company's existing stockholders
will receive shares of Class B Common Stock in the Recapitalization. The
number of shares of Class B Common Stock that will be issued as a result of
the conversion of the Company's existing classes of Common Stock will be
determined according to the relative preference rankings of such existing
Common Stock and the initial public offering price of the Class A Common
Stock. See "Principal Stockholders."
13
<PAGE>
DILUTION
The net tangible book value (deficit) of the Company as of June 30, 1996 was
$(10.1) million or $(2.02) per share based on 4,998,254 shares of Common Stock
outstanding after giving effect to the Recapitalization. After giving effect
to the sale of shares of Class A Common Stock and the application by the
Company of the net proceeds from the Offering (at an assumed initial public
offering price of $15.00 per share) as set forth under "Use of Proceeds," the
pro forma net tangible book value of the Company at June 30, 1996 would have
been $27.0 million or $3.51 per share of Common Stock outstanding. This
represents an immediate dilution of $11.49 per share to purchasers of shares
at the initial public offering price.
The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
Deficit in net tangible book value per share before the
Offering (1)............................................. $(2.02)
Increase in net tangible book value per share attributable
to new investors......................................... 5.53
------
Pro forma net tangible book value per share after the
Offering................................................... 3.51
------
Dilution per share to new investors (2)..................... $11.49
======
</TABLE>
- ---------------------
(1) Net tangible book value (deficit) per share of Common Stock is determined
by dividing the Company's tangible net worth (tangible assets less
liabilities) at June 30, 1996 by the number of shares of Common Stock (of
all classes) that will be outstanding prior to the Offering and after
giving effect to the Recapitalization.
(2) Dilution is computed by subtracting pro forma net tangible book value per
share of Common Stock after the Offering from the assumed initial public
offering price per share.
The following table summarizes, on a pro forma basis at June 30, 1996, the
differences between the number of shares purchased from the Company, the total
consideration given and the average price per share paid by the existing
stockholders and by the new investors purchasing shares of Class A Common
Stock in the Offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Current stockholders (1)....... 4,998,254 64.9% $13,733,149 25.3% $ 2.75
New investors.................. 2,700,000 35.1 40,500,000 74.7 15.00
--------- ----- ----------- -----
Total........................ 7,698,254 100.0% $54,233,149 100.0%
========= ===== =========== =====
</TABLE>
- ---------------------
(1) Excludes 32,045 shares of Class B Common Stock reserved for issuance upon
the exercise of options outstanding as of June 30, 1996. Such options
have an exercise price of $1.45 per share.
14
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of the
Company at June 30, 1996, and as adjusted to give effect to the
Recapitalization and the sale by the Company of the 2,700,000 shares of Class
A Common Stock in the Offering (at an assumed initial public offering price of
$15.00 per share) and the application of the proceeds therefrom (after
deducting the underwriting discounts and estimated expenses of the Offering)
as set forth under "Use of Proceeds." This table should be read in conjunction
with the consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
Long-term debt:
Term loan.......................................... $ 35,021 $ --
Revolving credit facility (1)...................... 6,500 8,456
Subordinated promissory notes...................... 4,000 --
Other.............................................. 570 570
Less: current maturities........................... (5,536) (163)
---------- ----------
Total long-term debt............................. 40,555 8,863
---------- ----------
Stockholders' investment:
Old Class A, Class A non-voting, Class B and Class
C Common Stock.................................... 3 --
Preferred stock, $1 par value per share; 5,000,000
shares authorized; none issued or outstanding..... -- --
New Class A Common Stock, $.01 par value per share;
30,000,000 shares authorized; 2,700,000 shares
issued and outstanding on an as adjusted basis.... -- 27
New Class B Common Stock, $.01 par value per share;
10,000,000 shares authorized; 4,998,254 shares
issued and outstanding on an as adjusted basis.... -- 50
Additional paid-in capital......................... 13,571 50,562
Retained earnings.................................. 19,212 19,212
Common stock subscriptions receivable.............. (159) (159)
---------- ----------
Total stockholders' investment................... 32,627 69,692
---------- ----------
Total capitalization........................... $ 73,182 $ 78,555
========== ==========
</TABLE>
- ---------------------
(1) Following the closing of the Offering, and the application of the
proceeds therefrom as described under "Use of Proceeds," the New Credit
Agreement, if entered into, is expected to have maximum availability of
$50.0 million.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data with
respect to the Company for each of the periods indicated. The selected
historical financial data for the Company for the years ended December 31,
1991 through 1995 have been derived from the Company's consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants. The data as of and for the six months ended June 30, 1995 and
1996 have been derived from the Company's unaudited consolidated financial
statements which, in the opinion of the Company's management, contain all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the financial condition and results of operations for these
periods. The results of operations for the six months ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the entire
year. The following pro forma consolidated financial data for the year ended
December 31, 1995 and the six months ended June 30, 1995, which give effect to
the sale of the Window Regulator Business as if such sale had occurred on
January 1, 1995, are presented for informational purposes only and are not
necessarily indicative of the results of the future operations of the Company
or the actual results that would have been achieved had the sale occurred on
such date. The selected historical and pro forma consolidated financial data
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the consolidated financial
statements and notes thereto all included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------- ----------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(2) 1995 1995(2) 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Revenues............... $116,183 $125,412 $129,328 $189,675 $253,726 $239,598 $142,866 $128,738 $127,357
Cost of sales.......... 104,407 115,045 116,961 170,748 220,274 206,953 124,730 111,409 109,141
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit........... 11,776 10,367 12,367 18,927 33,452 32,645 18,136 17,329 18,216
Selling, general and
administrative
expenses.............. 9,464 7,036 8,293 10,362 14,798 14,379 6,745 6,326 7,586
Amortization expense... 436 507 487 690 1,094 1,094 548 548 472
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income....... 1,876 2,824 3,587 7,875 17,560 17,172 10,843 10,455 10,158
Interest expense, net.. 1,590 1,268 1,533 3,473 4,822 4,422 2,631 2,231 1,900
Other (income)
expense............... -- 500 -- -- (4,240) -- (4,240) -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before income
taxes................. 286 1,056 2,054 4,402 16,978 12,750 12,452 8,224 8,258
Provision for income
taxes................. 48 641 936 1,822 6,852 5,148 5,026 3,319 3,304
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income............. $ 238 $ 415 $ 1,118 $ 2,580 $ 10,126 $ 7,602 $ 7,426 $ 4,905 $ 4,954
======== ======== ======== ======== ======== ======== ======== ======== ========
Pro forma net income
per common and common
equivalent share (3).. $ 2.03 $ 1.52 $ .99
======== ======== ========
Pro forma weighted
average common and
common equivalent
shares outstanding
(3)................... 4,989 4,989 5,026
SUPPLEMENTAL INCOME PER
SHARE DATA(4):
Net income, as
adjusted(4)........... $ 11,830 $ 9,306 $ 5,806
======== ======== ========
Net income per common
and common equivalent
share, as adjusted
(4)................... $ 1.54 $ 1.21 $ .75
======== ======== ========
Weighted average common
and common equivalent
shares outstanding, as
adjusted (4).......... 7,689 7,689 7,726
OTHER DATA:
Net cash provided by
(used in) operating
activities............ $ 2,575 $ 190 $ 3,724 $ (6,156) $ 13,138 $ 16,856 $ 9,583
Net cash provided by
(used in) investing
activities............ (4,961) (5,602) (2,951) (46,878) 11,428 15,692 (2,381)
Net cash provided by
(used in) financing
activities............ 2,386 5,440 (787) 53,037 (22,851) (28,495) (5,695)
EBITDA (5)............. 3,821 5,024 5,996 11,600 23,138 13,809 13,231
Depreciation and
amortization.......... 1,945 2,200 2,409 3,725 5,578 2,966 3,073
Capital expenditures,
net................... 1,650 2,066 2,951 5,406 6,116 2,009 2,076
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
----------------------------------------- ---------------------
AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED (4)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital........ $ 2,796 $ 3,801 $ 3,287 $ 18,631 $ 13,701 $ 14,000 $ 19,373
Total assets........... 51,520 56,213 52,823 166,133 140,531 139,362 139,362
Long-term debt,
net of current
maturities............ 12,823 18,242 16,792 70,112 46,639 40,555 8,863
Total stockholders'
investment............ 3,019 3,327 4,369 17,418 27,683 32,627 69,692
</TABLE>
- ---------------------
(1) In August 1994, the Company acquired the Brake and Cable Business from
Alkin for (i) 2,206,890 shares of Class B Common Stock, (ii) an option to
purchase up to 14,420 additional shares of Class B Common Stock at an
exercise price of $1.45 per share and (iii) cash consideration, net of
assumed indebtedness, of approximately $40 million. The results of
operations of the acquired business have been included in the consolidated
financial statements of the Company from August 31, 1994, the date of
acquisition. Separate statements of operations and cash flows of the Brake
and Cable Business (formerly the "Orscheln Automotive Business Unit") have
been included elsewhere herein for the year ended December 31, 1993 and
the eight-month period ended August 31, 1994. In April 1995, the Company
sold the Window Regulator Business to Rockwell for $18.0 million in cash,
resulting in a pretax gain of $4.2 million. The results of operations of
the Window Regulator Business have been included in the consolidated
financial statements of the Company through April 2, 1995, the date of
divestiture.
(2) The pro forma statement of operations data for the year ended December 31,
1995 and the six-month period ended June 30, 1995 give effect to the sale
of the Window Regulator Business as if such sale had occurred on January
1, 1995 and exclude the pretax gain recorded in connection with this
transaction.
(3) Gives effect to the Recapitalization, contingent upon and to occur
immediately prior to the consummation of the Offering. See "The
Recapitalization."
(4) Supplemental income per share data has been adjusted to give effect to (i)
the Recapitalization and (ii) the issuance and sale by the Company of
2,700,000 shares of Class A Common Stock pursuant to the Offering (at an
assumed initial public offering price of $15.00 per share) and the
application of the net proceeds therefrom as described under "Use of
Proceeds." Net income for the year ended December 31, 1995 was increased
by $1,704,000 and net income for each of the six month periods ended June
30, 1995 and 1996 was increased by $852,000 to reflect the reduction of
interest expense, net of income taxes, resulting from the application of
the proceeds from the Offering to reduce outstanding indebtedness.
(5) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles. The Company, however, believes it is generally
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The Company was organized to effect the acquisition of the Dura Divisions
from Wickes, which was completed in November 1990. In August 1994, the Company
completed the acquisition of the Brake and Cable Business from Alkin. In
connection with the acquisition of the Brake and Cable Business, the Company
entered into certain transition services agreements with Alkin pursuant to
which the Company currently receives data processing and payroll services from
Alkin. Each such agreement is terminable by either party upon 30 to 90 days
notice. The Company's payments to Alkin under such agreements were $1,788,000
in 1995, and the minimum commitment under such agreements will be
approximately $400,000 in 1996. The Company expects to terminate all such
service agreements during 1997 and is in the process of developing internal
replacement systems. In addition, the Company is party to a supply agreement
with Alkin through 1999 pursuant to which each party supplies certain items
necessary for the manufacture of the other party's products. The Company is
required to purchase such supplies from Alkin only so long as the supply terms
remain no less favorable than could be obtained from an independent third
party.
In order to focus on its higher margin products, the Company sold its Window
Regulator Business to Rockwell in April 1995 for $18.0 million in cash,
resulting in a pretax gain of $4.2 million. The results of operations of the
Window Regulator Business have been included in the consolidated financial
statements of the Company through the date of divestiture, April 2, 1995. The
unaudited pro forma data for the year ended December 31, 1995 and the six
months ended June 30, 1995 give effect to the sale of the Window Regulator
Business as if such sale had occurred on January 1, 1995.
The Company ordinarily begins working on products awarded for new or
redesigned models two to five years prior to the marketing of such models to
the public. During such period, the Company incurs (i) costs related to the
design and engineering of such product, (ii) costs related to the production
of the tools and dies used to manufacture the new product and (iii) start-up
costs associated with the initial production of such product. In general,
design and engineering costs are expensed in the period incurred unless they
are reimbursed by the customer, in which case they are capitalized and
amortized over the life of such product. Costs incurred in the production of
the tools and dies are generally capitalized and reimbursed by the customer
prior to production. Start-up costs, which are generally incurred 30 to 60
days immediately prior to and immediately after initial production, are
expensed as incurred.
The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------ ----------------------
PRO FORMA PRO FORMA
1993 1994 1995 1995 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 90.4 90.0 86.8 86.4 87.3 86.5 85.7
----- ----- ----- ----- ----- ----- -----
Gross profit........... 9.6 10.0 13.2 13.6 12.7 13.5 14.3
Selling, general and
administrative
expenses............... 6.4 5.4 5.9 6.0 4.7 4.9 5.9
Amortization expense.... 0.4 0.4 0.4 0.4 0.4 0.5 0.4
----- ----- ----- ----- ----- ----- -----
Operating income....... 2.8 4.2 6.9 7.2 7.6 8.1 8.0
Interest expense, net... 1.2 1.8 1.9 1.9 1.9 1.7 1.5
Gain on sale of Window
Regulator Business..... -- -- 1.7 -- (3.0) -- --
----- ----- ----- ----- ----- ----- -----
Income before provision
for income taxes...... 1.6 2.4 6.7 5.3 8.7 6.4 6.5
Provision for income
taxes.................. 0.7 1.0 2.7 2.1 3.5 2.6 2.6
----- ----- ----- ----- ----- ----- -----
Net income ............ 0.9% 1.4% 4.0% 3.2% 5.2% 3.8% 3.9%
===== ===== ===== ===== ===== ===== =====
</TABLE>
18
<PAGE>
COMPARISON OF SIX MONTH PERIOD ENDED JUNE 30, 1996 TO SIX MONTH PERIOD ENDED
JUNE 30, 1995
Revenues. Revenues for the first half of 1996 decreased by $15.5 million, or
10.9%, to $127.4 million from $142.9 million in the same period of 1995. The
divestiture of the Window Regulator Business in April 1995 accounted for $14.1
million of the decrease. The remaining decrease was the result of the decline
in North American automotive production, including the effects of the 17-day
work stoppage at GM in the first quarter of 1996, which adversely impacted the
Company's operations. Total production of cars and light trucks in North
America decreased by approximately 4.0% in the first half of 1996 as compared
to the same period of 1995.
Cost of Sales. Cost of sales for the first half of 1996 decreased by $15.6
million, or 12.5%, to $109.1 million from $124.7 million in the same period of
1995. As a percentage of revenues, cost of sales decreased to 85.7% in the
first half of 1996 from 87.3% in the same period of 1995, resulting in an
improved gross margin of 14.3% in the first half of 1996 from 12.7% in the
same period in 1995. The improvement in gross margin is a result of the
divestiture of the Window Regulator Business, which had lower margins, and the
Company's cost reduction efforts, which included the implementation of more
flexible cellular manufacturing methods and the closing of an underutilized
manufacturing facility.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $0.8 million, or 12.5%, to $7.6 million
in the first half of 1996 from $6.8 million for the same period in 1995. The
increase was primarily a result of costs incurred as a result of providing a
greater level of design and engineering services to the Company's customers,
partially offset by the sale of the Window Regulator Business. As a percentage
of revenues, selling, general and administrative expenses increased to 5.9% in
the first half of 1996 from 4.7% for the same period of 1995.
Amortization Expense. Amortization expense decreased to $472,000 in the
first half of 1996 from $548,000 for the same period in 1995. The amortization
expense results from goodwill related to the acquisitions of the Dura
Divisions and the Brake and Cable Business of Alkin in November 1990 and
August 1994, respectively.
Interest Expense. Interest expense for the six months ended June 30, 1996
decreased by $731,000, or 27.8%, to $1.9 million from $2.6 million for the
same period in 1995. The decrease was primarily the result of the repayment of
debt with the net proceeds from the sale of the Window Regulator Business in
April 1995.
Other Income. Other income of $4.2 million for the six months ended June 30,
1995 represents the pre-tax gain on the sale of the Window Regulator Business.
The Company received cash proceeds of $18.0 million from the sale, which were
used to reduce outstanding indebtedness.
Income Taxes. The effective income tax rate for the first half of 1996 was
40.0% compared to 40.4% for the same period in 1995. The effective income tax
rates were higher than federal statutory rates primarily as a result of state
income taxes and nondeductible goodwill amortization.
Net Income. As a result of the foregoing, net income decreased by $2.4
million, or 33.3%, to $5.0 million in the first half of 1996 from $7.4 million
for the same period in 1995.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Revenues. Revenues for 1995 increased by $64.0 million, or 33.8%, to $253.7
million from $189.7 million for 1994. This increase was primarily due to the
full year impact of the August 1994 acquisition of the Brake and Cable
Business of Alkin, which added approximately $100 million of revenues in 1995,
and the addition of approximately $12 million of incremental new business
relating to the liftgate and hood latches for the Ford Taurus/Sable, parking
brakes for the Toyota Avalon and the tailgate latch replacement program for
the Chrysler mini-van, all of which began production in the fourth quarter of
1994 or early 1995. This was partially offset by the April 1995 divestiture of
the Window Regulator Business, which had accounted for $62.1 million of
revenues in 1994 compared to $14.1 million in 1995.
Cost of Sales. Cost of sales for 1995 increased by $49.6 million, or 29.0%,
to $220.3 million from $170.7 million for 1994. As a percentage of revenues,
cost of sales decreased to 86.8% for 1995 from 90.0% for 1994,
19
<PAGE>
resulting in an improved gross margin of 13.2% from 10.0% in the preceding
year. The improvement in gross margin was the result of (i) the divestiture of
the Window Regulator Business, which generated lower margins, (ii) the
synergies resulting from consolidation of the Brake and Cable Business of
Alkin within the Company, (iii) the integration of the Company's business,
which included relocating production activities and the closing of certain
facilities, and (iv) the Company's efforts to improve its production
processes, including the implementation of more flexible cellular
manufacturing techniques. These improvements were partially offset by launch
costs associated with new liftgate and hood latch business on the redesigned
1996 model year Ford Taurus/Sable and the tailgate latch replacement for the
Chrysler mini-van.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $4.4 million, or 42.8%, to $14.8 million
for 1995 from $10.4 million for 1994. The increased expenses were the result
of the full year impact of the acquisition of the Brake and Cable Business
from Alkin, as well as costs incurred in providing a greater level of design
and engineering services to the Company's customers. As a percentage of
revenues, selling, general and administrative expenses increased to 5.9% for
1995 from 5.4% for 1994, primarily a result of the increased costs incurred in
providing a greater level of design and engineering services to customers. The
increases were partially offset by reduced costs as a result of the sale of
the Window Regulator Business.
Amortization Expense. Amortization expense increased by $404,000, or 58.6%,
to $1.1 million for 1995 from $690,000 for 1994. The increase was the result
of the full year of amortization related to the acquisition of the Brake and
Cable Business from Alkin.
Interest Expense. Interest expense for 1995 increased by $1.3 million, or
38.8%, to $4.8 million from $3.5 million for 1994. The increase was the result
of increased borrowings in the fourth quarter of 1994 as a result of the
acquisition of the Brake and Cable Business from Alkin. Partially offsetting
this increase was a reduction from the repayment of borrowings upon the sale
of the Window Regulator Business in April 1995.
Other Income. Other income of $4.2 million for 1995 represents the pre-tax
gain on the sale of the Window Regulator Business. The Company received cash
proceeds of $18.0 million from the sale, which were used to reduce outstanding
indebtedness.
Income Taxes. The effective income tax rate for 1995 was 40.4% compared to
41.4% for 1994. The decrease is due principally to the lower percentage impact
of permanent differences on pretax income. The effective rates were higher
than federal statutory rates primarily as a result of state income taxes and
nondeductible goodwill amortization.
Net Income. As a result of the foregoing, net income increased by $7.5
million, to $10.1 million for 1995 from $2.6 million for 1994.
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
Revenues. Revenues for 1994 increased $60.4 million, or 46.7%, to $189.7
million from $129.3 million for 1993. Approximately $50 million of the
increase was the result of the August 1994 acquisition of the Brake and Cable
Business from Alkin. The remaining increase was the result of incremental
business that began production in 1994, including the GM Cavalier/Sunfire
transmission shifters and parking brakes, the Ford Continental hood latches,
the Toyota Avalon parking brakes and hood latches and the Chrysler Neon
parking brakes. The Company also benefited from the overall increase in North
American automotive production in 1994.
Cost of Sales. Cost of sales for 1994 increased by $53.7 million, or 46.0%,
to $170.7 million from $117.0 million for 1993. As a percentage of revenues,
cost of sales decreased slightly to 90.0% for 1994 from 90.4% for 1993,
resulting in an improved gross margin of 10.0% from 9.6% in the preceding
year. The improvement was a result of the Company's continuing cost reduction
initiatives and the improvement in fixed cost absorption from higher sales.
Additionally, the Company began to realize cost savings associated with its
integration efforts following the acquisition of the Brake and Cable Business
in the third quarter. These improvements were partially offset by increases in
the cost of certain raw materials used by the Company, including steel.
20
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $2.1 million, or 24.9%, to $10.4 million
for 1994 compared to $8.3 million for 1993. The aggregate amount of selling,
general and administrative expenses increased in 1994 principally as a result
of incremental costs associated with the acquisition of the Brake and Cable
Business from Alkin. As a percentage of revenues, selling, general and
administrative expenses decreased to 5.4% for 1994 from 6.4% for 1993,
primarily due to the consolidation of Alkin's engineering, design and
administrative center into the Company's existing facility.
Amortization Expense. Amortization expense increased by $203,000, or 41.7%,
to $690,000 for 1994 from $487,000 for 1993. The increase was the result of
amortization of goodwill resulting from the August 1994 acquisition of the
Brake and Cable Business.
Interest Expense. Interest expense increased by $2.0 million, to $3.5
million for 1994 from $1.5 million for 1993. The increase is the result of
increased borrowings during 1994, primarily as a result of the indebtedness
incurred to finance the acquisition of the Brake and Cable Business.
Income Taxes. The effective income tax rate decreased to 41.4% for 1994 from
45.6% for 1993. The decrease is due principally to the lower percentage impact
of permanent differences on pretax income. The effective income tax rates were
higher than federal statutory rates primarily as a result of state income
taxes and nondeductible goodwill amortization.
Net Income. As a result of the foregoing, net income increased by $1.5
million, to $2.6 million in 1994 from $1.1 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Net cash provided by (used in) operating activities was $13.1 million,
$(6.2) million and $3.7 million in 1995, 1994 and 1993, respectively. The
changes in cash provided by (used in) operating activities were primarily due
to changes in working capital and improvements in net income. During 1995, the
Company collected certain outstanding receivables related to Brake and Cable
Business pricing matters. This source of cash was offset by reductions in
accrued liabilities and other of $13.3 million, which were primarily due to
payments on product recalls and integration and acquisition obligations.
Net cash provided by operating activities was $9.6 million in the first half
of 1996 compared to $16.9 million in the first half of 1995. The decrease in
net cash provided by operating activities resulted primarily from a net
decrease of $2.5 million in net income and changes in working capital,
particularly a net increase in accounts receivable of $5.8 million in 1996 as
compared to a net decrease of $12.1 million in 1995. During the first half of
1995, the Company collected certain outstanding receivables related to Brake
and Cable Business pricing matters.
Investing and Financing
On August 31, 1994, the Company completed the acquisition of the Brake and
Cable Business for (i) 2,206,890 shares of Class B Common Stock, (ii) an
option to purchase up to an additional 14,420 shares of Class B Common Stock
at an exercise price of $1.45 per share and (iii) cash consideration, net of
assumed indebtedness, of approximately $40 million. In addition to borrowings
under the Bank Credit Agreement, the Company financed a portion of the
acquisition of the Brake and Cable Business by borrowing $4.0 million from
certain stockholders of the Company, including Onex ($1.8 million), J2R ($0.2
million) and Alkin ($2.0 million). See "Certain Transactions."
21
<PAGE>
On April 2, 1995, the Company completed the sale of the Window Regulator
Business for net cash consideration of $18.0 million, resulting in a pretax
gain of $4.2 million.
The Bank Credit Agreement consists of a term loan, which matures on June 30,
2001, of approximately $35 million, and a revolving credit facility of $30.0
million (of which $6.5 million was outstanding as of June 30, 1996) which
expires on August 31, 2000. The Notes mature on December 31, 2001 and bear
interest at a fixed rate of 6.93% per annum. The Notes currently have an
outstanding balance of $4.0 million. The Company intends to use the proceeds
from the Offering, along with the additional $2.0 million borrowed under the
revolving credit facility, to repay the term loan and the Notes. The Bank
Credit Agreement contains various restrictive covenants, which, among other
matters, require the Company to maintain certain financial ratios, including
minimum liquidity, net worth and fixed charge coverage. The Bank Credit
Agreement also limits additional indebtedness, capital expenditures and cash
dividends. The Company was in compliance with all such covenants as of
December 31, 1995 and June 30, 1996. The Company has also entered into an
interest expense limitation agreement ("Cap Agreement") and an interest rate
swap agreement ("Swap Agreement") related to the Bank Credit Agreement. The
Cap Agreement has a notional amount of $10 million and provides for payment to
the Company to offset interest expense should interest rates exceed a defined
level. The Swap Agreement exchanges the variable interest rate on the Bank
Credit Agreement for a fixed rate.
Based upon discussions with its principal lender, following the completion
of the Offering, the Company intends to enter into the New Credit Agreement,
and expects that the New Credit Agreement, which would replace the Bank Credit
Agreement, will provide for borrowings of up to $50.0 million and have a
scheduled maturity in 2001. The Company anticipates the New Credit Agreement
will be secured by all assets of the Company and will generally contain less
restrictive covenants and better pricing terms than the Bank Credit Agreement.
To date, no definitive agreements have been executed and no assurance can be
given that the New Credit Agreement will be executed on such terms or entered
into at all.
The Company's principal source of funds has been, and is anticipated to
continue to be, its cash flows from operations. During 1995, the Company
generated $16.5 million from operations before the effects of changes in
working capital compared to $7.8 million in 1994. The cash generated from
operations combined with the net proceeds of $18.0 million from the sale of
the Window Regulator Business were used to fund capital expenditures of $6.1
million and to reduce outstanding indebtedness by $22.9 million in 1995.
The Company estimates that it will fund approximately $8 million in capital
expenditures in each of 1996 and 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.
The Company believes that funds available under the New Credit Agreement,
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 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 the additional public
offerings of equity securities.
QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY
The Company typically experiences decreased revenues and operating income
during the third calendar quarter of each year due to production shutdowns at
the automotive manufacturers for model changeovers and vacations. For example,
in 1995 the Company experienced a decrease in revenues and operating income of
17.3% and 65.0%, respectively, between the second and third quarters. See Note
12 of Notes to Consolidated Financial Statements for unaudited quarterly
financial data.
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 had an effect on the
Company's business over the past 18 months due to rising labor costs and raw
material costs,
22
<PAGE>
primarily steel, although at a rate below the producer price index. Although
certain of the Company's customer contracts provide that increases in the
Company's cost of raw materials in certain circumstances may be passed through
to its customers, prevailing industry practices have not allowed the Company
to pass such costs on to its customers.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the first quarter of 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" which requires
companies to review long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The adoption of SFAS
No. 121 did not have a significant impact on the financial condition or
results of operations of the Company.
SFAS No. 123, "Accounting for Stock-Based Compensation" encourages, but does
not require, a fair value based method of accounting for employee stock
options, the sale of stock under the Company's Employee Stock Purchase Plan or
similar equity instruments. The Company has elected to continue to measure
compensation cost under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" as was previously required, and to
comply with pro forma disclosure of net income and earnings per share as if
the fair value based method of accounting had been applied.
23
<PAGE>
BUSINESS
GENERAL
The Company is a leading designer and manufacturer of mechanical assemblies
and integrated systems for the global automotive industry. The Company
believes that it is the largest supplier of both parking brake mechanisms and
parking brake cables to OEMs in North America, with market shares of over 60%
and over 40%, respectively. The Company supplies both parking brake mechanisms
and cables, as well as complete parking brake systems, which consist of
parking brake mechanisms and the cables that connect the brake mechanism to
the brake drum. In addition, the Company designs and manufactures a variety of
automotive cables, latches, transmission shifter mechanisms and other
mechanical assemblies. The Company's products are sold to almost every major
North American automotive OEM, including Ford, GM and Chrysler, as well as to
foreign OEMs such as Toyota. On a pro forma basis, the Company had revenues of
$239.6 million, operating income of $17.2 million and net income of $7.6
million in 1995.
The Company has supplied parking brake components and automotive cables to
OEMs since 1961 and 1970, respectively, and was granted its first parking
brake patent in 1967. The Company has continually increased its design
capabilities, allowing it to capitalize on the desire of its customers to
shift total design responsibilities to their suppliers. The Company believes
it is the only North American supplier with the capability to design,
manufacture and assemble a complete parking brake system for its customers. As
a result of the Company's significant design, engineering and project
management capabilities, the Company has been designated as the only Full
Service Supplier of parking brake systems to Ford and is the largest supplier
of such systems to GM. In 1995, the Company estimates that it supplied
approximately 78% and 93%, respectively, of Ford's and GM's parking brake
mechanism purchases and approximately 88% and 56%, respectively, of Ford's and
GM's parking brake cable purchases.
On a pro forma basis, the Company's four largest customers, Ford, GM,
Chrysler and Toyota, accounted for approximately 50%, 37%, 6% and 5%,
respectively, of the Company's 1995 revenues. The Company manufactures
products for many of the most popular car, light truck, sport utility and
mini-van models, including eight of the top ten selling vehicles in the United
States for 1995: the Ford Taurus, Escort, Explorer, Ranger and F-Series
pickups, GM C/K pickups, Saturn and Toyota Camry. The Company is generally the
sole supplier of the parts it sells to OEMs and will ordinarily continue to
supply parts for a particular model for the life of the model, which usually
ranges from three to seven years.
The Company was formed by an investor group organized by Hidden Creek to
acquire the Dura Divisions from Wickes. Following this acquisition in November
1990, Hidden Creek hired a new management team that implemented a series of
strategic changes designed to improve product quality and reduce manufacturing
costs through, among other things, the introduction of cellular manufacturing
methods, consolidation of manufacturing facilities, improvement in inventory
management and reduction of scrap. The Company also embarked upon a strategic
acquisition program. In August 1994, the Company combined its operations with
the Brake and Cable Business of Alkin, which significantly expanded the
Company's size and capabilities. Since that acquisition, the Company has
achieved significant cost savings through the consolidation of manufacturing
facilities, sales, engineering and design functions and the reduction of
administrative personnel. The Company has substantially completed the
integration of the Brake and Cable Business and is now positioned to further
expand its capabilities.
INDUSTRY TRENDS
The Company's performance and growth is directly related to certain trends
within the automotive market, including the consolidation of the component
supply industry, the growth of system sourcing and the increase in global
sourcing.
24
<PAGE>
Supplier Consolidation. During the 1980s, Ford, GM and Chrysler began to
reduce their supplier base in certain product segments, including mechanical
assemblies, awarding sole-source contracts to full-service suppliers. As a
result, OEMs currently work with a smaller number of full-service suppliers,
each of which supply a greater proportion of the total vehicle. These
requirements can best be met by suppliers with sufficient size and financial
resources to meet such demands. For full-service suppliers such as the
Company, the new environment provides an opportunity to grow by obtaining
business previously provided by other non-full service suppliers and by
acquiring suppliers that further enhance product, manufacturing and service
capabilities. OEMs rigorously evaluate suppliers on the basis of product
quality, cost control, reliability of delivery, product design capability,
financial strength, new technology implementation, quality and condition of
facilities and overall management. Suppliers that obtain superior ratings are
considered for sourcing new business; those that do not may continue their
existing contracts, but normally do not receive additional business. Although
these new supplier policies have already resulted in significant consolidation
of component suppliers in certain segments, the Company believes that
opportunities exist for further consolidation within the Company's segment.
This is particularly true in Europe which has many suppliers in this segment,
each with relatively small market share.
System Sourcing. OEMs increasingly seek suppliers capable of manufacturing
complete systems of a vehicle rather than suppliers who only produce the
separate parts that comprise a system. By outsourcing complete systems, OEMs
are able to reduce their costs associated with the design and integration of
different components and improve quality by enabling their suppliers to
assemble and test major portions of the vehicle prior to beginning production.
The Company has capitalized on this trend by designing its mechanisms and
cable systems to function together and by providing cable and mechanism
designs that are integrated into the design of the entire vehicle. The Company
believes it is the only North American supplier with the capability to design,
manufacture and assemble a complete parking brake system and a complete hood
latch system for its customers.
Global Sourcing. Regions such as Asia, Latin America and Eastern Europe are
expected to experience significant growth in vehicle demand over the next ten
years. OEMs are positioning themselves to reach these emerging markets in a
cost-effective manner by seeking to design and produce "world cars" which can
be designed in one vehicle center but produced and sold in many different
geographic markets, thereby allowing OEMs to reduce design costs and take full
advantage of low-cost manufacturing locations. OEMs increasingly are requiring
their suppliers to have the capability to design and manufacture their
products in different geographic markets.
The Company has formed, or is in the process of forming, strategic alliances
with other suppliers throughout the world, including in Europe, Latin America
and India, and is also exploring opportunities for affiliations in Asia. These
strategic alliances, which range from investments in other manufacturers to
informal understandings, should not only give the Company access to new
geographic markets and customers, but also the capability of offering
complementary products. The Company also has relocated technical personnel
resources to locations in which OEMs will develop "world cars." By
participating in the design of these vehicles and through implementation of
manufacturing processes near the international facilities of the OEMs, the
Company believes it can continue to develop its international presence.
BUSINESS STRATEGY
The principal objective of the Company is to capitalize on opportunities
created by the consolidation of the automotive mechanical assembly industry
and the growth of systems sourcing on a global basis through both internal
development and strategic acquisitions. The key elements of the Company's
strategy include:
Technical Design and Engineering Capabilities. The Company has maintained a
technological advantage through its investment in product development and
advanced engineering. The Company's Advanced Technology Group has developed
many innovative features utilized in the Company's products, including self-
adjust features in parking brakes and automotive cables, vacuum and electric
releasing parking brake mechanisms and selector brackets on transmission
shifters. The Company was the first to provide a brake cable with a ten-year-
life and will manufacture and assemble the industry's first plastic pedal for
the 1998 model year Chrysler
25
<PAGE>
Intrepid/Concorde parking brake. The Company also designed a combination
transmission shifter/four-wheel drive selector into a dual-function unit that
will be manufactured for the 1999 model year Chrysler Grand Cherokee. The
Company works with OEMs throughout the product development process from
concept vehicle and prototype development through the design and
implementation of manufacturing processes. The Company's computer-aided design
systems are compatible with its major customers, enabling the Company to
communicate design developments with customer engineers throughout the design
and development stage.
Efficient Manufacturing/Continuous Improvement Programs. Following the
acquisition of the Dura Divisions, new management implemented a series of
strategic changes designed to improve product quality and reduce manufacturing
costs through, among other things, the introduction of cellular manufacturing
methods, consolidation of manufacturing facilities, improvement in inventory
management and reduction of scrap. The Company has also achieved significant
cost savings subsequent to the acquisition of the Brake and Cable Business by
implementing similar improvements to its operations as well as through the
consolidation of manufacturing facilities and sales, engineering and design
functions and reduction of administrative personnel. As one example of the
efficiency improvements implemented by new management after the acquisition of
the Dura Divisions, the Company increased inventory turnover from fewer than
five times per year as of December 1990 to over 18 times per year as of June
1994. In August 1994, the Company acquired the Brake and Cable Business of
Alkin. Despite the disproportionately higher level of inventories maintained
in the Brake and Cable Business, the Company further increased inventory
turnover to over 20 times per year as of June 1996. The improvements
implemented by management can be further illustrated in the improved gross
margin levels from 10.1% in 1991 to 14.3% for the six months ended June 30,
1996. The Company believes it can continue to improve its manufacturing
processes in the future.
Strategic Acquisitions. The Company believes that the continuing trend
toward supplier consolidation in certain product segments, together with
recent system and global sourcing trends, will provide attractive
opportunities to acquire high-quality companies whose acquisition will allow
the Company to expand into new geographic markets, add new customers, provide
new product, manufacturing and service capabilities or increase model
penetration with existing customers. The Company's acquisition of the Brake
and Cable Business from Alkin is a result of this initiative, providing
additional product capabilities such as automotive cables, enhanced system
capabilities including both mechanisms and cables and new customers such as
Nissan Motor Co. Ltd. The Company currently is targeting acquisitions that
will strengthen its ability to supply its products in Europe and other markets
outside of North America. In addition, the Company also is seeking to acquire
transmission shifter cable technology, which will further enhance the
Company's complete system capabilities. The Company is also focused on
expanding its product lines to include pedal boxes (gas, brake and clutch
pedal units) or other latching mechanisms. The Company is focusing on
automotive assemblies that utilize the Company's assembly and design
capabilities and, preferably, use attaching cables to capitalize on the
Company's system knowledge.
Expanding Customer Relationships. The Company has developed strong customer
relationships based on its long history of high-quality manufacturing,
significant investment in design and engineering capabilities, access to and
relationships with OEMs' engineering and purchasing personnel and ability to
produce complete systems. Strong customer relationships allow the Company to
identify business opportunities and react to customer needs in the early
stages of vehicle design and, therefore, maintain and increase its volume with
particular customers. The Company's strategy is to increase volume by
marketing a broader range of its products to existing customers and by
developing new products that complement its existing product lines. In
addition to its continuing strong relationships with Ford and GM, the Company
has developed a strong relationship with Toyota, which relationship has grown
substantially from limited model coverage in 1991 to a full range of Toyota
vehicles in 1995, including two models manufactured in Japan. The Company has
also experienced significant success at Chrysler in recent months, including
the award of business for the 1998 model year Intrepid/Concorde and the 1999
model year Grand Cherokee. These customer relationships are also expanding
outside the North American market as the Company supplies its products on a
global basis.
Management and Workforce Incentives. The Company's leadership team has an
average of 20 years of experience in the automotive supply industry and has a
significant stake in the Company's success. The
26
<PAGE>
Company's management team will beneficially own approximately 13% of the
Common Stock after the Offering. The Company plans to provide further
ownership-related incentives to other managers and salaried and hourly
employees through grants under the Stock Option Plan and participation in the
Employee Stock Purchase Plan. See "Management."
PRODUCTS
The Company's products consist primarily of parking brake systems,
transmission shifters, automotive cables and latches. The Company's product
offerings include foot and hand operated parking brakes; manual and automatic
floor mounted transmission shifters; parking brake, throttle, oil level, hood
release and fuel door cables; and primary, secondary and combination hood,
deck lid and tail gate latches. The Company offers parking brake and latch
systems (which consist of mechanisms and cables), allowing OEMs to capitalize
on the Company's expertise in manufacturing both components individually and
as an integrated system.
The following table sets forth the approximate composition by product
category of the Company's revenues on a pro forma basis for the last three
fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
PRODUCT CATEGORY 1993 1994 1995
<S> <C> <C> <C>
Parking brakes................................... 52% 45% 40%
Automotive cables................................ -- 27 40
Latches.......................................... 14 9 7
Transmission shifters............................ 9 6 4
Other body hardware.............................. 25 13 9
------- ------- -------
Total.......................................... 100% 100% 100%
======= ======= =======
</TABLE>
CUSTOMERS AND MARKETING
The North American automotive market is dominated by Ford, GM and Chrysler,
with Japanese and foreign manufacturers capturing approximately 26% of the
market. The Company supplies its products primarily to Ford, GM, Chrysler and
Toyota.
The following is a summary of the Company's customers that accounted for at
least 3% of revenues in the past three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
PRO FORMA
CUSTOMER 1993 1994 1995 1995
<S> <C> <C> <C> <C>
Ford................................................ 46% 57% 52% 50%
GM.................................................. 35 29 35 37
Chrysler............................................ 14 9 6 6
Toyota.............................................. 3 3 5 5
Other............................................... 2 2 2 2
--- --- --- ---
Total............................................. 100% 100% 100% 100%
=== === === ===
</TABLE>
The Company's customers award contracts for a particular car model. Such
contracts range from one year to the life of the model, which is generally
three to seven years, and do not require the purchase by the customer of any
minimum number of parts. The Company also competes for new business to supply
parts for successor models and therefore is subject to the risk that the OEM
will not select the Company to produce parts on a successor model. Because the
Company supplies parts for a broad cross-section of both new and mature
models, its reliance on any particular model is minimized. The Company
manufactures products for many of the most popular car, light truck, sport
utility and mini-van models, including eight of the top ten selling vehicles
in the United States for 1995: the Ford Taurus, Escort, Explorer, Ranger and
F-Series pickups, GM C/K pickups, Saturn and Toyota Camry. Although not
comprehensive, the following table presents an overview of the major models
for which the Company has orders to supply products on current or new model
vehicles:
27
<PAGE>
<TABLE>
<CAPTION>
CUSTOMER CAR MODELS TRUCK MODELS
<S> <C> <C>
Ford............... Contour/Mystique/Mondeo, Aerostar, Bronco, Econoline,
Continental/Town Car, Mark/ Expedition,
Mark VIII, Taurus/Sable, Explorer/Mountaineer, F-
Thunderbird/Cougar Series, Ranger, Villager,
Windstar
GM................. Achieva/Grand Am, Century, Safari/Astro, Blazer/Jimmy,
Corsica/Beretta, Corvette, C/K Truck/Tahoe/Sierra/Yukon,
Deville/Seville, Silhouette/TransSport/Lumina,
Firebird/Camaro, S-10 Pick-up/Sonoma/Bravada,
Lumina/Grand Prix/Regal, Suburban
Aurora/Riviera, Caprice,
Olds 98/Park Avenue, Olds
88/Bonneville/LeSabre, all
Saturn models,
Sunfire/Cavalier
Chrysler........... Intrepid/Concorde, Neon, Caravan, Dakota, Grand
Prowler, Viper Cherokee, Ram Van, Voyager
Toyota............. Avalon, Camry, Corolla, Previa
Lexus, Prizm
</TABLE>
Most of the parts the Company produces have a lead time of two to five years
from product development to production. Examples of recently awarded new
business include parking brakes and hood latches for Ford's 1999 model year
DEW98, parking brakes and parking brake cables for GM's 1999 model year GMT800
Truck, parking brakes, shifters and hood release cables for Chrysler's 1999
model year Grand Cherokee, parking brakes for Chrysler's 1998 model year
Intrepid/Concorde and parking brakes, hood latches and service brake pedals
for Toyota's 1997 model year Previa.
DESIGN AND ENGINEERING SUPPORT
The Company believes that engineering service and support are key factors in
successfully obtaining new business. The Company utilizes program management
with customer-dedicated program teams, which have full design, development,
test and commercial issues under the operational control of a single manager.
In addition, cross-functional teams are established for each new program to
ensure proper management from program conception through product launch.
Advanced technology development is used to maintain product and process
technology for the Company's products, with customers often included in the
product development teams.
The Company's Technical Center is located in Rochester Hills, Michigan,
which is near the development centers of each of the Company's top four
customers. A separate Advanced Technology Group has been established to
maintain the Company's position as a technology leader. The Advanced
Technology Group has developed many innovative features in the Company's
products, many of which features were developed in conjunction with the
Company's customers. The Company utilizes Computer Aided Designs ("CAD") in
the design process, which enables the Company to share data files with its
customers' compatible systems during the design stage, improving function, fit
and performance within the total vehicle. The Company also utilizes CAD links
with its manufacturing facilities to assure manufacturability and quality of
the designs through early involvement of the manufacturing engineers.
The Company has more than 100 patents granted or in the application process.
The patents granted expire over several years commencing in late 1996.
Although the Company believes that, taken together, the patents are
significant, the loss or expiration of any particular patent would not be
material to the Company.
MANUFACTURING
In manufacturing its products, the Company utilizes two different
manufacturing processes, one for mechanisms and one for cables that will
ultimately attach to such mechanisms, creating a system. The Company
28
<PAGE>
utilizes flexible manufacturing cells in both the mechanism and cable assembly
processes. Manufacturing cells are clusters of individual manufacturing
operations and work stations grouped in a cylindrical configuration, with the
operators placed centrally within the configuration. This provides flexibility
by allowing efficient changes to the number of operations each operator
performs. When compared to the more traditional, less flexible assembly line
process, cell manufacturing allows the Company to maintain its production
output consistently with its customers' requirements and reduce the level of
inventory.
Mechanical assemblies consist of between five and 50 individual components,
which are attached to form an integrated mechanism. The Company's assembly
operations are performed on either dedicated, high-volume, automated assembly
machines or on low capital-intensive, flexible, cell-oriented assembly units
capable of low or high volume production runs. The assembly operations
construct the final product through welding, staking and riveting the
component parts. A large portion of the component parts are purchased from
outside suppliers to the Company. However, the Company manufactures its own
stampings, which process consists of passing sheet metal through dies in a
stamping press to form the metal into three-dimensional parts. The Company
produces stamped parts using single-stage and progressive dies in presses,
ranging in size from 150 to 600 tons. Through cell teams, which stress
employee involvement, the Company's processes are continuously upgraded to
increase flexibility, improve operating safety and minimize changeover times
of the dies.
Cables are manufactured using a variety of processes, including plastic
injection molding, extrusion, wire flattening, spring making and zinc
diecasting. Wire is purchased from outside suppliers and then formed into
contra-twisted layers on tubular stranders and bunching machines to produce
19-wire stranded cable. Corrosion resistance is provided by a proprietary,
ceramic coating applied during the stranding process. The cable then is
plastic-coated by an extrusion process to provide a smooth, low coefficient
surface that results in high efficiency and durability. Conduit is then
produced by flattening and coiling wire, which is then extruded with a
protective coating. Proprietary strand and conduit cutting machines enable
efficient processing. Assembly operations are arranged in cells to minimize
inventory, improve quality, reduce scrap, improve productivity and enhance
employee involvement. The cables are assembled with various attachments and
end fittings that allow the customer to install the cables to the appropriate
mating mechanisms.
The Company utilizes frequent communication meetings at all levels of
manufacturing to provide training and instruction as well as to assure a
cohesive, focused effort toward common goals. The Company encourages employee
involvement in all production activity and views such involvement as a key
element toward the success of the Company. The Company also aggressively
pursues involvement from its suppliers, which is necessary to assure a
consistent flow of raw materials and components on a timely basis with
consistently high quality. The Company utilizes the component suppliers where
practical in the design and prototype stages of the new product development to
facilitate the most comprehensive, state-of-the-art designs available. The
Company has made substantial investments in manufacturing technology and
product design capability to support its products, including modern
manufacturing equipment, fineblanking, sophisticated computer-aided design
systems and highly-trained engineering personnel. These advanced capabilities
have helped to further reduce scrap rates, ensure superior product quality and
increase efficiency.
OEMs have established quality rating systems involving rigorous inspections
of suppliers' facilities and operations. OEMs' factory rating programs provide
a quantitative measure of a company's success in improving the quality of its
operations. The Company's facilities in Mancelona, Michigan; Hannibal (South)
and Brookfield, Missouri and Matamoros, Mexico were all certified as Ford Q-1
suppliers, and the Company's remaining plants were in the process of being so
certified, when the automotive industry adopted a quality rating system known
as QS-9000. The Company has completed three of the five phases toward QS-9000
Company-wide registration and expects to complete the remaining phases by the
end of 1996. The Q-1 and QS-9000 awards were designed by OEMs to measure
quality of products and manufacturing systems. The Company believes that
qualifying for such awards will make it more likely that OEMs will purchase
the Company's products.
The Company's plants have been recognized by its customers with various
awards, such as the Chrysler Pentastar Award, GM Target for Excellence, Nummi
Delivery Performance Award, Isuzu Quality Achievement Award and Calsonic
Supplier of the Year Award.
29
<PAGE>
FACILITIES
The following table provides information regarding the Company's principal
facilities. The Company believes that the productive capacity and utilization
of its facilities are sufficient to allow the Company to conduct its
operations in accordance with its business strategy. All of the owned
facilities are subject to liens under the Bank Credit Agreement. The Company
expects that all of the owned facilities will likewise be subject to liens
under the New Credit Agreement.
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
<S> <C> <C> <C>
Mancelona, Michigan..................... 167,000 Owned Manufacturing
Moberly, Missouri....................... 165,000 Owned Manufacturing
East Jordan, Michigan................... 135,000 Owned Manufacturing
Hannibal, Missouri (South).............. 90,000 Owned Manufacturing
Rochester Hills, Michigan............... 65,000 Leased Product Development/
Operating Headquarters
Hannibal, Missouri (North).............. 64,000 Owned Manufacturing
Brookfield, Missouri.................... 51,000 Owned Manufacturing
Moberly, Missouri(1).................... 46,000 Leased Manufacturing
Matamoros, Mexico....................... 42,000 Owned Manufacturing
Minneapolis, Minnesota.................. 5,700 Leased Corporate Headquarters
</TABLE>
- ---------------------
(1) Will be vacated by July 1, 1997.
Management believes that substantially all of its property and equipment is
in good condition and that it has sufficient capacity to meet its current
manufacturing needs.
COMPETITION
The Company operates in a highly competitive environment. The number of the
Company's competitors has decreased due to the supplier consolidation
resulting from changing OEM policies. The Company currently estimates that it
has over 60% of the North American parking brake market. Its competitors for
parking brakes include Magna International Inc. and Atwood Industries Inc., a
division of Excel Corporation. The Company estimates it has over 40% of the
brake cable market. Dominion Controls Company is the Company's largest
competitor in brake cables. In the hood latch market, the Company estimates it
has approximately 20% of the market. Competitors in the hood latch market
include Magna International Inc. and the Inland Fisher Guide Division of GM.
In the North American shifter market, the Company believes its share is under
5%. The Company's largest competitors in the shifter market are Grand Haven
Stamped Products Co., Sparton Corp. and Atwood Industries Inc.
The Company principally competes for new business both at the beginning of
the development of new models and upon the redesign of existing models. New
model development generally begins two to five years before the marketing of
such models to the public. Once a producer has been designated to supply parts
for a new program, an OEM usually will continue to purchase those parts from
the designated producer for the life of the program, although not necessarily
for a redesign. Competitive factors in the market for the Company's products
include product quality and reliability, cost, timely delivery, technical
expertise and development capability, new product innovation and customer
service.
SUPPLIERS AND RAW MATERIALS
The principal raw materials purchased by the Company are steel, wire and
resin. The types of steel the Company purchases include hot and cold rolled,
galvanized, organically coated and aluminized steel. In general the wire used
by the Company is produced from steel with many of the same characteristics
with the exception that it has a higher carbon content. The Company utilizes
plastic resin to produce the protective coating for its cables. The Company
employs just-in-time manufacturing and sourcing systems enabling it to meet
customer requirements for faster deliveries while minimizing its need to carry
significant inventory levels. The Company has not experienced any significant
shortages of raw materials and normally does not carry inventories of raw
materials or finished products in excess of those reasonably required to meet
production and shipping schedules.
30
<PAGE>
The Company typically negotiates blanket purchase orders or 12-month supply
agreements with integrated steel suppliers, mini-mills and service centers
that have demonstrated timely delivery, quality steel and competitive prices.
These relationships allow the Company to order precise quantities and types of
steel for delivery on short notice, thereby permitting the Company to maintain
low inventories. In addition, the Company occasionally must "spot buy" steel
from service centers to meet unexpected customer demand, engineering changes
or new part tool trials.
Other raw materials purchased by the Company include dies, fasteners,
springs, rivets and rubber products, all of which are available from numerous
sources.
EMPLOYEES
As of June 30, 1996, the Company employed 2,584 persons, 432 of whom are
salaried and the balance of whom are paid on an hourly basis. Approximately
500 employees located at the Company's facilities in Matamoros, Mexico and
East Jordan and Mancelona, Michigan are currently covered by collective
bargaining agreements. The collective bargaining agreement at the Michigan
facilities is with the UAW and expires in December 2000. The collective
bargaining agreement at the Matamoros facility is with the Confederacion de
Trabajadores de Mexico and expires in August 1997. Although management
believes that the Company's relationship with its union employees at these
facilities is good, there can be no assurance that the Company will be able to
negotiate new agreements on favorable terms. In the event the Company is
unsuccessful in negotiating new agreements, these facilities could be subject
to work stoppages, which would have a material adverse effect on the
operations of the Company. The Company has not experienced any work stoppages
and considers its relations with its employees to be good.
ENVIRONMENTAL MATTERS
The Company is subject to the requirements of federal, state, and local
environmental and occupational health and safety laws and regulations. There
can be no assurance that the Company is at all times in complete compliance
with all such requirements. Although the Company has made and will continue to
make capital and other expenditures to comply with environmental requirements,
the Company does not expect to incur material capital expenditures for
environmental controls in 1996 or 1997. If a release of hazardous substances
occurs on or from the Company's properties or any associated offsite disposal
location, or if contamination is discovered at any of the Company's current or
former properties, the Company may be held liable for remediation costs and
expenses, and the amount of such liability could be material.
In 1995, the Michigan Department of Environmental Quality ("MDEQ") requested
that Wickes and the Company investigate environmental conditions at the
Company's Mancelona facility and at certain adjacent property retained by
Wickes. Wickes and the Company jointly completed the requested investigation
and, in January of 1996, submitted the results to MDEQ. The Company is
awaiting MDEQ's response to the sampling results. The Company could incur
additional costs to further investigate or conduct cleanup at the facility. In
1993, the Company received requests for information pursuant to CERCLA from
the U.S. EPA with respect to two landfill sites located in Toledo, Ohio. In
1994, the Company received a notice of potential liability under CERCLA from
the EPA with respect to one of the sites. The Company responded to the
requests and notice by explaining to the EPA that it had no involvement with
these sites, which apparently ceased operations prior to the formation of the
Company in 1990. The Company has received no further communications from the
EPA with respect to either site.
In connection with the Company's acquisition of certain assets from Wickes
in 1990, and subject to certain limitations, Wickes agreed to indemnify the
Company for environmental liabilities arising from the operation of the
acquired facilities prior to the acquisition. The Company and Wickes
subsequently agreed that the Company had provided Wickes with timely and
adequate notice with respect to certain matters (including the matters
described in the immediately preceding paragraph) and that, subject to the
limitations set forth in the agreement, those matters are covered by the
Wickes indemnification. There can be no assurance, however, that all costs
associated with such matters will ultimately be reimbursed by Wickes. The
Company does not currently believe that any liability associated with the
foregoing matters will be material to the Company.
31
<PAGE>
LEGAL PROCEEDINGS
The Company faces an inherent business risk of exposure to product liability
claims in the event that the failure of its products results in personal
injury or death, and there can be no assurance that the Company will not
experience any material product liability losses in the future. In addition,
if any Company-designed products prove to be defective, the Company may be
required to participate in a recall involving such products.
In late 1994, Ford issued a recall of a series of manual-transmission Ford
F-Series pick-ups to repair the self-adjust parking brakes originally
manufactured by the Brake and Cable Business of Alkin. Ford had received
several reports that the brakes failed. Pursuant to a letter agreement entered
into in connection with the acquisition of the Brake and Cable Business, the
Company agreed to reimburse Ford for up to $6.0 million of Ford's costs of the
recall. The Company has reimbursed Ford for the full amount under this
agreement. The Company is also involved in a product recall relating to the
same issue with respect to the Ford Contour/Mystique in Europe. The Company
has agreed to pay 50% of the costs of that recall not to exceed $1.0 million,
which payments totalled $0.4 million as of June 30, 1996.
The type of alleged failures that prompted the F-Series recalls have also
led to a number of claims and lawsuits filed against Ford and, in certain
instances, against the Company and/or Alkin. The Company may be subject to
claims brought directly against the Company by injured occupants of Ford
vehicles and to claims for contribution or indemnification asserted by Ford.
The agreement relating to the acquisition of the Brake and Cable Business
provided that the Company is liable for claims arising out of accidents that
take place on or after August 31, 1994 and that the Company will be liable for
other claims only to the extent any losses by Alkin relating to such claims
are not paid by Alkin's insurance policies (either because they are not over
the deductible amount, because Alkin's policy limits have been exceeded or
because they are not covered by Alkin's insurance policies for other reasons).
Two cases are currently pending directly against the Company or Alkin relating
to personal injury claims, and Ford has received over 400 claims (generally
for property damage) relating to alleged defects in the self-adjust parking
brakes. Ford has maintained that the Company or Alkin is responsible for all
damages or liabilities arising out of these claims. The Company disputes this
position. By July 1996, Ford had tendered its defense of 15 such claims to
Dura and Alkin, and indicated that it would look to Dura and Alkin for
indemnification were Ford ultimately found to be liable and required to make
any payments relating to such claims. Dura and Alkin have submitted these
claims to their insurance carriers. The Company has attempted to work together
with Ford to address the claims arising from the self-adjust parking brakes
originally manufactured by the Brake and Cable Business of Alkin and does not
believe that these claims have adversely affected its business relationship
with Ford.
From time to time, in the ordinary course of its business, the Company
receives notice from a customer that a product may not be properly
functioning. For example, in November 1995, the Company was notified by
Chrysler that it had received reports of a number of parking brake failures in
manual transmission vehicles, particularly in Europe. The Company's
investigation of this matter remains in preliminary stages, and the Company
has had no further contacts from Chrysler regarding this matter. It is
possible that Chrysler could seek contribution from the Company for costs it
incurs if a recall were undertaken or for costs associated with possible
repairs.
In January 1996, the Company was served with a complaint alleging a wrongful
death as the result of injuries purportedly caused by a defectively-designed
manual release for an emergency brake on a 1990 Cadillac Fleetwood. The
lawsuit is in preliminary stages and has been referred to the Company's
insurance carrier.
In June 1996, the Company was served with a complaint alleging a wrongful
death as the result of injuries purportedly caused by a defectively designed
rear latch on a Chrysler mini-van. Chrysler and two other suppliers to
Chrysler were also named as defendants in the complaint. The lawsuit is in
preliminary stages and has been referred to the Company's insurance carrier.
In addition, Chrysler has agreed to assume the defense of, and to indemnify
the Company with respect to, this claim as long as the plaintiffs do not make
any claim alleging a manufacturing defect as it relates to the Company. There
can be no assurance that the plaintiffs will not make such an allegation.
The Company believes it maintains adequate insurance, including product
liability coverage, to cover the claims described above. The Company has also
established reserves in amounts it believes adequate to cover any adverse
judgments. However, any adverse judgment in excess of its insurance coverage
and such reserves could result in a material adverse effect on the Company.
32
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<S> <C> <C>
S.A. (Tony) Johnson............ 56 Chairman and Director
President, Chief Executive Officer and
Karl F. Storrie................ 58 Director
David R. Bovee................. 46 Vice President, Chief Financial Officer and
Assistant Secretary
Joe A. Bubenzer................ 44 Senior Vice President
Robert R. Hibbs................ 34 Vice President and Director
David P. Klosterman............ 59 Vice President
John J. Knappenberger.......... 49 Vice President
Milton D. Kniss................ 48 Vice President
Craig L. Lamiman............... 41 Vice President
Scott D. Rued.................. 39 Vice President
Neil Anderson.................. 45 Director
W. H. Clement.................. 68 Director
James L. O'Loughlin............ 52 Director
William L. (Barry) Orscheln.... 45 Director
Eric J. Rosen.................. 35 Director
Barbara A. Westhues............ 35 Director
</TABLE>
S.A. (Tony) Johnson has served as Chairman and a Director of the Company
since November 1990. Mr. Johnson is the founder, Chief Executive Officer and
President of Hidden Creek, a private industrial management company based in
Minneapolis, Minnesota, which has provided certain management and other
services to the Company. Mr. Johnson is also the President of J2R. Prior to
forming Hidden Creek, Mr. Johnson served from 1985 to 1989 as Chief Operating
Officer of Pentair, Inc., a diversified industrial company. From 1981 to 1985,
Mr. Johnson was President and Chief Executive Officer of Onan Corp., a
diversified manufacturer of electrical generating equipment and engines for
commercial, defense and industrial markets. Mr. Johnson served as Chairman and
a director of Automotive Industries Holding, Inc., a supplier of interior trim
components to the automotive industry, from May 1990 to August 1995. Mr.
Johnson is also Chairman and a director of Tower Automotive, Inc., a
manufacturer of engineered metal stampings and assemblies for the automotive
industry.
Karl F. Storrie has served as President, Chief Executive Officer and a
Director of the Company since March 1991. Prior to joining the Company and
from 1986, Mr. Storrie was Group President of a number of aerospace
manufacturing companies owned by Coltec Industries, a multi-divisional public
corporation. Prior to becoming a Group President, Mr. Storrie was a Division
President of two aerospace design and manufacturing companies for Coltec
Industries from 1981 to 1986. During his thirty-five year career, Mr. Storrie
has held a variety of positions in technical and operations management. Mr.
Storrie is also a director of Argo-Tech Corporation, a manufacturer of
aircraft fuel, boost and transfer pumps.
David R. Bovee has served as Vice President and Chief Financial Officer of
the Company since November 1990. Mr. Bovee also serves as Assistant Secretary
for the Company. Prior to joining the Company, Mr. Bovee served as Vice
President at Wickes in its Automotive Group from 1987 to 1990.
Joe A. Bubenzer has served as Vice President Sales/Engineering since joining
the Company in October 1993 and was named Senior Vice President in 1995. Prior
to joining the Company, Mr. Bubenzer filled various executive positions with
ITT Automotive, a supplier of components to the automotive industry, where he
worked for six years, and, prior to such time, at GM, where he worked for 14
years.
Robert R. Hibbs has served as a Director of the Company since August 1994
and as Vice President since November 1990. Mr. Hibbs, a stockholder of J2R,
has also served as Vice President-Corporate Development of
33
<PAGE>
Hidden Creek since January 1994 and as its Director from April 1990 through
December 1993. Prior thereto, Mr. Hibbs worked in the corporate finance area
with Drexel Burnham Lambert, an investment banking firm, in New York from 1988
to 1990. Mr. Hibbs is also Chairman of the Audit Committee of the Board.
David P. Klosterman has served as Vice President of Advanced Technology
Development since September 1994. Mr. Klosterman served as Vice President of
Engineering for Alkin since December 1991 and prior thereto served as General
Manager of Engineering for Orscheln since January 1979.
John J. Knappenberger has served as Vice President of Quality and Materials
of the Company since December 1995. Prior to joining the Company, Mr.
Knappenberger was Director of Quality for Carrier Corporation's North American
Operations, manufacturers of heating and air conditioning systems, from
February 1992. From 1985 to 1991, Mr. Knappenberger was employed by TRW Inc.,
a supplier of components to the automotive industry, beginning as Director of
Quality in 1985 for the Steering and Suspension Division and becoming Vice
President, Quality for the Automotive Sector in 1990.
Milton D. Kniss has served as Vice President of Operations of the Company
since January 1994. From April 1991 until January 1994, Mr. Kniss served as
Director of Michigan Operations for the Company. Mr. Kniss joined the
predecessor in 1981 as a Divisional Purchasing Manager, served as Plant
Manager of East Jordan, Michigan from 1982 until 1986, and Plant Manager of
Gordonsville, Tennessee until 1991.
Craig L. Lamiman has served as Vice President of the Company since August
1994. Prior to joining the Company, Mr. Lamiman served as Director of
Industrial Relations at United Technologies Corporation, a diversified
publicly-held corporation, and President and CEO of his own company in
Connecticut. Mr. Lamiman served in several positions while at Pepsico, Inc.
from 1980 to 1988, the most recent being as Regional Personnel Director for
Pepsi-Cola International Limited (U.S.A.).
Scott D. Rued has served as Vice President of the Company since November
1990. Mr. Rued, a stockholder of J2R, has also served as Executive Vice
President and Chief Financial Officer of Hidden Creek since January 1994 and
served as its Vice President--Finance and Corporate Development from June 1989
through 1993. Mr. Rued has served as Vice President, Corporate Development and
a director of Tower Automotive, Inc. since April 1993. Mr. Rued served as Vice
President, Chief Financial Officer and a director of Automotive Industries
Holding, Inc. from April 1990 to August 1995. Mr. Rued is also a director of
The Rottlund Company, Inc., a corporation engaged in the development and sale
of residential real estate.
Neil Anderson has served as a Director of the Company since August 1994. Mr.
Anderson has also served as Vice President of Finance for Orscheln Management
Co. since March 1991 and was named Senior Vice President of Finance in October
1995. Mr. Anderson has also served as a director for Analytical Bio Chemistry
Laboratories, Inc. since June 1995.
W. H. Clement has served as a Director of the Company since 1993. Mr.
Clement serves as a consultant to Hidden Creek. From 1975 until May 1994, Mr.
Clement served as Chief Executive Officer or as President of Automotive
Industries Holding, Inc. and its predecessor. Mr. Clement is also a director
of F&M National Corporation, a bank holding company, and Tower Automotive,
Inc.
James L. O'Loughlin has served as a Director of the Company since August
1994. Mr. O'Loughlin has also served as Vice President and General Counsel to
Orscheln Management Co. since December 1987 and was named Senior Vice
President in October 1995.
William L. (Barry) Orscheln has served as a Director of the Company since
August 1994. Mr. Orscheln has also served as President of Alkin (and its
predecessors) since March 1994, as President of Orscheln Farm and Home since
September 1995, as President of Orscheln Properties Co., L.L.C., since October
1994 and as President of Orscheln Management Co. since December 1987. Mr.
Orscheln has served as a director of UMB Bank, a bank holding company, since
July 1989 and as a director of Orscheln Management Co. since 1987.
Eric J. Rosen has served as a Director of the Company since January 1995.
Mr. Rosen is Managing Director of Onex Investment Corp., a diversified
industrial corporation and an affiliate of Onex, and served as a Vice
34
<PAGE>
President of Onex Investment Corp. from 1989 to February 1994. Prior thereto,
Mr. Rosen worked in the merchant banking group at Kidder, Peabody & Co.
Incorporated from 1987 to 1989. Mr. Rosen is also a director of Tower
Automotive, Inc.
Barbara A. Westhues has served as a Director of the Company since August
1994. Ms. Westhues has served on the Audit Committee since August 1994. Ms.
Westhues has also served as the Controller of Orscheln Management Co. since
December 1987 and was named Senior Vice President in October 1995.
The Company currently has nine Directors, all of whom were elected pursuant
to the terms of the Stockholders Agreement. Promptly following consummation of
the Offering, the Company intends to appoint two additional Directors who are
not otherwise affiliated with the Company or any of its stockholders. Such
nominees have not been selected as of the date hereof. Each Director is
elected to serve until the next annual meeting of stockholders or until a
successor is duly elected and qualified. Executive officers of the Company are
duly elected by the Board to serve until their respective successors are
elected and qualified. There are no family relationships between any of the
Directors or executive officers of the Company.
The Company has letter agreements with Messrs. Lamiman, Klosterman and
Knappenberger with respect to their employment with the Company. The
agreements provide for an annual base salary of $125,000 for Mr. Lamiman,
$95,000 for Mr. Klosterman and $135,000 for Mr. Knappenberger. The agreements
provide that each individual is eligible for an annual bonus of up to 50% of
his annual base salary and certain other benefits customary for agreements of
this type.
Certain of the Company's existing stockholders have entered into agreements
pursuant to which such stockholders have agreed to vote their shares of the
Company's voting stock for the election of directors designated by certain of
the existing stockholders. See "--Stockholders Agreement."
There are three Committees of the Board: the Executive Committee, the
Compensation Committee and the Audit Committee. The Executive Committee, which
is currently composed of Messrs. Johnson, Storrie and Orscheln, exercises the
powers of the Board of Directors during intervals between Board meetings and
acts as an advisory body to the Board by reviewing various matters prior to
their submission to the Board. The Compensation Committee, which is currently
composed of Messrs. Johnson and Orscheln, reviews and makes recommendations to
the Board of Directors regarding salaries, compensation and benefits of
executive officers and key employees of the Company and grants all options to
purchase Common Stock of the Company. The Audit Committee is currently
composed of Messrs. Hibbs, Clement, Anderson and Rosen and Ms. Westhues. Among
other duties, the Audit Committee reviews the internal and external financial
reporting of the Company, reviews the scope of the independent audit and
considers comments by the auditors regarding internal controls and accounting
procedures and management's response to these comments. The Company does not
have a nominating committee. The Company intends to appoint one of the new
independent directors to each of the Audit Committee and the Compensation
Committee.
DIRECTOR COMPENSATION
Directors who are not employees of the Company or any of its affiliates each
receive an annual fee of $14,400 for serving as a director of the Company. In
addition, each non-employee director receives $1,000 for each Board of
Directors meeting attended, $500 for each committee meeting attended and
reimbursement of out of pocket expenses incurred to attend such meetings.
EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's chief
executive officer and its four other most highly compensated executive
officers (the "Named Executive Officers") for 1995. The Named Executive
Officers did not exercise and were not granted any stock options in 1995 and
did not hold any stock options as of December 31, 1995.
35
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2) ($)(3)
<S> <C> <C> <C> <C> <C>
Karl F. Storrie............... 1995 $258,340 $260,000 $11,775 $3,600
President and Chief Executive
Officer
Joe A. Bubenzer............... 1995 157,333 120,000 8,322 2,616
Senior Vice President
David R. Bovee................ 1995 130,833 100,000 4,389 2,832
Vice President
Milton D. Kniss............... 1995 122,000 86,000 6,250 2,776
Vice President
Craig L. Lamiman.............. 1995 125,000 28,000 8,417 231
Vice President
</TABLE>
- ---------------------
(1) Includes amounts deferred by employees under the Company's 401(k) employee
savings plan.
(2) Includes the value of personal benefits and perquisites.
(3) Includes the dollar value of premiums paid by the Company for term life
insurance on behalf of the Named Executive Officers and the Company's
matching 401(k) contributions.
1996 KEY EMPLOYEE STOCK OPTION PLAN
Prior to consummation of the Offering, the Board and stockholders of the
Company will approve the Stock Option Plan. The Stock Option Plan will be
administered by a Compensation Committee (the "Committee") composed of non-
management members of the Board, who will be appointed by the Board. Certain
people who are full-time, salaried employees of the Company will be eligible
to participate in the Stock Option Plan (an "Employee Participant"). The
Committee will select the Employee Participants and determine the terms and
conditions of the options. The Stock Option Plan will provide for the issuance
of options to Employee Participants covering 600,000 shares of Class A Common
Stock of the Company, subject to certain adjustments reflecting changes in the
Company's capitalization.
Options granted under the Stock Option Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs")
as the Committee may determine. ISOs are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). The exercise price of (i) an ISO granted to
an individual who owns shares possessing more than 10% of the total combined
voting power of all classes of stock of the Company (a "10% Owner") will be at
least 110% of the fair market value of a share of common stock on the date of
grant and (ii) an ISO granted to an individual other than a 10% Owner and an
NQO will be at least 100% of the fair market value of a share of Common Stock
on the date of grant.
Options granted under the Stock Option Plan may be subject to time vesting
and certain other restrictions at the Committee's sole discretion. Subject to
certain exceptions, the right to exercise an option generally will terminate
at the earlier of (i) the first date on which the initial grantee of such
option is not employed by the Company for any reason other than termination
without cause, death or permanent disability or (ii) the expiration date of
the option. If the holder of an option dies or suffers a permanent disability
while still employed by the Company, the right to exercise all unexpired
installments of such option shall be accelerated and shall vest as of the
latest of the date of such death, the date of such permanent disability and
the date of the discovery of such permanent disability, and such option shall
be exercisable, subject to certain exceptions, for 90 days after such date. If
the holder of an option is terminated without cause, to the extent the option
has vested, such option will be exercisable for 30 days after such date.
36
<PAGE>
All outstanding options under the Stock Option Plan will terminate
immediately prior to consummation of a liquidation or dissolution of the
Company, unless otherwise provided by the Board. In the event of the sale of
all or substantially all of the assets of the Company or the merger of the
Company with another corporation, all restrictions on any outstanding options
will terminate and Employee Participants will be entitled to the full benefit
of their options immediately prior to the closing date of such sale or merger,
unless otherwise provided by the Board.
The Board generally will have the power and authority to amend the Stock
Option Plan at any time without approval of the Company's stockholders;
however, the Board may not amend the Stock Option Plan to materially alter the
plan eligibility requirements, number of shares issuable under the plan or
benefits to participants in the plan without the approval of the Company's
stockholders. No options have been granted under the Stock Option Plan to
date. Immediately following the consummation of the Offering, the Company
intends to grant to Karl F. Storrie, President and Chief Executive Officer of
the Company, and John J. Knappenberger, Vice President of the Company, options
to purchase 80,000 shares and 22,600 shares, respectively, of Class A Common
Stock at an exercise price equal to the initial public offering price per
share. One-half of Mr. Storrie's options will vest on the first anniversary of
the date of grant, and one-half will vest on the second anniversary of the
date of grant. All of Mr. Knappenberger's options will vest on the six-month
anniversary of the date of grant.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
The Employee Stock Purchase Plan will be approved by the Board and
stockholders prior to the consummation of the Offering. The Employee Stock
Purchase Plan will be established to give employees desiring to do so a
convenient means of purchasing shares of Common Stock through payroll
deductions. The Employee Stock Purchase Plan will provide an incentive to
participate by permitting purchases at a discounted price. The Company
believes that ownership of stock by employees will foster greater employee
interest in the success, growth and development of the Company.
Subject to certain restrictions, each employee of the Company who is a U.S.
resident or a U.S. citizen temporarily on location at a facility outside of
the U.S. will be eligible to participate in the Employee Stock Purchase Plan
if he or she has been employed by the Company for more than six months.
Participation will be discretionary with each eligible employee. The Company
will reserve 500,000 shares of Class A Common Stock for issuance in connection
with the Employee Stock Purchase Plan. Each eligible employee will be entitled
to purchase a maximum of 200 shares per year. Elections to participate and
purchases of stock will be made on a quarterly basis. Each participating
employee contributes to the Employee Stock Purchase Plan by choosing a payroll
deduction in any specified amount, with a minimum deduction of $10 per payroll
period. A participating employee may increase or decrease the amount of
his/her payroll deduction, including a change to a zero deduction as of the
beginning of any calendar quarter. Elected contributions will be credited to
participants' accounts at the end of each calendar quarter. In addition,
employees may make lump sum contributions at the end of the year to enable
them to purchase the maximum number of shares available for purchase during
the plan year.
Each participating employee's contributions will be used to purchase shares
for the employee's share account within 15 days after the last day of each
calendar quarter. The cost per share is 85% of the lower of the closing price
of the Company's Class A Common Stock on the Nasdaq National Market on the
first or the last day of the calendar quarter. The number of shares purchased
on each employee's behalf and deposited in his/her share account will be based
on the amount accumulated in such participant's cash account and the purchase
price for shares with respect to any calendar quarter. Shares purchased under
the Employee Stock Purchase Plan carry full rights to receive dividends
declared from time to time. Under the Employee Stock Purchase Plan any
dividends attributable to shares in the employee's share account will be
automatically used to purchase additional shares for such employee's share
account. Share distributions and share splits will be credited to the
participating employee's share account as of the record date and effective
date, respectively. A participating employee will have full ownership of all
shares in his/her share account and may withdraw them for sale or otherwise by
written
37
<PAGE>
request to the Committee following the close of each calendar quarter. Subject
to applicable federal securities and tax laws, the Board of Directors will
have the right to amend or to terminate the Employee Stock Purchase Plan.
Amendments to the Employee Stock Purchase Plan will not affect a participating
employee's right to the benefit of the contributions made by such employee
prior to the date of any such amendment. In the event the Employee Stock
Purchase Plan is terminated, the Committee will be required to distribute all
shares held in each participating employee's share account plus an amount of
cash equal to the balance in each participating employee's cash account.
INDEPENDENT DIRECTOR STOCK OPTION PLAN
The Director Option Plan will be approved by the Board and stockholders
prior to the consummation of the Offering. The Director Option Plan will be
established to encourage stock ownership by certain Directors of the Company
and to provide those individuals with an additional incentive to manage the
Company and to provide a form of compensation that will attract and retain
highly qualified individuals as members of the Board. The Director Option Plan
will provide for the issuance of options to independent Directors, as defined,
covering 100,000 shares of Class A Common Stock of the Company, subject to
certain adjustments reflecting changes in the Company's capitalization.
The terms of each option granted under the Director Option Plan may not
exceed ten years from the date of grant. The option price for each option must
equal 100% of the fair market value of the Company's Class A Common Stock on
the date the option is granted. In general, no option may be exercised in
whole or in part prior to the expiration of at least six months from the date
of grant of the option. In consideration of the grant of an option, an
optionee is required to agree to continue to serve as a director of the
Company for the lesser of 12 months from the date the option is granted or for
the remainder of the optionee's term as a Director of the Company.
Notwithstanding this requirement, nothing contained in the Director Option
Plan or any agreement to be executed pursuant to the Director Option Plan will
obligate the Company, its Board or its stockholders to retain an optionee as a
Director of the Company. No options have been granted under the Director
Option Plan to date.
STOCKHOLDERS AGREEMENT
On August 31, 1994, the Company, Onex, J2R, Alkin and certain individuals
named therein (including members of the Company's management) entered into a
Stockholders Agreement (as amended, the "Stockholders Agreement").
Concurrently with the Offering, the Stockholders Agreement will be amended and
restated to require all the parties thereto to vote their shares of Common
Stock and take any other action necessary to ensure the Board will be
comprised of eleven persons, seven of whom, including the two independent
directors, shall be designated by Onex, J2R and certain stockholders
affiliated with Hidden Creek (collectively, the "MC Stockholders") and four of
whom shall be designated by Alkin (the "Alkin Stockholders"). The voting
provision terminates automatically when the Alkin Stockholders cease to own at
least 10% of the outstanding Common Stock. The Stockholders Agreement also
contains provisions granting the parties thereto certain tag-along rights
allowing them to sell their shares in certain private sales of Common Stock
initiated by the other parties to the Stockholders Agreement. The Stockholders
Agreement also provides that the affirmative vote of two-thirds of the Board
is required to issue any Preferred Stock (as defined below) of the Company.
The Stockholders Agreement also binds subsequent transferees who have acquired
their shares in private sales from the parties to the Stockholders Agreement.
Subject to certain exemptions, each of Alkin, Onex, J2R and the MC
Stockholders have agreed not to compete with the business of the Company for a
period of five years after the date of the original Stockholders Agreement and
Onex, J2R, the MC Stockholders and the Company have agreed not to compete with
the business of Alkin during that period. J2R, Onex and Messrs. Johnson, Rued
and Hibbs have also entered into an agreement requiring the parties to vote
their shares of Common Stock as directed by Onex, and providing Onex with
certain first offer rights in connection with private sales of Common Stock.
38
<PAGE>
CERTAIN TRANSACTIONS
On August 31, 1994, MCHC, Alkin and all of the existing stockholders of MCHC
entered into an agreement whereby stockholders of MCHC contributed all shares
of MCHC common stock to the Company in return for shares of Class A Common
Stock. Alkin contributed the Brake and Cable Business to the Company in return
for (i) 2,206,890 shares of Class B Common Stock, (ii) an option to purchase
up to an additional 14,420 shares of Class B Common Stock at an exercise price
of $1.45 per share and (iii) cash consideration, net of assumed indebtedness,
of approximately $40 million. In addition to borrowings under the Bank Credit
Agreement, in financing such transaction, the Company borrowed an aggregate of
$4.0 million, evidenced by the Notes, from certain stockholders of the
Company, including Onex ($1.8 million), J2R ($0.2 million) and Alkin ($2.0
million). See "Use of Proceeds."
In connection with the acquisition of the Brake and Cable Business, the
Company entered into agreements with Alkin whereby the Company receives
services related to data processing, payroll, personnel administration and
other administrative matters. Amounts paid under these agreements were
$570,000 in 1994, $1,788,000 in 1995 and $370,000 in the six-month period
ended June 30, 1996. In addition, the Company and Alkin agreed to supply each
other's operations with certain items necessary for the manufacture of their
respective products. These supply agreements are for periods of up to five
years and the Company is required to purchase such supplies from Alkin only so
long as the supply terms remain no less favorable than could be obtained from
an independent party.
In November 1990, the Company's predecessor entered into a Management
Agreement with Hidden Creek, an affiliate of the Company. On August 31, 1994,
the Company and Hidden Creek entered into a new Management Agreement, and the
prior agreement was terminated. Pursuant to the Management Agreements, Hidden
Creek has provided strategic direction, management and financial and
administrative services to the Company. In exchange for such services, the
Company has paid monthly management fees to Hidden Creek. Total management
fees under such agreements were approximately $500,000 for 1993, $554,000 for
1994, $733,000 for 1995 and $500,000 for the six months ended June 30, 1996.
Although the current Management Agreement will be terminated upon completion
of the Offering, certain officers and employees of Hidden Creek will continue
to provide services to the Company. A portion of the salaries and expenses of
the Hidden Creek officers and employees will be allocated to the Company. The
Company also paid to Hidden Creek fees of approximately $500,000 in connection
with the acquisition of the Brake and Cable Business from Alkin and fees of
approximately $250,000 in connection with the sale of the Window Regulator
Business to Rockwell.
On June 26, 1995, the Company sold an aggregate of 78,819 shares of Class B
Common Stock to certain management employees at a purchase price of $2.69 per
share and 70,500 shares of Class B Common Stock to certain management
employees at a purchase price of $1.96 per share, pursuant to agreements
entered into in May 1995 and August 1994, respectively. In connection
therewith, Messrs. Klosterman, Kniss and Lamiman, each an executive officer of
the Company, purchased 35,250, 8,812 and 35,250 shares, respectively. In
connection with such sale, the Company loaned funds to finance up to half of
the purchase price for such shares at an interest rate equal to the base rate
of the Company's senior lender plus 1.5% (9.75% at June 30, 1996) and a
scheduled maturity on the earlier of (i) June 26, 2000 or (ii) the date such
employee sells such shares.
The Company has granted registration rights to certain of its existing
stockholders, including Onex, J2R, Alkin and Messrs. Johnson, Storrie,
Bubenzer, Bovee, Kniss, Klosterman and Lamiman. See "Shares Eligible for
Future Sale--Registration Agreement."
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The Company currently has four classes of Common Stock outstanding.
Immediately prior to and contingent upon the Offering, the Company's four
classes of Common Stock will be converted into Class B Common Stock. The Class
A Common Stock being offered hereby and the Class B Common Stock will be
substantially identical except with respect to voting and conversion rights.
Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to ten votes. Except as otherwise required by
law or by the Restated Certificate, the Class A Common Stock and the Class B
Common Stock will vote together as a single class on all matters submitted to
a vote of the stockholders, including the election of Directors. In addition,
the Class B Common Stock is convertible at any time at the option of the
holder thereof, and is mandatorily convertible upon any transfer thereof
(except to affiliates) and at any time that the MC Stockholders and their
affiliates, in the aggregate, do not hold at least 10% of the total
outstanding shares of Common Stock, into shares of Class A Common Stock on a
share-for-share basis. All of the Company's existing stockholders will receive
shares of Class B Common Stock in the Recapitalization. The number of shares
of Class B Common Stock that will be issued as a result of the conversion of
the Company's existing classes of Common Stock will be determined according to
the relative preference rankings of such existing Common Stock and the initial
public offering price of the Class A Common Stock.
The table below sets forth certain information regarding the equity
ownership of the Company as of June 30, 1996 and immediately following the
Offering (in each case giving effect to the Recapitalization at an assumed
initial public offering price of $15.00 per share), by (i) each person or
entity known to the Company who beneficially owns five percent or more of the
Common Stock of the Company, (ii) each Director and Named Executive Officer
and (iii) all Directors and executive officers of the Company as a group.
Unless otherwise stated, each of the persons named in the table has sole
voting and investment power with respect to the securities beneficially owned
by it or him as set forth opposite its or his name. Beneficial ownership of
the Common Stock listed in the table has been determined in accordance with
the applicable rules and regulations promulgated under the Exchange Act. The
actual number of shares to be issued to each existing stockholder in the
Recapitalization is subject to change based upon changes in the assumed
initial public offering price.
<TABLE>
<CAPTION>
COMMON STOCK OWNED COMMON STOCK OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------- -------------------------------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
OF SHARES OF SHARES OF SHARES OF SHARES
OF CLASS A OF CLASS A OF CLASS B OF CLASS B
NUMBER PERCENTAGE COMMON COMMON COMMON COMMON
NAME AND ADDRESS OF SHARES OF SHARES STOCK STOCK STOCK STOCK
<S> <C> <C> <C> <C> <C> <C>
Onex DHC LLC (1)(2)..... 2,791,364 55.7% -- -- 2,791,364 55.7%
Alkin Co. (2)(3)........ 2,221,310 44.3 -- -- 2,221,310 44.3
J2R Corporation (2)(4).. 409,291 8.2 -- -- 409,291 8.2
S. A. Johnson (2)(4).... 468,959 9.4 -- -- 468,959 9.4
Karl F. Storrie (2)..... 139,531 2.8 -- -- 139,531 2.8
David R. Bovee (2)...... 41,308 * -- -- 41,308 *
Joe A. Bubenzer (2)..... 35,814 * -- -- 35,814 *
Robert R. Hibbs (2)(5).. 432,240 8.6 -- -- 432,240 8.6
David P. Klosterman
(2).................... 35,250 * -- -- 35,250 *
John J. Knappenberger... -- -- -- -- -- --
Milton D. Kniss (2)..... 17,992 * -- -- 17,992 *
Craig L. Lamiman (2).... 35,250 * -- -- 35,250 *
Neil Anderson (2)(3).... 2,221,310 44.3 -- -- 2,221,310 44.3
W. H. Clement (2)....... -- -- -- -- -- --
James L. O'Loughlin
(2)(3)................. 2,221,310 44.3 -- -- 2,221,310 44.3
William L. Orscheln
(2)(3)................. 2,221,310 44.3 -- -- 2,221,310 44.3
Eric J. Rosen (1)(2).... 2,791,364 55.7 -- -- 2,791,364 55.7
Scott D. Rued (2)(6).... 455,189 9.1 -- -- 455,189 9.1
Barbara A. Westhues
(2)(3)................. 2,221,310 44.3 -- -- 2,221,310 44.3
All Directors and
executive officers as a
group
(16 persons)........... 4,858,094 96.9 -- -- 4,858,094 96.9
</TABLE>
- ---------------------
*Less than one percent.
40
<PAGE>
(1) Reflects shares of Class B Common Stock held by Onex DHC LLC, which has
shared voting power over 2,791,364 shares of Common Stock (see footnote
(2)) and sole dispositive power over 1,793,833 shares of Class B Common
Stock. Mr. Rosen, a Director of the Company, is Managing Director of Onex
Investment Corp. and disclaims beneficial ownership of all shares of
Common Stock owned by Onex DHC LLC. Onex DHC LLC and Onex Investment
Corp. are both wholly owned subsidiaries of Onex Corporation. The address
for Onex DHC LLC and Mr. Rosen is c/o Onex Investment Corp., 712 Fifth
Avenue, 40th Floor, New York, New York 10019.
(2) Onex, J2R, Messrs. Johnson, Storrie, Bovee, Bubenzer, Hibbs, Klosterman,
Kniss, Lamiman, Clement, Rosen and Rued and certain of the Company's other
existing stockholders have entered into agreements pursuant to which such
stockholders agreed to vote their shares of Common Stock in the same
manner as Onex votes its shares on all matters presented to the Company's
stockholders for a vote and, to the extent permitted by law, granted to
Onex a proxy to effectuate such agreement. As a result, Onex will have
voting control of approximately 53.0% of the Common Stock following the
completion of the Offering (52.6% if the Underwriters' over-allotment
option is exercised in full). All of the Company's existing stockholders,
including Alkin, have entered into an agreement providing for the election
of the Board. As a result, such stockholders will collectively have voting
control over 94.9% of the Common Stock following the completion of the
Offering (94.2% if the Underwriters' over-allotment option is exercised in
full).
(3) Includes 14,420 shares issuable upon the exercise of a currently
exercisable option issued to Alkin in connection with the Company's
acquisition of the Brake and Cable Business. Alkin has granted each of
Messrs. Anderson and O'Loughlin and Ms. Westhues options to acquire 13,218
shares of the Class B Common Stock owned by Alkin. Messrs. Anderson,
O'Loughlin and Orscheln and Ms. Westhues are officers of Alkin and, other
than Mr. Orscheln, each disclaims beneficial ownership of the shares owned
by Alkin other than the shares subject to each of their outstanding
options. The address for Alkin is 2000 U.S. Highway 63 South, Moberly,
Missouri 65270, and the address of each such individual is c/o Alkin at
the same address.
(4) Includes 409,291 shares owned by J2R, of which Mr. Johnson is President,
and 59,668 shares owned by Mr. Johnson. The address for Mr. Johnson and
J2R is c/o Dura Automotive Systems, Inc., 4508 IDS Center, Minneapolis,
Minnesota 55402.
(5) Includes 409,291 shares owned by J2R, of which Mr. Hibbs is a stockholder,
and 22,949 shares owned by Mr. Hibbs. Mr. Hibbs disclaims beneficial
ownership of the shares owned by J2R. The address for Mr. Hibbs is c/o
Dura Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota
55402.
(6) Includes 409,291 shares owned by J2R, of which Mr. Rued is a stockholder,
and 45,898 shares owned by Mr. Rued. Mr. Rued disclaims beneficial
ownership of the shares owned by J2R. The address for Mr. Rued is c/o Dura
Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota 55402.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The Company currently has four classes of Common Stock outstanding.
Immediately prior to and contingent upon the Offering, the Company's four
classes of Common Stock will be converted into Class B Common Stock. All of
the Company's existing stockholders will receive shares of Class B Common
Stock in the Recapitalization. The number of shares of Class B Common Stock
that will be issued as a result of the conversion of the Company's existing
classes of Common Stock will be determined according to the relative
preference rankings of such existing Common Stock and the initial public
offering price of the Class A Common Stock.
At the time of the Offering, after giving effect to the Recapitalization,
the total amount of authorized capital stock of the Company will consist of
30,000,000 shares of Class A Common Stock, par value $0.01 per share,
10,000,000 shares of Class B Common Stock, par value $0.01 per share and
5,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred
Stock"). Giving effect to the Recapitalization and upon completion of the
Offering, 2,700,000 shares of Class A Common Stock, 4,998,254 shares of Class
B Common Stock and no shares of Preferred Stock will be issued and
outstanding. The discussion herein describes the Company's capital stock, the
Restated Certificate and By-laws as anticipated to be in effect upon
consummation of the Offering. The following summary of certain provisions of
the Company's capital stock describes all material provisions of, but does not
purport to be complete and is subject to, and qualified in its entirety by,
the Restated Certificate and the By-laws of the Company that are included as
exhibits to the Registration Statement of which this Prospectus forms a part
and by the provisions of applicable law. As of June 30, 1996 (without giving
effect to the Recapitalization), the Company had 283,589 shares of Common
Stock outstanding held by 35 holders of record.
The Restated Certificate and By-laws will contain certain provisions that
are intended to enhance the likelihood of continuity and stability in the
composition of the Board and which may have the effect of delaying, deferring
or preventing a future takeover or change in control of the Company unless
such takeover or change in control is approved by the Board.
CLASS A COMMON STOCK
The shares of Class A Common Stock being offered by the Company will be,
upon payment therefor, validly issued, fully paid and nonassessable. Subject
to the prior rights of the holders of any Preferred Stock, the holders of
outstanding shares of Class A Common Stock will be entitled to receive
dividends out of assets legally available therefor at such time and in such
amounts as the Board may from time to time determine. See "Dividend Policy."
The shares of Class A Common Stock will not be convertible and the holders
thereof will have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of Class A Common Stock will be entitled to receive pro
rata the assets of the Company which are legally available for distribution,
after payment of all debts and other liabilities and subject to the prior
rights of any holders of Preferred Stock then outstanding. Each outstanding
share of Class A Common Stock will be entitled to one vote on all matters
submitted to a vote of stockholders. Except as otherwise required by law or
the Restated Certificate, the Class A Common Stock and Class B Common Stock
will vote together on all matters submitted to a vote of the stockholders,
including the election of Directors.
Application has been made for quotation of the Class A Common Stock on the
Nasdaq National Market under the symbol "DRRA."
CLASS B COMMON STOCK
The issued and outstanding shares of Class B Common Stock generally will
have identical rights to those of the Class A Common Stock except with respect
to voting power and conversion rights. Each share of Class B Common Stock will
be entitled to ten votes on all matters submitted to a vote of stockholders,
as compared to
42
<PAGE>
one vote for each share of Class A Common Stock. Class B Common Stock will be
convertible at the option of the holder, and mandatorily convertible upon any
transfer thereof (except to affiliates) and at any time that the MC
Stockholders and their affiliates, in the aggregate, do not beneficially own
at least 10% of the total outstanding shares of Common Stock, into Class A
Common Stock on a share-for-share basis. The Class B Common Stock will not be
registered under the Securities Act and will not be listed for trading on any
national securities exchange or on the Nasdaq National Market.
PREFERRED STOCK
The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of shares of Preferred Stock in series and
may, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds
available for the payment of dividends on shares of Common Stock. Holders of
shares of Preferred Stock may be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of shares of Common Stock. Under certain
circumstances, the issuance of shares of Preferred Stock may render more
difficult or tend to discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of the Company's securities
or the removal of incumbent management. Upon the affirmative vote of a
majority of the total number of Directors then in office, the Board, without
stockholder approval, may issue shares of Preferred Stock with voting and
conversion rights which could adversely affect the holders of shares of Common
Stock. Upon consummation of the Offering, there will be no shares of Preferred
Stock outstanding, and the Company has no present intention to issue any
shares of Preferred Stock. The Stockholders Agreement provides that the
affirmative vote of two-thirds of the Board is required to issue any Preferred
Stock.
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AND BY-LAWS
The Restated Certificate will provide that stockholder action can be taken
only at an annual or special meeting of stockholders and cannot be taken by
written consent in lieu of a meeting. The Restated Certificate and the By-laws
will provide that, except as otherwise required by law, special meetings of
the stockholders can only be called by the Chairman of the Board or the
President of the Company, or pursuant to a resolution adopted by a majority of
the Board. Stockholders will not be permitted to call a special meeting or to
require the Board to call a special meeting.
The By-laws will establish an advance notice procedure for stockholder
proposals to be brought before an annual meeting of stockholders of the
Company, including proposed nominations of persons for election to the Board.
Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of the Board or by a stockholder who was a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and
who has given to the Company's Secretary timely written notice, in proper
form, of the stockholder's intention to bring that business before the
meeting. Although the By-laws will not give the Board the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the By-laws may have
the effect of precluding the conduct of certain business at a meeting if the
proper procedures are not followed or may discourage or defer a potential
acquiror from conducting a solicitation of proxies to elect its own slate of
Directors or otherwise attempting to obtain control of the Company.
The Restated Certificate and By-laws will provide that the affirmative vote
of holders of at least 80% of the total votes eligible to be cast in the
election of Directors will be required to amend, alter, change or repeal
certain of their provisions. This requirement of a super-majority vote to
approve amendments to the Restated Certificate and By-laws could enable a
minority of the Company's stockholders to exercise veto power over any such
amendments. In addition, the Class B Common Stock has ten votes, as compared
to one vote for each share of
43
<PAGE>
Class A Common Stock, on all matters, including the election of Directors, to
come before the stockholders. By virtue of such stock ownership, the holders
of the Class B Common Stock will be able to control the vote on all matters
submitted to a vote of the holders of Common Stock, including the election of
Directors, amendments to the Restated Certificate and By-laws and approval of
significant corporate transactions. Such concentration of ownership could also
have the effect of delaying, deterring or preventing a change in control of
the Company that might otherwise be beneficial to stockholders. See "Risk
Factors--Controlling Stockholder."
CERTAIN PROVISIONS OF DELAWARE LAW
Following the consummation of the Offering, the Company will be subject to
the "business combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (i) the
transaction is approved by the Board of Directors prior to the date the
"interested stockholder" obtained such status, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder," owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned by (a) persons who are directors and also officers and (b)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to such date
the "business combination" is approved by the board of directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the "interested stockholder." A "business combination" is defined to include
mergers, asset sales and other transactions resulting in financial benefit to
a stockholder. In general, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of a corporation's voting stock. The statute could prohibit or
delay mergers or other takeover or change in control attempts with respect to
the Company and, accordingly, may discourage attempts to acquire the Company.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Restated Certificate will limit the liability of Directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
the Restated Certificate will provide that the Company shall indemnify
Directors and officers of the Company to the fullest extent permitted by such
law. The Company anticipates entering into indemnification agreements with its
current Directors and executive officers prior to the completion of the
Offering.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A Common Stock will be
Firstar Trust Company.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering there has been no market for the Common Stock of the
Company. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Class A Common Stock in the public market, or the perception that such
sales may occur, could adversely affect prevailing market prices. See "Risk
Factors--Shares Eligible for Future Sale."
Upon completion of the Offering, the Company expects to have 7,698,254
shares of Common Stock outstanding. Of these shares, the 2,700,000 shares of
Class A Common Stock sold in the Offering (3,105,000 shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction under the Securities Act, except for any such
shares which may be acquired by an "affiliate" of the Company (an "Affiliate")
as that term is defined in Rule 144 under the Securities Act, which shares
will be subject to the resale limitations of Rule 144. The remaining
outstanding shares of Common Stock held by existing stockholders upon
completion of the Offering will be "restricted securities" (as that phrase is
defined in Rule 144) and may not be resold in the absence of registration
under the Securities Act or pursuant to exemptions from such registration,
including among others, the exemptions provided by Rule 144 under the
Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least two years has elapsed
since the later of the date the restricted securities were acquired from the
Company and the date they were acquired from an Affiliate, then the holder of
such restricted securities (including an Affiliate) is entitled to sell a
number of shares within any three-month period that does not exceed the
greater of 1% of the then outstanding shares of the Class A Common Stock
(approximately 27,000 shares immediately after the Offering) or the average
weekly reported volume of trading of the Class A Common Stock on the Nasdaq
National Market during the four calendar weeks preceding such sale. The holder
may only sell such shares through unsolicited brokers' transactions. Sales
under Rule 144 are also subject to certain requirements pertaining to the
manner of such sales, notices of such sales and the availability of current
public information concerning the Company. Affiliates may sell shares not
constituting restricted shares in accordance with the foregoing volume
limitations and other requirements but without regard to the two-year holding
period. Under Rule 144(k), if a period of at least three years has elapsed
between the later of the date restricted securities were acquired from the
Company and the date they were acquired from an Affiliate, as applicable, a
holder of such restricted securities who is not an Affiliate at the time of
the sale and has not been an Affiliate for at least three months prior to the
sale would be entitled to sell the shares immediately without regard to the
volume limitations and other conditions described above. In June 1995, the
Commission proposed reducing the two and three-year holding period under Rule
144 described above to one and two years, respectively.
Without giving effect to the contractual restrictions described below,
4,854,317 shares of Class A Common Stock (represented by currently outstanding
shares of Class B Common Stock) will be eligible for sale in the public market
under Rule 144, subject to the volume limitations and the other conditions
described above, 90 days after the date of this Prospectus.
The Company and certain of its existing stockholders, who in aggregate own
4,998,254 shares of Common Stock, will agree that, for a period of 180 days
after the date of this Prospectus, they will not, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
other than sales of Class A Common Stock under the Underwriting Agreement (as
defined) or the issuance of shares of Class A Common Stock upon the exercise
of outstanding options.
REGISTRATION AGREEMENT
The Company, Onex, J2R, Alkin and the management stockholders named therein
(the "Management Stockholders") are parties to a registration agreement (the
"Registration Agreement") dated August 31, 1994. Under the Registration
Agreement, the holders of a majority of shares of Common Stock held by Onex,
J2R and
45
<PAGE>
the Management Stockholders, as a group, or the holders of a majority of
shares of Common Stock held by Alkin, each have the right at any time, subject
to certain conditions, to require the Company to register any and all of their
shares of Common Stock under the Securities Act on Form S-1 (a "Long-Form
Registration") on four occasions at the Company's expense and on Form S-2 or
Form S-3 (a "Short-Form Registration") on an unlimited number of occasions at
the Company's expense. The Company is not required, however, to effect any
such Long-Form Registration or Short-Form Registration within six months after
the effective date of a prior demand registration or a registration in which
the holders of registrable securities were given piggyback rights with no
cutbacks and may postpone the filing of such registration for up to six months
if the holders of a majority of the registrable securities agree that such a
registration would likely have a material adverse effect on the Company. In
addition, such parties are entitled to request the inclusion of any Common
Stock subject to the Registration Agreement in any registration statement at
the Company's expense whenever the Company proposed to register any of its
securities under the Securities Act, subject to certain conditions. In
connection with all registrations, the Company has agreed to indemnify all
holders of registerable securities against certain liabilities, including
liabilities under the Securities Act. Beginning 180 days after the date of the
Prospectus, the holders of an aggregate of 4,998,254 shares of Common Stock
will have registration rights pursuant to the Registration Agreement.
46
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters") for whom Donaldson, Lufkin
& Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated and
Robert W. Baird & Co. Incorporated are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
of an underwriting agreement (the "Underwriting Agreement"), to purchase from
the Company the respective number of shares of Class A Common Stock set forth
opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF CLASS A
UNDERWRITER COMMON STOCK
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........
Morgan Stanley & Co. Incorporated..........................
Robert W. Baird & Co. Incorporated.........................
---------
Total.............................................. 2,700,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of the Class A
Common Stock offered hereby are subject to approval of certain legal matters
by counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all the shares of the Class A Common Stock if any are taken.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of the Class A Common Stock in part directly to the public
initially at the public offering price set forth on the cover page of this
Prospectus and in part to certain dealers at such price less a concession not
in excess of $ per share; that the Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share on sales to other
dealers; and that after the initial public offering, the public offering price
and other selling terms may be changed by the Representatives. The
Underwriters have informed the Company that they do not intend to confirm
sales to any accounts over which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
405,000 additional shares of Class A Common Stock at the initial public
offering price less underwriting discounts and commissions. The Underwriters
may exercise such option only for the purpose of covering over-allotments, if
any, incurred in connection with the sales of Class A Common Stock offered
hereby. To the extent that the Underwriters exercise such option, each
Underwriter will become obligated, subject to certain conditions, to purchase
the same percentage of such additional shares as the number of other shares to
be purchased by that Underwriter bears to the total number of shares set forth
on the cover page of this Prospectus.
At the request of the Company, the Underwriters have reserved up to 135,000
shares of Class A Common Stock for sale at the initial public offering price
to directors, officers, employees and business associates of the Company. Any
reserved shares which are not so purchased will be offered by the Underwriters
to the general public on the same basis as the other shares offered hereby.
The Company and certain of its existing stockholders, who own an aggregate
of 4,998,254 shares of Common Stock, have agreed prior to the consummation of
the offering with the Underwriters, not to offer, sell, contract to sell,
grant any other option to purchase or otherwise dispose of any shares of the
Common Stock or
47
<PAGE>
any securities convertible into or exercisable for, or warrants, rights or
options to acquire, shares of Common Stock for a period of 180 days without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation, other than sales of Class A Common Stock under the Underwriting
Agreement or the issuance of shares of Class A Common Stock upon the exercise
of outstanding options.
The Company and its principal operating subsidiary have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that they may be required to make
in respect thereof.
The initial public offering price for the shares of Class A Common Stock
will be determined through negotiations between the Company and the
Representatives. Among the factors to be considered in such negotiations are
the future prospects of the Company and its industry in general, the
experience of management, the demand for similar securities of companies
considered comparable to the Company, the prevailing conditions in the equity
securities market and other relevant factors. There can be no assurance that
an active trading market will develop for the shares of Class A Common Stock
or that the shares of Class A Common Stock will trade in the public market
subsequent to the Offering at or above the initial offering price.
LEGAL MATTERS
The validity of the Class A Common Stock being offered hereby will be passed
upon for the Company by Kirkland & Ellis (a partnership which includes
professional corporations), Chicago, Illinois, and for the Underwriters by
Gardner, Carton & Douglas, Chicago, Illinois.
EXPERTS
The audited financial statements included in this Prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Class A Common Stock being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto, certain
items of which are omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Prospectus concerning the provisions
of documents filed with the Registration Statement as exhibits are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable document filed as an
exhibit to the Registration Statement. The Registration Statement can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; at its Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511; and at its New York Regional Office, Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained from
the public reference section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission, and the address of such site is http://www.sec.gov. For further
information pertaining to the Company and the Common Stock being offered
hereby, reference is made to the Registration Statement, including the
exhibits thereto and the financial statements, notes and schedules filed as a
part thereof.
As a result of the Offering, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). So long as the Company is subject to the periodic
reporting requirements of the Exchange Act, it will continue to furnish the
reports and other information required thereby to the Commission. The Company
intends to furnish holders of the Class A Common Stock with annual reports
containing, among other information, audited financial statements certified by
an independent public accounting firm and quarterly reports containing
unaudited condensed financial information for the first three quarters of each
fiscal year. The Company also intends to furnish such other reports as it may
determine or as may be required by law.
48
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DURA AUTOMOTIVE SYSTEMS, INC.
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June
30, 1996 (unaudited)................................................... F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995 and for the six months ended June 30, 1995 and 1996
(unaudited)............................................................ F-4
Consolidated Statements of Stockholders' Investment for the years ended
December 31, 1993, 1994 and 1995 and for the six months ended June 30,
1996 (unaudited)....................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995 and for the six months ended June 30, 1995 and 1996
(unaudited)............................................................ F-6
Notes to Consolidated Financial Statements.............................. F-7
ORSCHELN AUTOMOTIVE BUSINESS UNIT
Report of Independent Public Accountants................................ F-20
Statements of Operations for the year ended December 31, 1993 and the
eight-month period ended August 31, 1994............................... F-21
Statements of Cash Flows for the year ended December 31, 1993 and the
eight-month period ended August 31, 1994............................... F-22
Notes to Financial Statements........................................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Dura Automotive Systems, Inc.
We have audited the accompanying consolidated balance sheets of Dura
Automotive Systems, Inc. (a Delaware corporation--See Note 1 of Notes to
Consolidated Financial Statements) and Subsidiaries as of December 31, 1994
and 1995 and the related consolidated statements of operations, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dura Automotive Systems,
Inc. and Subsidiaries as of December 31, 1994 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Minneapolis, Minnesota,
January 26, 1996
(except for the matters
discussed in Notes 10 and 11
for which the date is
August 9, 1996)
F-2
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................... $ 17 $ 1,732 $ 3,239
Accounts receivable, net...................... 46,762 34,990 40,760
Inventories................................... 16,348 11,916 10,278
Other current assets.......................... 9,922 10,661 6,203
-------- -------- --------
Total current assets....................... 73,049 59,299 60,480
-------- -------- --------
Property, Plant and Equipment:
Land and buildings............................ 10,665 9,333 9,771
Machinery and equipment....................... 35,681 34,889 36,298
Construction in progress...................... 4,538 2,731 2,960
Less--Accumulated depreciation................ (8,175) (10,246) (12,847)
-------- -------- --------
Net property, plant and equipment.......... 42,709 36,707 36,182
-------- -------- --------
Other Assets:
Goodwill...................................... 47,287 42,388 40,730
Other......................................... 5,219 5,362 5,667
Less--Accumulated amortization................ (2,131) (3,225) (3,697)
-------- -------- --------
Total other assets......................... 50,375 44,525 42,700
-------- -------- --------
$166,133 $140,531 $139,362
======== ======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable.............................. $ 27,353 $ 24,865 $ 22,756
Accrued liabilities........................... 22,411 15,596 18,188
Current maturities of long-term debt.......... 4,654 5,137 5,536
-------- -------- --------
Total current liabilities.................. 54,418 45,598 46,480
Long-Term Debt, net of current maturities...... 70,112 46,639 40,555
Other Noncurrent Liabilities................... 24,185 20,611 19,700
-------- -------- --------
Commitments and Contingencies (Notes 4, 7, 8
and 9)
Stockholders' Investment:
Preferred stock, par value $1; 5,000,000
shares authorized;
none issued or outstanding................... -- -- --
Common stock, Class A; par value $.01;
30,000,000 shares authorized; none issued or
outstanding.................................. -- -- --
Common stock, Class B; par value $.01;
10,000,000 shares authorized; 4,904,186,
5,007,307 and 4,998,254 shares issued and
outstanding.................................. 49 50 50
Additional paid-in capital.................... 13,368 13,563 13,524
Retained earnings............................. 4,132 14,258 19,212
Common stock subscriptions receivable......... (131) (188) (159)
-------- -------- --------
Total stockholders' investment............. 17,418 27,683 32,627
-------- -------- --------
$166,133 $140,531 $139,362
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------- -----------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $129,328 $189,675 $253,726 $142,866 $127,357
Cost of sales..................... 116,961 170,748 220,274 124,730 109,141
-------- -------- -------- -------- --------
Gross profit..................... 12,367 18,927 33,452 18,136 18,216
Selling, general and
administrative expenses.......... 8,293 10,362 14,798 6,745 7,586
Amortization expense.............. 487 690 1,094 548 472
-------- -------- -------- -------- --------
Operating income................. 3,587 7,875 17,560 10,843 10,158
Interest expense.................. 1,533 3,473 4,822 2,631 1,900
Gain on sale of window regulator
business......................... -- -- 4,240 4,240 --
-------- -------- -------- -------- --------
Income before income taxes....... 2,054 4,402 16,978 12,452 8,258
Provision for income taxes........ 936 1,822 6,852 5,026 3,304
-------- -------- -------- -------- --------
Net income....................... $ 1,118 $ 2,580 $ 10,126 $ 7,426 $ 4,954
======== ======== ======== ======== ========
Pro forma net income per common
and common equivalent share after
giving effect to recapitalization
(Notes 2 and 10)................. $ 2.03 $ .99
======== ========
Pro forma weighted average common
and common equivalent shares
outstanding after giving effect
to recapitalization (Notes 2 and
10).............................. 4,989 5,026
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------
CLASS A CLASS B ADDITIONAL COMMON STOCK
------------- ----------------- PAID-IN RETAINED SUBSCRIPTIONS
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE TOTAL
------ ------ --------- ------ ---------- -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1992................... -- -- 2,764,907 $28 $ 2,979 $ 434 $(114) $ 3,327
Repurchase of common
stock, net............ -- -- (64,701) (1) (86) -- 11 (76)
Net income............. -- -- -- -- -- 1,118 -- 1,118
--- --- --------- --- ------- ------- ----- -------
BALANCE, December 31,
1993................... -- -- 2,700,206 27 2,893 1,552 (103) 4,369
Repurchase of common
stock, net............ -- -- (2,910) -- (3) -- (28) (31)
Issuance of common
stock for
acquisition........... -- -- 2,206,890 22 10,478 -- -- 10,500
Net income............. -- -- -- -- -- 2,580 -- 2,580
--- --- --------- --- ------- ------- ----- -------
BALANCE, December 31,
1994................... -- -- 4,904,186 49 13,368 4,132 (131) 17,418
Repurchase of common
stock, net............ -- -- (46,204) -- (155) -- 19 (136)
Issuance of common
stock................. -- -- 149,325 1 350 -- (76) 275
Net income............. -- -- -- -- -- 10,126 -- 10,126
--- --- --------- --- ------- ------- ----- -------
BALANCE, December 31,
1995................... -- -- 5,007,307 50 13,563 14,258 (188) 27,683
Repurchase of common
stock, net
(unaudited)........... -- -- (9,053) -- (39) -- 29 (10)
Net income
(unaudited)........... -- -- -- -- -- 4,954 -- 4,954
--- --- --------- --- ------- ------- ----- -------
BALANCE, June 30, 1996
(unaudited)............ -- -- 4,998,254 $50 $13,524 $19,212 $(159) $32,627
=== === ========= === ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- ------------------
1993 1994 1995 1995 1996
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income................... $ 1,118 $ 2,580 $ 10,126 $ 7,426 $ 4,954
Adjustments required to
reconcile net income to net
cash provided by (used in)
operating activities--
Depreciation and
amortization.............. 2,409 3,725 5,578 2,966 3,073
Deferred income tax
provision................. 681 1,507 5,067 2,608 1,658
Gain on sale of window
regulator business........ -- -- (4,240) (4,240) --
Change in other operating
items:
Accounts receivable, net.. 5,505 (6,997) 11,772 12,137 (5,770)
Inventories............... 900 1,821 2,167 375 1,638
Other current assets...... (3,183) (3,261) (1,405) (1,771) 4,458
Accounts payable.......... 3,962 (6,813) (2,656) (663) (2,109)
Accrued liabilities and
other.................... (7,668) 1,282 (13,271) (1,982) 1,681
------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities.............. 3,724 (6,156) 13,138 16,856 9,583
------- -------- -------- -------- --------
Investing activities:
Capital expenditures, net.... (2,951) (5,406) (6,116) (2,009) (2,076)
Acquisition, net............. -- (39,428) -- -- --
Sale of window regulator
business, net............... -- -- 18,006 18,006 --
Other, net................... -- (2,044) (462) (305) (305)
------- -------- -------- -------- --------
Net cash provided by
(used in) investing
activities.............. (2,951) (46,878) 11,428 15,692 (2,381)
------- -------- -------- -------- --------
Financing activities:
Borrowings under revolving
credit facility............. 92,748 91,625 95,500 34,750 62,500
Repayment of revolving credit
facility.................... (92,898) (83,550) (105,750) (52,000) (65,750)
Proceeds from issuance of
debt........................ -- 66,500 -- -- --
Repayments of debt........... (1,300) (22,660) (12,740) (11,437) (2,435)
Sale (repurchase) of common
stock, net.................. (87) (3) 139 192 (10)
Proceeds from notes payable
to stockholders............. 750 1,125 -- -- --
------- -------- -------- -------- --------
Net cash provided by
(used in) financing
activities.............. (787) 53,037 (22,851) (28,495) (5,695)
------- -------- -------- -------- --------
Net change in cash and
cash equivalents........ (14) 3 1,715 4,053 1,507
Cash and cash equivalents,
beginning of period.......... 28 14 17 17 1,732
------- -------- -------- -------- --------
Cash and cash equivalents, end
of period.................... $ 14 $ 17 $ 1,732 $ 4,070 $ 3,239
======= ======== ======== ======== ========
Supplemental cash flow
information:
Cash paid for--
Interest.................... $ 1,504 $ 2,781 $ 4,822 $ 2,962 $ 2,153
======= ======== ======== ======== ========
Income taxes................ $ 245 $ 145 $ 2,285 $ 475 $ 1,052
======= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Dura
Automotive Systems, Inc. (Systems or Parent; formerly Dura Automotive Holding,
Inc.) and its subsidiaries, Dura Operating Corp. (formerly Dura Automotive
Systems, Inc.) and Dura de Mexico S.A. de C.V. (a Mexican corporation),
collectively referred to as Dura or the Company. Dura designs and manufactures
mechanical assembly systems, components and hardware for use in the automotive
industry. Dura has eight manufacturing facilities located in Michigan,
Missouri and Mexico.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Systems and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
FISCAL YEAR:
The Company has adopted a 52-/53-week fiscal year. For presentation
purposes, the Company uses December 31 as the fiscal year end.
USE OF ESTIMATES:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Ultimate results could differ from those
estimates.
CASH EQUIVALENTS:
Cash equivalents consist of money market instruments with original
maturities of three months or less and are stated at cost which approximates
fair value.
INVENTORIES:
Inventories are valued at the lower of first-in, first-out (FIFO) cost or
market.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
------- ------- -----------
<S> <C> <C> <C> <C>
Raw materials................................... $ 6,762 $ 5,841 $ 4,915
Work in process................................. 7,220 3,883 3,401
Finished goods.................................. 2,366 2,192 1,962
------- ------- -------
$16,348 $11,916 $10,278
======= ======= =======
</TABLE>
Effective December 31, 1995, the Company adopted the FIFO method of
inventory valuation for all locations. Prior to that date, the Company used
the last-in, first-out (LIFO) method of inventory valuation for certain
locations. The effect of this change in accounting method, if it had been
retroactively reflected in the accompanying consolidated financial statements,
would not have been material to the Company's consolidated financial position
or results of operations.
F-7
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OTHER CURRENT ASSETS:
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1994 1995 1996
------ ------- --------
<S> <C> <C> <C>
Excess of cost over billings on uncompleted
tooling projects................................ $8,851 $ 8,653 $4,960
Prepaid expenses................................. 1,071 2,008 1,243
------ ------- ------
$9,922 $10,661 $6,203
====== ======= ======
</TABLE>
Excess of cost over billings on uncompleted tooling projects represents
costs incurred by the Company in production of customer-owned tooling to be
used by the Company in the manufacture of its products. The Company receives a
specific purchase order for this tooling and is reimbursed by the customer
within one operating cycle. Costs are deferred until reimbursed by the
customer. Forecasted losses on incomplete projects are recognized currently.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment acquired in connection with the acquisition
discussed in Note 3 are stated at fair value as of the acquisition date.
Additions to property, plant and equipment are stated at cost. For financial
reporting purposes, depreciation is provided on the straight-line method over
the following estimated useful lives:
<TABLE>
<S> <C>
Buildings...................... 30 years
Machinery and equipment........ 3 to 20 years
</TABLE>
Accelerated depreciation methods are used for tax reporting purposes.
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements which extend the useful life of the item are
capitalized and depreciated. The cost and accumulated depreciation of
property, plant and equipment retired or otherwise disposed of are removed
from the related accounts and any residual values are charged or credited to
income.
OTHER ASSETS:
Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired and is being amortized on a straight-line basis over a
40-year period from the date of the related acquisition. Other assets
principally consist of transaction costs, representing costs incurred related
to the acquisitions and are being amortized over five to seven years.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of
the remaining balance of its goodwill. If such events or circumstances
indicate that the carrying amount of goodwill may not be recoverable, the
Company estimates the future cash flows expected to result from the use of the
net assets acquired and their eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less than the
carrying amount of goodwill, the Company will recognize an impairment loss in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of."
F-8
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Certain tooling and design costs related to previously proven product designs
are reimbursed by the Company's customers as the related product is sold
through an incremental increase in each product's unit selling price. Such
costs are capitalized and amortized using the unit of production over the life
of the related tool. Amounts capitalized and included in other assets were
$2,437,000 at December 31, 1995 and $2,611,000 at June 30, 1996. If the Company
forecasts that the amount of capitalized tooling and design costs exceeds the
amount to be reimbursed by the customer, a loss is recognized currently.
Research and development costs, which are not material, and start-up costs are
expensed as incurred.
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Compensation and benefits........................... $ 3,681 $ 4,256 $ 4,014
Medical insurance................................... 2,904 4,016 5,467
Product warranty.................................... 7,000 1,125 616
Interest............................................ 641 763 552
Other............................................... 8,185 5,436 7,539
------- ------- -------
$22,411 $15,596 $18,188
======= ======= =======
</TABLE>
OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Legal and environmental............................. $ 8,600 $ 8,568 $ 8,502
Post-retirement medical benefits.................... 5,404 5,724 5,930
Accrued pension liability........................... 1,697 1,782 1,832
Other............................................... 8,484 4,537 3,436
------- ------- -------
$24,185 $20,611 $19,700
======= ======= =======
</TABLE>
INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using currently enacted tax rates.
COMMON STOCK:
The holder of each share of Class A common stock outstanding is entitled to
one vote per share and the holder of each share of Class B common stock
outstanding is entitled to ten votes per share.
F-9
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS:
The Company's only involvement with derivative financial instruments, none
of which are used for trading purposes, consists of an interest rate cap
agreement and a swap agreement used to hedge against exposure to fluctuations
in interest rates on the Company's term loan and revolving credit facility.
The Company manages exposure to counterparty credit risk by entering into such
transactions with major financial institutions that are expected to perform
under the terms of such agreements. Costs of such agreements are amortized
over the period of the related borrowings and were not material to the Company
as of or for the years ended December 31, 1993, 1994, 1995 and the six months
ended June 30, 1995 and 1996. In addition, at no time during such periods were
such transactions material nor did the Company have a material risk of off-
balance sheet accounting loss.
PRO FORMA NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE AFTER GIVING
EFFECT TO RECAPITALIZATION:
Pro forma net income per common and common equivalent share is computed by
dividing net income by the weighted average number of shares of common and
common stock equivalent shares outstanding, after giving effect to the
recapitalization discussed in Note 10. Common stock issued and common stock
options granted within one year immediately preceding the initial public
offering of common stock, discussed in Note 11, at prices below the public
offering price have been reflected in the net income per share calculation as
if they had been outstanding for all periods presented. Historical net income
per common and common equivalent share is not presented as it is no longer
relevant due to the recapitalization discussed in Note 10.
INTERIM FINANCIAL INFORMATION (UNAUDITED):
The accompanying consolidated balance sheet as of June 30, 1996, and the
consolidated statements of operations, stockholders' investment and cash flows
for the six-month periods ended June 30, 1995 and 1996, are unaudited. In the
opinion of management, such consolidated financial statements include all
adjustments, consisting solely of normal recurring adjustments, necessary for
a fair presentation of results for these interim periods. The results of
operations for the six-month period ended June 30, 1996 are not necessarily
indicative of results to be expected for the entire year.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
During the first quarter of 1996, the Company adopted SFAS No. 121 which
requires companies to review long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. The
adoption of SFAS No. 121 did not have a significant impact on the financial
condition or results of operations of the Company.
SFAS No. 123, "Accounting for Stock-Based Compensation" encourages, but does
not require, a fair value based method of accounting for employee stock
options, the sale of stock under the Company's employee stock purchase plan or
similar equity instruments. The Company has elected to continue to measure
compensation cost under Accounting Principles Board Opinion No. 25 (APB No.
25), "Accounting for Stock Issued to Employees" as was previously required,
and to comply with pro forma disclosure of net income and earnings per share
as if the fair value based method of accounting had been applied.
F-10
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITION AND DIVESTITURE:
ACQUISITION:
On August 31, 1994, Orscheln Co. (Orscheln), a manufacturer of parking brake
cables and levers and light duty cables, transferred certain assets and
liabilities to Systems. Orscheln received total consideration of approximately
$50.5 million, consisting of 2,206,890 shares of Systems common stock and an
option to purchase up to 14,420 additional shares of Systems Class A common
stock at an exercise price of $1.45 per share with a combined value of
approximately $10.5 million and cash consideration, net of assumed
indebtedness, of approximately $40 million.
The acquisition of Orscheln was accounted for as a purchase. Accordingly,
the assets acquired and liabilities assumed have been recorded at fair value
as of the date of the acquisition. The purchase price in excess of the fair
value of the net assets acquired is included in goodwill in the accompanying
consolidated balance sheets. The results of operations of the acquired
business have been included in the accompanying consolidated financial
statements from August 31, 1994, the date of acquisition.
DIVESTITURE:
On April 2, 1995, the Company sold the net assets of its window regulator
business to Rockwell International Corporation for approximately $18 million
in cash, resulting in a pretax gain of approximately $4.2 million. The results
of operations of the window regulator business have been included in the
accompanying consolidated financial statements through April 2, 1995, the date
of divestiture.
Following are the unaudited pro forma results of operations for the years
ended December 31, 1994 and 1995 and the six months ended June 30, 1995 as if
the aforementioned acquisition and divestiture had occurred at the beginning
of the respective period. The following unaudited pro forma financial
information does not purport to represent what the Company's consolidated
results of operations would actually have been if such transactions in fact
had occurred at such date or to project the Company's results of future
operations (in thousands):
<TABLE>
<CAPTION>
PRO FORMA RESULTS FOR THE PRO FORMA RESULTS
YEARS ENDED DECEMBER 31, FOR THE SIX
-------------------------- MONTHS ENDED
1994 1995 JUNE 30, 1995
------------ ------------ -----------------
<S> <C> <C> <C>
Revenues...................... $ 231,509 $ 239,598 $128,738
============ ============ ========
Operating income (loss)....... $ (1,213) $ 17,172 $ 10,455
============ ============ ========
Net income (loss)............. $ (7,955) $ 7,602 $ 4,905
============ ============ ========
Net income (loss) per common
and common equivalent share.. $ (2.32) $ 1.52 $ .99
============ ============ ========
</TABLE>
F-11
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. DEBT:
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C> <C>
Term loan, principal and interest due in
quarterly installments through June 30,
2001, interest at the lender's prevailing
reference rate plus up to 0.50% or the
Eurodollar rate plus 0.75% to 1.75% at the
discretion of the Company (6.94% to 8.5%
at December 31, 1995 and 6.6% to 8.25% at
June 30, 1996)............................ $50,000 $37,408 $35,021
Revolving credit facility, due August 31,
2000, interest at the lender's prevailing
reference rate plus up to 0.50% or the
Eurodollar rate plus 0.75% to 1.75% at the
discretion of the Company (6.81% to 8.5%
at December 31, 1995 and 8.25% at June 30,
1996)..................................... 20,000 9,750 6,500
Subordinated promissory notes, payable to
stockholders, due December 31, 2001,
interest due semiannually at 6.93%........ 4,000 4,000 4,000
Other...................................... 766 618 570
------- ------- -------
74,766 51,776 46,091
Less--Current maturities................... (4,654) (5,137) (5,536)
------- ------- -------
$70,112 $46,639 $40,555
======= ======= =======
</TABLE>
Future maturities of long-term debt as of December 31, 1995 are as follows
(in thousands):
<TABLE>
<S> <C>
1996............................. $ 5,137
1997............................. 5,652
1998............................. 5,831
1999............................. 8,023
2000............................. 15,390
Thereafter....................... 11,743
-------
$51,776
=======
</TABLE>
The revolving credit facility provides for borrowings of up to $30 million
and is collateralized by substantially all assets of the Company. Borrowings
are limited to eligible accounts receivable, inventories and tooling work in
process, as defined. The borrowing base limit was $30 million at December 31,
1995 and June 30, 1996. The weighted average interest rate for borrowings
under the revolving credit facility was 8.3 percent for the year ended
December 31, 1994, 8.8 percent for the year ended December 31, 1995 and 7.2
percent for the six months ended June 30, 1996.
The term loan and revolving credit facility contain various restrictive
covenants which, among other matters, require the Company to maintain certain
financial ratios, as defined. The agreement also limits additional
indebtedness, capital expenditures and cash dividends. The Company was in
compliance with all such covenants as of December 31, 1995 and June 30, 1996.
In September 1994, the Company entered into an Interest Expense Limitation
Agreement (Cap Agreement) and an Interest Rate Swap Agreement (Swap Agreement)
related to its term loan and revolving credit facility.
F-12
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Cap Agreement has a notional amount of $10 million, provides for payment
to the Company to offset interest expense, in the event the quoted LIBOR rate
exceeds 7.0%, and expires March 30, 1997. The Swap Agreement has a decreasing
notional amount of $20 million at inception, decreasing to $8.6 million at its
September 30, 1999 expiration. The Swap Agreement exchanges the variable
interest rate under the term loan and revolving credit facility described
above for a fixed rate of 6.95% on the notional amount, as defined. Fees paid
under the Cap and Swap Agreements are being amortized over the period of the
related term loan and revolving credit facility. The impact of the Cap and
Swap Agreements were not material to the Company.
The Company issued subordinated promissory notes to certain stockholders of
Systems in connection with the acquisition discussed in Note 3. Proceeds from
the notes were used to pay a portion of the purchase price. The notes are
unsecured.
The Company also has outstanding letters of credit totaling $600,000 at
December 31, 1995 and $1,310,000 at June 30, 1996 for the benefit of its
insurance companies related to workers' compensation coverage.
5. INCOME TAXES:
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ --------------
1993 1994 1995 1995 1996
--------------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Current............................... $ 255 $ 315 $ 1,785 $ 1,309 $1,646
Deferred.............................. 681 1,507 5,067 3,717 1,658
------ -------- -------- ------- ------
Total................................. $ 936 $ 1,822 $ 6,852 $ 5,026 $3,304
====== ======== ======== ======= ======
</TABLE>
A reconciliation of the provision for income taxes at the statutory rates to
the reported income tax provision is as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ---------------
1993 1994 1995 1995 1996
--------------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Federal provision at statutory
rates............................. $ 698 $ 1,497 $ 5,898 $ 4,358 $ 2,890
Amortization of non-deductible
goodwill.......................... 70 115 255 130 140
State taxes, net of federal
benefit........................... 168 210 685 531 314
Other, net......................... -- -- 14 7 (40)
------ -------- -------- ------- -------
Total.............................. $ 936 $ 1,822 $ 6,852 $ 5,026 $ 3,304
====== ======== ======== ======= =======
</TABLE>
The benefit from the utilization of preacquisition net deferred income tax
assets has been reflected as a reduction of goodwill in the accompanying
consolidated financial statements. As of December 31, 1995 and June 30, 1996,
the Company had remaining acquired net operating loss and alternative minimum
tax credit carryforwards for income tax reporting purposes of approximately $2
million. The Company will record further reductions in goodwill to the extent
such carryforwards are realized in future periods.
F-13
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1994 and 1995 and June 30, 1996, the Company had provided
a valuation allowance for its net deferred income taxes as, based on available
evidence, it is more likely than not that net deferred tax assets will not be
realized. A summary of deferred tax assets (liabilities) is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Accrued legal and insurance costs............ $ 6,993 $ 5,387 $ 5,253
Accrued integration reserves................. 2,825 2,078 1,789
Net operating loss and alternative minimum
tax credit carryforwards.................... 1,836 1,375 1,375
Accrued compensation costs................... 767 868 1,017
Post retirement benefit obligations.......... 570 668 686
Inventory.................................... 441 344 366
Other reserves and accruals not deductible
for tax purposes............................ 3,039 1,805 2,403
-------- -------- --------
Deferred tax assets........................ 16,471 12,525 12,889
-------- -------- --------
Depreciation and property basis differences.. (1,306) (1,459) (1,683)
Deferred research and development costs...... (515) (833) (899)
-------- -------- --------
Deferred tax liabilites.................... (1,821) (2,292) (2,582)
-------- -------- --------
Valuation allowance........................ (14,650) (10,233) (10,307)
-------- -------- --------
Net deferred income taxes................ $ -- $ -- $ --
======== ======== ========
</TABLE>
6. MAJOR CUSTOMERS:
The Company sells directly to each of the three major North American
automobile manufacturers and to certain automobile manufacturers operating in
Europe. Following is a summary of customers that accounted for a significant
percentage of consolidated revenues:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------- --------------
1993 1994 1995 1995 1996
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Ford.......................................... 46% 57% 52% 54% 48%
GM............................................ 35 29 35 34 35
Chrysler...................................... 14 9 6 5 10
Toyota........................................ -- 3 5 4 5
--- --- --- ------- -------
95% 98% 98% 97% 98%
=== === === ======= =======
</TABLE>
As of December 31, 1994 and 1995 and June 30, 1996, receivables from these
customers represented 92%, 91% and 95% of total accounts receivable.
The Company had export sales, principally to customers in Canada and Mexico,
of $30,138,000 in 1993, $36,343,000 in 1994, $34,807,000 in 1995 and
$24,307,000 for the six months ended June 30, 1996. These sales require
payment in U.S. dollars.
7. MANAGEMENT AGREEMENT:
Under the terms of a management agreement, the Company paid Hidden Creek
Industries (HCI), an affiliate of the Company, monthly management fees for
certain administrative services. Total management fees of approximately
$500,000 for the year ended December 31, 1993, $554,000 for the year ended
December 31, 1994, $733,000 for the year ended December 31, 1995, $300,000 for
the six months ended June 30, 1995 and $500,000 for the six months ended June
30, 1996 are included in selling, general and administrative expenses in the
accompanying consolidated statements of operations. In addition, the Company
paid fees to HCI of approximately $500,000 in connection with the acquisition
and $250,000 in connection with the divestiture discussed in Note 3.
F-14
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. EMPLOYEE BENEFIT PLANS:
PENSION PLANS:
The Company sponsors two defined benefit pension plans which cover certain
employees. The Company's policy is to make annual contributions to the plans
to meet the minimum funding requirements of the Employee Retirement Income
Security Act of 1974.
Net pension expense consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits
earned during the year... $ 388 $ 394 $ 413
Interest cost on projected
benefit obligation....... 194 242 277
Return on plan assets..... (73) (116) (150)
Net amortization and
deferral................. 26 26 26
------- -------- --------
Net pension expense..... $ 535 $ 546 $ 566
======= ======== ========
</TABLE>
Pursuant to Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions," the Company has recorded deferred pension costs of
$246,000, $220,000 and $194,000 at December 31, 1993, 1994 and 1995 related to
the minimum pension liability, which are classified as other assets in the
accompanying consolidated balance sheets.
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1994 1995
------ ------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation............................... $1,369 $2,164
====== ======
Accumulated benefit obligation.......................... $2,115 $2,855
====== ======
Projected benefit obligation............................ $3,473 $3,987
Plan assets at fair value................................. 1,704 2,305
------ ------
Projected benefit obligation in excess of plan assets... 1,769 1,682
Unrecognized net loss..................................... (201) (18)
Prior service cost........................................ (220) (194)
Adjustment to recognize minimum liability................. 349 312
------ ------
Accrued pension costs................................... $1,697 $1,782
====== ======
</TABLE>
The accumulated and projected benefit obligations were determined using an
assumed discount rate of 8% at December 31, 1994 and 7.5% at December 31,
1995. The assumed long-term rate of return on assets was 8% at December 31,
1994 and 7.5% at December 31, 1995. Plan assets consist principally of common
stock, fixed income securities and guaranteed investment contracts.
RETIREMENT SAVINGS PLANS:
The Company sponsors employee retirement savings plans which allow qualified
employees to provide for their retirement on a tax-deferred basis. In
accordance with the terms of the retirement savings plans, the Company is
required to match certain of the participants' contributions and/or provide
employer contributions
F-15
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
based on the Company's performance. Such matching contributions totaled
$95,000, $419,000 and $976,000 during fiscal 1993, 1994 and 1995 and $525,000
and $665,000 for the six months ended June 30, 1995 and 1996.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company has various postretirement medical benefit plans for certain
employee groups and has recorded a liability for its estimated obligations
under these plans.
Net periodic postretirement benefit cost is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during the year...... $ 45 $ 54 $ 74
Interest cost on projected benefit obligation..... 424 529 679
Net amortization and deferral..................... -- 93 124
-------- -------- --------
Net periodic postretirement benefit cost........ $ 469 $ 676 $ 877
======== ======== ========
</TABLE>
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995
------- -------
<S> <C> <C>
Accumulated benefit obligation......................... $ 7,527 $ 7,738
Plan assets at fair value.............................. -- --
------- -------
Projected benefit obligation in excess of plan
assets.............................................. 7,527 7,738
Unrecognized net loss.................................. (2,123) (2,014)
------- -------
Accrued postretirement benefits...................... $ 5,404 $ 5,724
======= =======
</TABLE>
For measurement purposes, a 9% annual rate of increase for the healthcare
cost trend was assumed for 1995. The rate was assumed to decrease 1% annually
to 5% at 2000 and remain level thereafter. Increasing the assumed healthcare
cost trend assumption by one percentage point would increase the accumulated
postretirement benefit obligation by approximately $491,000 and the net
periodic postretirement expense by approximately $46,000 for the year ended
December 31, 1995.
9. COMMITMENTS AND CONTINGENCIES:
ORSCHELN SERVICE AND SUPPLY AGREEMENTS:
In connection with the acquisition discussed in Note 3, the Company entered
into agreements with Orscheln whereby the Company is to receive services
related to data processing, payroll and personnel administration, and other
administrative matters. Amounts paid under these service agreements were
$570,000 and $1,788,000 for the years ended December 31, 1994 and 1995 and
$370,000 for the six months ended June 30, 1996. Future minimum commitments
under the service agreements are approximately $400,000 in 1996. In addition,
the Company and Orscheln have mutually agreed to supply each other's
operations with certain items necessary for the manufacture of their products.
These supply agreements are for periods of up to five years and are at terms
which the Company believes are no less favorable than could be obtained from
an independent party.
F-16
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LEASES:
The Company leases office and manufacturing space and certain equipment
under operating lease agreements which require it to pay maintenance,
insurance, taxes and other expenses in addition to annual rentals. Future
annual rental commitments at December 31, 1995 under these operating leases
are as follows (in thousands):
<TABLE>
<CAPTION>
AMOUNT
YEAR ------
<S> <C>
1996................................................................ $1,091
1997................................................................ 689
1998................................................................ 534
1999................................................................ 401
2000................................................................ 423
Thereafter.......................................................... 1,569
------
$4,707
======
</TABLE>
STOCK PURCHASE PLAN:
The Company maintains a plan which allows for the sale of shares of the
Company's Class B common stock, either directly or through the granting of
options to certain employees. Eligible employees and the terms of such sales
or options are as determined by the Company's board of directors. During 1994,
1995 and the six months ended June 30, 1996, the Company sold 42,070, 149,325
and 0 shares of its common stock to management and repurchased 44,980, 46,204
and 9,053 shares of its common stock from management at estimated fair market
value, as determined under the terms of this plan.
STOCK OPTIONS:
During 1993, MCHC issued an option to purchase 17,625 shares of Class B
common stock to an outside consultant who can exercise the options at any time
while still associated with the Company for up to ten years, at a price of
$1.45 per share. In connection with the acquisition discussed in Note 3, this
option was exchanged for an option to purchase 17,625 shares of Systems common
stock at terms similar to those discussed above.
As discussed in Note 3, an option to purchase up to 14,420 shares of Systems
Class B common stock, at a price of $1.45 per share, was granted to Orscheln
in connection with the acquisition. The option is exercisable for up to ten
years or the date of exercise of the option discussed above, which ever occurs
earlier.
PRODUCT WARRANTY AND CLAIMS:
In connection with the acquisition discussed in Note 3, the Company agreed
to assume the liability for two potential product recalls by a customer,
related to two parking brake systems manufactured by Orscheln. The customer
has agreed to limit the liability of the Company in connection with the
potential recalls to $7 million. In fiscal 1994, the Company recorded a
reserve for its full obligation related to the liability associated with these
recalls in the accounting for the purchase of Orscheln. As of June 30, 1996,
the Company has reimbursed the customer approximately $6.5 million for such
costs.
The type of alleged failures that prompted the recalls discussed above have
also led to a number of claims and lawsuits against the customer and in
certain instances against the Company and Orscheln. The claims and lawsuits
relate primarily to property damage and personal liability. The customer
maintains that Orscheln and the Company are responsible for all damages and
liabilities arising from these claims and lawsuits. Further, in
F-17
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
connection with the acquisition of certain assets and liabilities of Orscheln
as discussed in Note 3, the Company indemnified Orscheln for these claims and
lawsuits. While the Company maintains that it is not responsible for any
liabilities arising from these claims and lawsuits, the Company provided
reserves it considers adequate to cover its potential exposure for these
matters in connection with the allocation of the purchase price of Orscheln.
LITIGATION:
The Company is party to certain claims arising in the ordinary course of
business. In the opinion of management, based upon the advice of legal
counsel, the outcomes of such claims are not expected to be material to the
Company.
ENVIRONMENTAL MATTERS:
Due to the nature of its business, the Company may, from time to time, be
exposed to potential liabilities to clean up environmental contaminants. The
Company has been named as one of four potentially responsible parties related
to groundwater contamination in East Jordan, Michigan, that was in existence
at the date of the Company's formation. The Company has provided reserves
which management believes are adequate to cover any exposure related to this
matter, and the Company's former owners have agreed to indemnify the Company
for any costs in excess of the provided reserves.
10. RECAPITALIZATION:
In connection with the Offering discussed in Note 11, the Company's board of
directors and stockholders have approved a 17.625 for 1 stock split and
approved a recapitalization pursuant to which the shares of the Company's
Class A, B and C common stock were converted into shares of new Class B Common
Stock. The allocation of shares of Common Stock among existing stockholders
was in accordance with the resolutions of the Company's stockholders
containing conversion ratios which were arrived at by applying an established
formula based upon the stockholders' initial capital contributions, relative
preference ranking and the initial public offering price of the Common Stock.
The Company's board of directors and stockholders also approved an increase in
the number of authorized shares to 30,000,000 Class A common shares and
10,000,000 Class B common shares. These actions were contingent upon and
occurred immediately prior to the Offering. The accompanying consolidated
financial statements have been retroactively restated to give effect to the
stock split.
11. INITIAL PUBLIC OFFERING AND STOCK OPTION AND PURCHASE PLANS:
INITIAL PUBLIC OFFERING:
On June 21, 1996, the Company's board of directors approved the filing of a
Form S-1 Registration Statement with the Securities and Exchange Commission
for the sale of 2,700,000 shares of the Company's Class A common stock to the
public (the Offering).
The Company intends to use the proceeds of the Offering to repay certain
outstanding indebtedness.
STOCK OPTION PLAN:
In May 1996, the Company's board of directors approved an employee stock
option plan that provides for the issuance of options to acquire up to 600,000
shares of the Company's Class A common stock. The exercise price of the
options will be at least 100% of the fair market value of the Company's Class
A common stock at the time of the issuance of options.
EMPLOYEE STOCK PURCHASE PLAN:
In May 1996, the Company's board of directors approved an employee stock
discount purchase plan that reserves 500,000 shares of the Company's Class A
common stock for sale to employees at discounted purchase
F-18
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
prices, subject to certain limitations. The cost per share under this plan
will be 85% of the market value of the Company's Class A common stock, as
defined.
INDEPENDENT DIRECTOR STOCK OPTION PLAN:
In May 1996, the Company's board of directors approved an independent
director stock option plan that provides for the issuance of options to
acquire up to 100,000 shares of the Company's Class A common stock. The
exercise price of the options will be at least 100% of the fair market value
of the Company's Class A common stock at the time of the issuance of the
options.
12. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a condensed summary of actual quarterly results of
operations for 1994, 1995 and the first half of 1996 (in thousands except per
share amounts):
<TABLE>
<CAPTION>
NET INCOME
PER COMMON
AND COMMON
GROSS OPERATING EQUIVALENT
REVENUES PROFIT INCOME NET INCOME SHARE
-------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994:
First........................ $ 33,881 $ 2,381 $ 513 $ 64 $ .02
Second....................... 37,732 3,558 1,305 455 .17
Third........................ 43,973 3,836 1,393 210 .06
Fourth....................... 74,089 9,152 4,664 1,851 .38
-------- ------- ------- -------
$189,675 $18,927 $ 7,875 $ 2,580 $ .75
======== ======= ======= =======
1995:
First........................ $ 80,707 $ 9,019 $ 5,607 $ 2,442 $ .50
Second....................... 62,159 9,117 5,236 4,984 1.00
Third........................ 51,426 5,568 1,833 417 .08
Fourth....................... 59,434 9,748 4,884 2,283 .45
-------- ------- ------- -------
$253,726 $33,452 $17,560 $10,126 $2.03
======== ======= ======= =======
1996:
First........................ $ 59,303 $ 7,462 $ 3,336 $ 1,347 $ .27
Second....................... 68,054 10,754 6,822 3,607 .72
-------- ------- ------- -------
$127,357 $18,216 $10,158 $ 4,954 $ .99
======== ======= ======= =======
</TABLE>
The sum of net income per common and common equivalent share for each of the
fiscal 1994 quarters does not agree with the total per share for the year due
to the timing of the Offering and its effects on the computation of weighted
average number of shares outstanding.
F-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Orscheln Co.:
We have audited the accompanying statements of operations and cash flows of
Orscheln Automotive Business Unit (an operating unit of Orscheln Co.--see Note
1 of Notes to Financial Statements) for the year ended December 31, 1993 and
the eight-month period ended August 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, Orscheln Automotive Business Unit's results of
operations and its cash flows for the year ended December 31, 1993 and the
eight-month period ended August 31, 1994, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
May 20, 1996
F-20
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
(AN OPERATING UNIT OF ORSCHELN CO.)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT-MONTH
PERIOD
YEAR ENDED ENDED
DECEMBER 31, AUGUST 31,
1993 1994
------------ -----------
<S> <C> <C>
Revenues (Notes 2 and 3)............................... $132,873 $104,816
Cost of sales.......................................... 125,183 93,220
-------- --------
Gross profit......................................... 7,690 11,596
Selling, general and administrative expenses........... 10,492 6,979
Product recall and claims expense (Note 7)............. -- 14,000
-------- --------
Operating loss....................................... (2,802) (9,383)
Interest expense (Notes 3 and 4)....................... (1,167) (1,113)
Other expense, net..................................... (245) --
-------- --------
Net loss............................................. $ (4,214) $(10,496)
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
(AN OPERATING UNIT OF ORSCHELN CO.)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT-MONTH
PERIOD
YEAR ENDED ENDED
DECEMBER 31, AUGUST 31,
1993 1994
------------ -----------
<S> <C> <C>
Operating Activities:
Net loss............................................ $(4,214) $(10,496)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities--
Depreciation and amortization..................... 4,744 2,782
Noncash product recall and claims expense......... -- 14,000
Change in operating items:
Accounts receivable, net........................ (2,731) (4,222)
Receivables from affiliates..................... (826) 655
Unbilled customer tooling....................... (496) 1,597
Inventories..................................... (595) 2,471
Other assets.................................... 312 157
Accounts payable and accrued liabilities........ 2,092 1,849
------- --------
Net cash provided by (used in) operating
activities................................... (1,714) 8,793
------- --------
Investing Activities:
Capital expenditures, net........................... (7,533) (2,601)
Increase in pooled investments...................... -- (8,503)
------- --------
Net cash used in investing activities......... (7,533) (11,104)
------- --------
Financing Activities:
Principal payments on long-term debt................ (4,449) (2,328)
Proceeds from issuance of long-term debt............ 13,500 --
Increase (decrease) in line of credit............... (1,750) 3,450
Increase in affiliate notes payable................. 1,949 1,190
------- --------
Net cash provided by financing activities..... 9,250 2,312
------- --------
Net increase in cash and cash equivalents..... 3 1
Cash and Cash Equivalents, beginning of period........ 7 10
------- --------
Cash and Cash Equivalents, end of period.............. $ 10 $ 11
======= ========
Supplemental Disclosure--
Cash paid for interest.............................. $ 1,099 $ 1,043
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
(AN OPERATING UNIT OF ORSCHELN CO.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND AUGUST 31, 1994
1. ORGANIZATION AND BASIS OF PRESENTATION:
Orscheln Automotive Business Unit (the Company) is an operating unit of
Orscheln Co., a Delaware corporation. The Company's principal operations
include the manufacture and marketing of mechanical control assemblies and
component parts to North American original equipment manufacturers of
automotive vehicles, after market distributors and first tier suppliers to
automotive manufacturers.
On August 31, 1994, Orscheln Co. entered into an agreement whereby
stockholders of MC Holding Corp. (MCHC) contributed all shares of MCHC common
stock to Dura Automotive Holding, Inc. (Dura) in return for shares of Dura
common stock. Orscheln Co. transferred certain assets and liabilities of the
Company to Dura in return for 125,214 shares of Dura common stock, an option
to purchase up to 818.18 additional shares of Dura common stock and cash
consideration, net of assumed indebtedness, of approximately $40 million.
In February 1996, Orscheln Co. changed its name to Alkin Co.
2. SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year:
The Company has adopted a 52-/53-week fiscal year. For presentation
purposes, the Company uses December 31 as the fiscal year end.
Use of Estimates:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Ultimate results could differ from those estimates.
Inventories:
Inventories are valued at the lower of cost or market. The last-in, first-
out (LIFO) method of determining costs is used. Cost includes material, labor
and manufacturing overhead required in the production of the Company's
products. During 1994, inventory quantities were reduced, which resulted in a
liquidation of LIFO quantities recorded at lower costs prevailing in prior
years as compared to the cost of 1994 purchases. The effect was not material
to the results of operations for 1994.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Predominately all
depreciation is computed using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements.................................. 3 to 20 years
Machinery and equipment..................................... 3 to 10 years
Office furniture and fixtures............................... 3 to 10 years
Vehicles.................................................... 3 to 5 years
</TABLE>
Income Taxes:
The Company is an operating unit of Orscheln Co., a subchapter S corporation
as defined under the Internal Revenue Code. Under S status, the taxable income
or loss of Orscheln Co. is included in the taxable income of its stockholders.
F-23
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Research and Development:
Research and development expenses were approximately $1,986,000 and
$1,212,000 for the year ended December 31, 1993 and the eight-month period
ended August 31, 1994, respectively, and were charged to expense as incurred.
Major Customers:
The Company sells directly to two major North American automobile
manufacturers. Sales to these customers for the year ended December 31, 1993
and the eight-month period ended August 31, 1994, accounted for a significant
percentage of revenue.
<TABLE>
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
Ford.......................... 66% 62%
General Motors................ 28 32
--- ---
94% 94%
=== ===
</TABLE>
Statements of Cash Flows:
Cash equivalents consist of money market instruments with original
maturities of three months or less and are stated at cost which approximates
fair value.
3. TRANSACTIONS WITH AFFILIATES:
The Company has transactions with stockholders and companies that are
affiliated through common ownership and management. A summary of significant,
related-party transactions not disclosed elsewhere in the financial statements
or notes is as follows:
Interest Expense:
Interest expense incurred on notes payable to affiliates was approximately
$403,000 and $327,000 for the year ended December 31, 1993 and for the eight-
month period ended August 31, 1994, and respectively.
Payments to Affiliated Companies
Significant payments to affiliated companies for the year ended December 31,
1993 and the eight-month period ended August 31, 1994, were as follows:
. Orscheln Management Co. provides administrative, management, payroll,
human resources and other services to the Company, for which the Company
paid $4,496,000 for the year ended December 31, 1993 and $3,097,000 for
the eight-month period ended August 31, 1994.
. Computerized Business Systems, Inc., provides data processing services
to the Company, for which the Company paid $1,099,000 for the year ended
December 31, 1993 and $1,151,000 for the eight-month period ended August
31, 1994.
. Suratco Products Co. supplies the Company with component parts, for
which the Company paid $1,811,000 for the year ended December 31, 1993
and $0 for the eight-month period ended August 31, 1994.
. Utility Air, Inc., provides air transportation services and other travel
services to the Company, for which the Company paid $850,000 for the
year ended December 31, 1993 and $424,000 for the eight-month period
ended August 31, 1994.
F-24
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
. American Third Century Co. provides risk-management services and sells
insurance to the Company, for which the Company paid $560,000 for the
year ended December 31, 1993 and $386,000 for the eight-month period
ended August 31, 1994.
. The Company paid Orscheln Industries Health Plan Trust $2,928,000 for
the year ended December 31, 1993 and $1,967,000 for the eight-month
period ended August 31, 1994.
. The Company made payments to other affiliated companies of $906,000 for
the year ended December 31, 1993 and $511,000 for the eight-month period
ended August 31, 1994. These payments were primarily for building
improvements, employee payroll deductions, production tooling and
miscellaneous transportation costs.
Sales to Affiliates
Sales to affiliated companies were $3,859,000 for the year ended December
31, 1993 and $2,000,000 for the eight-month period ended August 31, 1994.
4. NOTES PAYABLE:
The Company has a bank line of credit and a term loan with an institutional
lender that bears interest at the prime rate and notes payable and capitalized
lease obligations which bear interest at rates ranging from 5 percent to 10.85
percent.
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
1993 1994
------------ ----------
(IN THOUSANDS)
<S> <C> <C>
10.85% unsecured note payable, payable in monthly
installments of principal and interest of $33,000
through February 1994................................ $ 64 $ --
6% capitalized lease obligation secured by lease
improvements, interest payable semiannually and
principal payable annually in amounts varying from
$60,000 to $80,000 through September 30, 1996........ 230 230
5% unsecured notes payable to a municipality payable
in monthly installments of principal and interest of
less than $1,000 maturing in March 1996 and November
2000................................................. 73 64
5% notes payable to a state agency secured by a deed
of trust, payable in monthly installments of
principal and interest varying form $2,000 to $3,000
maturing August 1997 through August 2002............. 340 308
5% subordinated note payable to a municipality,
secured by a deed of trust payable in monthly
installments of principal and interest of $3,000
beginning February 1995 through February 2005........ 270 270
Unsecured note payable to an institutional lender,
payable in equal monthly principal installments of
$278,000 through July 1996 plus interest at prime
(7.75% at August 31, 1994)........................... 9,167 6,944
------- ------
10,144 7,816
Less--Current maturities.............................. 3,535 3,485
------- ------
Total............................................. $ 6,609 $4,331
======= ======
</TABLE>
F-25
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. LEASES:
The Company leases certain equipment and facilities under operating leases
which expire through 1998. Rental expense was $525,000 and $374,000 for the
year ended December 31, 1993 and the eight-month period ended August 31, 1994,
respectively. Future minimum lease payments for noncancelable leases as of
August 31, 1994, are as follows (in thousands):
<TABLE>
<S> <C>
1995................................ $171
1996................................ 160
1997................................ 118
1998................................ 100
----
$549
====
</TABLE>
6. EMPLOYEE BENEFIT PLAN:
The Company participates in the Orscheln Industries Retirement Program, a
defined contribution plan (the Plan). Employees who have completed one year of
service may participate in the Plan. Participants may contribute 1 percent to
15 percent of their gross earnings and the Company is required to match 50
percent of the contribution up to 2 percent of gross earnings. The Company
contributes an additional 3 percent of the participant's gross earnings to
those employees who have completed two years or more of service.
Company contributions to the Plan were approximately $880,000 and $675,000
during the year ended December 31, 1993 and the eight-month period ended
August 31, 1994, respectively.
7. PRODUCT RECALL AND CLAIMS EXPENSE:
In late 1994 a customer of the Company issued a recall of a series of manual
transmission vehicles to repair self-adjust parking brakes manufactured by the
Company. In connection with the transaction discussed in Note 1, Dura and the
Company agreed they would reimburse the customer one-half of the customers
costs related to the recall of these vehicles, subject to certain limitations.
Amounts reimbursed to the customer were paid by Dura subsequent to the
transaction discussed in Note 1.
The type of alleged failures that prompted the recalls discussed above have
also led to a number of claims and lawsuits against the customer and in
certain instances against the Company. The claims and lawsuits relate
primarily to property damage and personal injury. The customer maintains that
the Company and Dura are liable for all damages or liabilities arising from
these claims and lawsuits. While the Company disputes this position, it has
provided reserves that it believes are adequate to cover its potential
exposure. In connection with the transaction discussed in Note 1 Dura assumed
the liability for any claims or lawsuits related to the alleged parking brake
failures.
The Company has recorded an expense of $14 million in the eight-month period
ended August 31, 1994 related to the product recall and claims and lawsuits.
8. PRO FORMA FINANCIAL INFORMATION (UNAUDITED):
The unaudited pro forma financial information is provided to show the
significant effects on the historical financial information had the Company
operated as a C corporation throughout all periods presented. The Company has
not reflected a tax benefit as carryback of the losses is not available and,
based on available evidence, it is more likely than not that the losses will
not result in income tax benefits in future periods.
<TABLE>
<CAPTION>
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1993 AUGUST 31, 1994
----------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Unaudited pro forma information--
Loss before provision for income
taxes.............................. $(4,214) $(10,496)
Provision for income taxes.......... -- --
------- --------
Net loss.......................... $(4,214) $(10,496)
======= ========
</TABLE>
F-26
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITA-
TION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OF-
FER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
The Company.............................................................. 12
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
The Recapitalization..................................................... 13
Dilution................................................................. 14
Capitalization........................................................... 15
Selected Consolidated Financial Data..................................... 16
Management's Discussion and Analysis of Results of Operations and
Financial Condition..................................................... 18
Business................................................................. 24
Management............................................................... 33
Certain Transactions..................................................... 39
Principal Stockholders................................................... 40
Description of Capital Stock............................................. 42
Shares Eligible for Future Sale.......................................... 45
Underwriting............................................................. 47
Legal Matters............................................................ 48
Experts.................................................................. 48
Additional Information................................................... 48
Index to Financial Statements............................................ F-1
</TABLE>
-------------
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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2,700,000 SHARES
LOGO
DURA AUTOMOTIVE
SYSTEMS, INC.
CLASS A COMMON STOCK
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
ROBERT W. BAIRD & CO.
INCORPORATED
, 1996
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- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of the expenses of the issuance and
distribution of the securities being registered other than underwriting
compensation, all of which are estimates with the exception of the Securities
and Exchange Commission fee and the National Association of Securities Dealers
fee and all of which will be paid by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 17,131
National Association of Securities Dealers, Inc. fee............ 5,468
Nasdaq National Market listing fee.............................. 20,525
Blue sky fees and expenses (including attorneys' fees and
expenses)...................................................... 30,000
Printing and engraving expenses................................. 120,000
Transfer agent's fees and expenses.............................. 15,000
Accounting fees and expenses.................................... 100,000
Legal fees and expenses......................................... 175,000
Miscellaneous expenses.......................................... 116,876
--------
Total........................................................... $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person was an officer, director, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnification
may include expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best
interests except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
The Company's Restated Certificate will provide for the indemnification of
directors and officers of the Company to the fullest extent permitted by
Section 145.
In that regard, the Restated Certificate will provide that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than action by or in the right
of the corporation) by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as
a director, officer or member of another corporation, partnership, joint
venture, trust or other
II-1
<PAGE>
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of such corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Indemnification in connection with an action or suit by or in the right of
such corporation to procure a judgment in its favor will be limited to payment
of expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such an action or suit except
that no such indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the indemnifying
corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
that, despite the adjudication of liability but in consideration of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
The Company has in effect insurance policies covering all of the Company's
directors and officers in certain instances where by law they may not be
indemnified by the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since its incorporation in August 1994, the Company has not sold any
securities not registered under the Securities Act, except as follows:
(i) On August 31, 1994 and in connection with its initial capitalization,
after giving effect to the Recapitalization (as defined in the Prospectus),
the Company issued an aggregate of 494,185 shares of Class A Common Stock,
1,762,500 shares of Class B Common Stock and 440,625 shares of Class C
Common Stock to the former stockholders of MC Holding Corp. ("MCHC") in
exchange for all of their outstanding MCHC common stock. Concurrently, the
Company issued 2,206,890 shares of Class B Common Stock together with an
option to purchase 14,420 additional shares of Class B Common Stock to
Alkin Co. as partial consideration for its Brake and Cable Business (as
defined in the Prospectus).
(ii) On June 26, 1995, after giving effect to the Recapitalization, the
Company sold an aggregate of 78,819 shares of its Class B Common Stock to
certain employees of the Company at a price equal to $2.69 per share and
70,500 shares of its Class B Common Stock to certain employees of the
Company at a price equal to $1.96 per share, pursuant to agreements entered
into in May 1995 and in August and September 1994, respectively.
The sale and issuances of the securities listed above in paragraphs (i) and
(ii) were deemed to be exempt from registration under the Securities Act by
virtue of Section 4(2) thereof and Regulation D promulgated thereunder as
transactions not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
1* Form of Underwriting Agreement
3.1* Form of Amended and Restated Certificate of Incorporation of the
Company
3.2* Form of Amended and Restated By-laws of the Company
4.1* Stockholders Agreement, dated as of August 31, 1994, by and among
the Company, Onex U.S. Investments, Inc., J2R, Alkin, the HCI
Stockholders (as defined therein) and the Management
Stockholders (as defined therein)
4.2* Amendment to Stockholders Agreement, dated May 17, 1995, by and
between the Company, Onex DHC LLC, J2R, Alkin, the HCI
Stockholders (as defined therein) and the Management
Stockholders (as defined therein)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
4.3* Registration Agreement, dated as of August 31, 1994, among the
Company, Alkin and the MC Stockholders (as defined therein)
4.4* Amendment to Registration Agreement, dated May 17, 1995, by and
between the Company, the MC Stockholders (as defined therein) and
Alkin
4.5* Investor Stockholder Agreement, dated as of August 31, 1994, by and
among the Company, Onex U.S. Investments, Inc., J2R and certain
other stockholders party thereto
4.6* Form of certificate representing Class A Common Stock of the Company
5* Opinion and Consent of Kirkland & Ellis
10.1* Joint Venture Agreement, dated as of August 31, 1994, by and among
the Company, Alkin, MCHC, Onex and J2R. The Company agrees to
furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to the Agreement upon request by the Commission.
10.2* Management Contribution Agreement, dated as of August 31, 1994, by
and among the Company, Kim B. Clark and the Management Stockholders
(as defined therein)
10.3* Management Agreement, dated as of August 31, 1994, by and between
Hidden Creek and Dura Operating Corp. (formerly known as Dura
Automotive Systems, Inc.) ("Dura Operating")
10.4* Stock Option Agreement, dated as of August 31, 1994, between the
Company and Alkin
10.5* Stock Option Agreement, dated as of August 31, 1994, between the
Company and Kim B. Clark
10.6* Subordinated Promissory Note, dated August 31, 1994, of the Company
in the amount of $2,000,000 in favor of Alkin
10.7* Subordinated Promissory Note, dated August 31, 1994, of MCHC in the
amount of $1,800,000 in favor of Onex Ohio Holdings, Inc.
10.8* Subordinated Promissory Note, dated August 31, 1994, of MCHC in the
amount of $200,000 in favor of J2R
10.9* Credit Agreement, dated as of August 31, 1994, among Dura Operating,
certain commercial lending institutions, The Bank of Nova Scotia,
Comerica Bank, The Chase Manhattan Bank and Continental Bank
10.10* Security Agreement, dated as of August 31, 1994, between Dura
Operating and Continental Bank, as agent
10.11* Pledge Agreement, dated as of August 31, 1994, entered into by Dura
Operating in favor of Continental Bank, as agent
10.12* Guaranty, dated August 31, 1994, by Dura de Mexico S.A. de C.V.
("Dura Mexico") in favor of the Agents, the Co-Agents and the
Lenders (each as defined therein)
10.13* Accounts Receivable Pledge Agreement, dated as of August 31, 1994, by
and between Continental Bank, as agent, and Dura Mexico
10.14* Corporate Guaranty, dated August 31, 1994, by MCHC in favor of the
Agent, Co-Agents and Lenders (each as defined therein)
10.15* Pledge Agreement, dated as of August 31, 1994, by MCHC in favor of
Continental Bank, as agent
10.16* Letter Agreement, dated August 25, 1994, between the Company and Ford
10.17* Promissory Note, dated December 31, 1991, of Karl F. Storrie in favor
of Continental Bank, as agent
10.18* Asset Purchase Agreement, dated March 23, 1995, by and among Dura
Operating, the Company and Rockwell International Corporation. The
Company agrees to furnish supplementally to the Commission a copy of
any omitted schedule or exhibit to the Agreement upon request by the
Commission.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
10.19* Subscription Agreement, dated as of June 26, 1995, by and between
the Company and the persons listed on the signature pages thereto
10.20* Subscription Agreement, dated as of June 26, 1995, by and between
the Company, David P. Klosterman and Craig L. Lamiman
10.21* Letter Agreement, dated November 9, 1995, between the Company and
John J. Knappenberger
10.21.1* Letter Agreement, dated August 16, 1994, between the Company and
Craig L. Lamiman
10.21.2* Letter Agreement, dated September 1, 1994, between the Company and
David P. Klosterman
10.22* Lease, entered into as of January 5, 1988, between the City of
Moberly, Missouri and Alkin
10.23* Net Lease, made as of March 16, 1995, by and between First
Industrial Financing Partnership, L.P. ("First Industrial") and
Dura Operating
10.24* First Addendum to Net Lease, dated April 24, 1995, between First
Industrial and Dura Operating
10.25* Lease of Office Space, dated June 14, 1991, between 80 South Eighth
Street Limited Partnership ("Eighth Street") and Hidden Creek
10.26* Amendment and Renewal of Lease, made as of April 30, 1993, by and
between Eighth Street and Hidden Creek
10.27* Form of 1996 Key Employee Stock Option Plan
10.28* Form of Independent Director Stock Option Plan
10.29* Form of Employee Stock Discount Purchase Plan
10.30* Form of Amended and Restated Stockholders Agreement
10.31* Form of Amended and Restated Investor Stockholders Agreement
21* Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP, Minneapolis, Minnesota
23.2 Consent of Arthur Andersen LLP, Kansas City, Missouri
23.3* Consent of Kirkland & Ellis (included in Exhibit 5)
24* Powers of Attorney
27* Financial Data Schedule
</TABLE>
- ---------------------
*Previously filed.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at closing specified in the underwriting agreement certificates in such
denominations and registered in such names as requested by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-4
<PAGE>
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 4 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ROCHESTER HILLS, STATE OF MICHIGAN ON AUGUST 13, 1996.
Dura Automotive Systems, Inc.
/s/ Karl F. Storrie
By: __________________________________
KARL F. STORRIE
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<S> <C> <C>
SIGNATURE CAPACITY DATE
/s/ Karl F. Storrie President, Chief Executive
_________________________________ Officer and Director August 13, 1996
KARL F. STORRIE (principal executive
officer)
/s/ David R. Bovee Vice President and Chief
_________________________________ Financial Officer (principal August 13, 1996
DAVID R. BOVEE financial officer)
/s/ S.A. Johnson Chairman of the Board and
_________________________________ Director August 13, 1996
S.A. JOHNSON
/s/ Robert R. Hibbs Vice President and Director
_________________________________ August 13, 1996
ROBERT R. HIBBS
/s/ Neil Anderson Director
_________________________________ August 13, 1996
NEIL ANDERSON
Director
/s/ W. H. Clement August 13, 1996
_________________________________
W. H. CLEMENT
/s/ James O'Loughlin Director
_________________________________ August 13, 1996
JAMES O'LOUGHLIN
/s/ William L. Orscheln Director
_________________________________ August 13, 1996
WILLIAM L. ORSCHELN
Director
/s/ Eric J. Rosen August 13, 1996
_________________________________
ERIC J. ROSEN
/s/ Barbara A. Westhues Director
_________________________________ August 13, 1996
BARBARA A. WESTHUES
</TABLE>
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
August 13, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
August 13, 1996