<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- ----------
Commission file number 0-21139
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4508 IDS CENTER 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
(612) 342-2311
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -----
The number of shares outstanding of the Registrant's Class A Common Stock, par
value $.01 per share, at April 15, 1997 was 3,825,756 shares. The number of
shares outstanding of the Registrant's Class B Common Stock, par value $.01 per
share, at April 15, 1997 was 4,976,254 shares.
<PAGE>
ITEM 1 - FINANCIAL INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------
1997 1996
----------- -----------
(Note 4)
<S> <C> <C>
Revenues $ 107,367 $ 59,303
Cost of sales 91,453 51,841
----------- -----------
Gross profit 15,914 7,462
Selling, general and administrative expenses 7,228 3,864
Amortization expense 883 262
----------- -----------
Operating income 7,803 3,336
Interest expense, net 1,896 1,089
----------- ----------
Income-before provision for income taxes 5,907 2,247
Provision for income taxes 2,363 900
----------- ----------
Net income $ 3,544 $ 1,347
----------- -----------
----------- -----------
Net income per common and common
equivalent share $ 0.40 $ 0.27
----------- -----------
----------- -----------
Weighted average common and common
equivalent shares outstanding 8,856 5,029
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral
part of these condensed consolidated statements.
-2-
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1997 1996
- ---------------------------------------- ----------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,027 $ 1,667
Accounts receivable, net 59,228 49,490
Inventories 26,394 18,093
Other current assets 17,375 14,678
---------- -----------
Total current assets 109,024 83,928
Property, plant and equipment, net 61,831 47,347
Goodwill and other assets, net 133,693 114,854
---------- -----------
$ 304,548 $ 246,129
---------- -----------
---------- -----------
Liabilities and Stockholders' Investment
- ----------------------------------------
Current liabilities:
Current maturities of long-term debt $ 72 $ 80
Accounts payable 37,573 30,230
Accrued liabilities 28,467 26,090
----------- -----------
Total current liabilities 66,112 56,400
Long-term debt, net of current maturities 115,202 77,376
Other noncurrent liabilities 32,191 24,986
----------- -----------
Stockholders' investment:
Preferred stock -- --
Common stock - Class A 38 38
Common stock - Class B 50 50
Additional paid-in capital 63,188 63,061
Retained earnings 27,930 24,386
Subscriptions receivable (163) (168)
----------- -----------
Total stockholders' investment 91,043 87,367
----------- -----------
$ 304,548 $ 246,129
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral
part of these condensed consolidated balance sheets.
-3-
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,544 $ 1,347
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 2,905 1,589
Deferred income tax provision - 494
Changes in other operating items 836 (12)
--------- ---------
Net cash provided by operating activities 7,285 3,418
--------- ---------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (18,610) -
Capital expenditures, net (1,965) (1,446)
Other, net - (233)
--------- ---------
Net cash used in investing activities (20,575) (1,679)
--------- ---------
FINANCING ACTIVITIES:
Borrowings under revolving credit facility 80,250 24,250
Repayment of revolving credit facility (64,000) (21,500)
Borrowings of long-term debt 1,292 -
Repayment of long-term debt (18) (2,414)
Other, net 127 4
--------- ---------
Net cash provided by financing activities 17,651 340
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,360 2,079
CASH AND CASH EQUIVALENTS:
Beginning of period 1,667 1,732
--------- ---------
End of period $ 6,027 $ 3,811
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral
part of these condensed consolidated statements.
-4-
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed consolidated financial statements have been
prepared by Dura Automotive Systems, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments and reflects
all adjustments which are, in the opinion of management, necessary for a
fair presentation of such financial statements. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with
the audited financial statements and the notes thereto included in the
Company's 1996 Annual Report to Stockholders.
Revenues and operating results for the three months ended March 31, 1997
are not necessarily indicative of the results to be expected for the full
year.
2. On August 14, 1996, the Company completed an initial public offering of
3,795,000 shares of its Class A common stock at $14.50 per share (the
"Offering"). The Company received net proceeds of approximately $50
million from the Offering. Net proceeds from the Offering were used to
repay certain outstanding indebtedness. Immediately prior to the
completion of the Offering, the Company's board of directors and
stockholders approved an Amended and Restated Certificate of
Incorporation and a recapitalization pursuant to which the outstanding
shares of the Company's Class A, B and C common stock were exchanged for
4,998,254 shares in the aggregate of the Company's new Class B common
stock (out of a total of 10,000,000 shares of Class B common stock
authorized for issuance under the Amended and Restated Certificate of
Incorporation). Immediately after the consummation of the
recapitalization and the Offering, the Company had outstanding 8,793,254
shares of common stock. In addition, the Company has options outstanding
to purchase 32,045 shares of Class B common stock at an exercise price of
$1.45 per share. The accompanying unaudited condensed consolidated
financial statements have been retroactively restated to give effect to
the recapitalization as if it had occurred at the beginning of the
earliest period presented.
-5-
<PAGE>
3. Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
Mar. 31, 1997 Dec. 31, 1996
------------- -------------
<S> <C> <C>
Raw materials $ 12,275 $ 9,384
Work in process 10,014 4,767
Finished goods 4,105 3,942
------------- -------------
$ 26,394 $ 18,093
------------- -------------
------------- -------------
</TABLE>
4. In December 1996, the Company acquired all of the outstanding common
stock of KPI Automotive Group (KPI) from Sparton Corporation for
approximately $78.8 million in cash. KPI manufactures shifter systems,
parking brake mechanisms, brake pedals, underbody spare tire carriers and
airbag components for the North American automotive industry from
facilities in Indiana and Michigan. The acquisition was financed with
proceeds from borrowings under the Company's bank credit agreement.
In January 1997, the Company acquired all of the outstanding common stock
of the VOFA Group (VOFA) for approximately $38 million in cash and
assumed indebtedness. The purchase was financed with borrowings under
the Company's bank credit agreement. The Company will also make
additional payments of up to approximately $6 million if certain
operating targets are achieved by VOFA in the first three years following
the acquisition. VOFA manufactures shifter cables, brake cables and
other light duty cables for the European automotive and industrial
markets from facilities in Dusseldorf, Gehren and Daun, Germany and
Barcelona, Spain.
The accompanying unaudited consolidated pro forma results of operations
for the three months ended March 31, 1996 give effect to the Offering and
the acquisitions of KPI and VOFA as if they were completed at the
beginning of the period. The unaudited pro forma financial information
does not purport to represent what the Company's results of operations
would actually have been if such transactions had occurred at such date
or to project the Company's results of future operations (in thousands,
except per share data):
-6-
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended
March 31, 1996
--------------
<S> <C>
Revenues $ 100,771
--------------
--------------
Operating income $ 6,458
--------------
--------------
Net income $ 2,551
--------------
--------------
Weighted average common
and common equivalent
shares outstanding 8,824
--------------
--------------
Net income per common
and common equivalent
share $ 0.29
--------------
--------------
</TABLE>
5. Long-term debt consisted of the following (in thousands):
<TABLE>
March 31, Dec. 31,
1997 1996
---------- ----------
<S> <C> <C>
Revolving credit facility $ 114,841 $ 77,000
Other 433 456
---------- ----------
115,274 77,456
Less-current maturities (72) (80)
---------- ----------
$ 115,202 $ 77,376
---------- ----------
---------- ----------
</TABLE>
The Company's bank credit agreement, as amended, consists of a revolving
credit facility with a committed amount of $120 million, is
collateralized by substantially all assets of the Company, matures in
December 2001 and bears interest at the lender's prevailing reference
rate plus .5% or LIBOR plus 1% minus the Eurocurrency Reserve Percentage,
at the discretion of the Company. The agreement also provides the Company
with the ability to borrow in foreign currencies up to an amount
equivalent to $30 million. The bank credit agreement requires the
Company to pay a facility fee on the commitment amount of .25% and
contains various restrictive covenants, which, among other matters,
require the Company to maintain certain financial ratios, including
minimum liquidity and interest coverage. The bank credit agreement also
limits additional indebtedness, investments, rental obligations and cash
dividends. The Company was in compliance with all such covenants at
March 31, 1997. In addition, the Company has outstanding letters of
credit in the amount of $1.7 million expiring through October 1997.
-7-
<PAGE>
6. During March 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share", which requires the disclosure of basic earnings per
share and diluted earnings per share. The Company expects to adopt SFAS
128 effective December 31, 1997 and anticipates it will not have a
material impact on previously reported earnings per share.
7. Supplemental cash flow information (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash paid for -
Interest $1,273 $1,218
Income taxes 275 250
</TABLE>
-8-
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 TO THE THREE MONTHS ENDED
MARCH 31, 1996
REVENUES -- Revenues for the three months ended March 31, 1997 increased by
$48.1 million, or 81%, to $107.4 million from $59.3 million for the three months
ended March 31, 1996. Approximately $44.2 million of the increase in revenues
relates to the acquisitions of KPI Automotive Group (KPI) in December 1996 and
the VOFA Group (VOFA) in January 1997. The remaining increase is due to new
business awarded to the Company.
COST OF SALES -- Cost of sales for the three months ended March 31, 1997
increased by $39.7 million, or 76.6%, to $91.5 million from $51.8 million for
the three months ended March 31, 1996. Cost of sales as a percentage of
revenues for the three months ended March 31, 1997 was 85.2% compared to 87.4%
for the three months ended March 31, 1996. The increase in gross margin was the
result of higher margins on new business, continued cost reduction efforts,
including cellular manufacturing and plant consolidation, and the initial
effects of cost reduction opportunities at KPI.
S, G & A EXPENSES -- Selling, general and administrative expenses increased by
$3.3 million, or 84.6%, to $7.2 million for the three months ended March 31,
1997 from $3.9 million for the three months ended March 31, 1996. The increase
was due to increased support for worldwide engineering and marketing efforts and
increased costs related to the acquisitions of KPI and VOFA partially offset by
initial consolidation opportunities at KPI. As a percentage of revenues,
selling, general and administrative expenses were 6.7% for the three months
ended March 31, 1997 compared to 6.5% for the three months ended March 31, 1996.
INTEREST EXPENSE -- Interest expense for the three months ended March 31, 1997
was $1.9 million compared to $1.1 million for the three months ended March 31,
1996. The increase was due principally to borrowings incurred related to the
acquisitions of KPI and VOFA.
INCOME TAXES -- The effective income tax rate was 40.0% for the three months
ended March 31, 1997 and 40.1% for the three months ended March 31, 1996. The
effective rates differed from the statutory rates primarily as a result of state
taxes and non-deductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
On August 14, 1996, the Company completed an initial public offering of
3,795,000 shares of its Class A common stock at a price of $14.50 per share.
The Company realized net proceeds of approximately $50 million from this
offering.
The Company's bank credit agreement consists of a $120 million revolving credit
facility which expires in December 2001. The agreement also provides the
Company with the ability to borrow in foreign currencies up to an amount
equivalent to $30 million. As of March 31, 1997, there was
-9-
<PAGE>
a total of $114.8 million outstanding under this revolving credit facility.
The bank credit agreement requires the Company to pay a facility fee on the
commitment amount of .25% and contains various restrictive covenants, which,
among other matters, require the Company to maintain certain financial
ratios, including minimum liquidity and interest coverage. The bank credit
agreement also limits additional indebtedness, investments, rental
obligations and cash dividends. The Company was in compliance with all such
covenants at March 31, 1997. In addition, the Company has outstanding
letters of credit in the amount of $1.7 million expiring through October 1997.
In December 1996, the Company acquired all of the outstanding common stock of
KPI from Sparton Corporation for approximately $78.8 million in cash. KPI
manufactures shifter systems, parking brake mechanisms, brake pedals, underbody
spare tire carriers and airbag components for the North American automotive
industry from facilities in Indiana and Michigan. The acquisition was financed
with proceeds from borrowings under the Company's bank credit agreement.
In January 1997, the Company acquired all of the outstanding common stock of the
VOFA Group (VOFA) for approximately $38 million in cash and assumed
indebtedness. The Company will also make additional payments of up to
approximately $6 million if certain operating targets are achieved by VOFA in
the first three years following the acquisition. VOFA manufactures shifter
cables, brake cables and other light duty cables for the European automotive and
industrial markets from facilities in Dusseldorf, Gehren and Daun, Germany and
Barcelona, Spain.
The Company's principal source of funds has been, and is anticipated to be, its
cash flows from operations. During the three months ended March 31, 1997, the
Company generated cash from operations of $6.4 million before the effects of
changes in working capital compared to $2.9 million in 1996. The cash generated
from operations was used to fund capital expenditures of approximately $2
million and to partially finance the acquisitions referred to above.
The Company estimates that it will fund approximately $13 million in capital
expenditures for the remaining months of 1997. These capital expenditures will
be used primarily for the purchase of machinery and equipment to support new
business awards, as well as to finance continued cost reduction efforts.
The Company believes that funds available under its bank 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 additional significant
acquisitions may require additional debt or equity financing. The Company
believes additional financing will be available from bank lenders, through the
issuance of public or private debt securities or through additional offerings of
equity securities.
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.
-10-
<PAGE>
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, 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.
-11-
<PAGE>
PART II. OTHER INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
In March 1997, the Company was involved in settling a lawsuit 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. This lawsuit was previously disclosed in the Company's 1996 Annual
Report on Form 10-K and prior filings with the Securities and Exchange
Commission. The terms of the settlement are confidential. The Company's
share of the settlement, which has been paid on behalf of the Company by its
insurance carrier, after taking into account the deductible, is not material
to the Company.
Item 2. Change in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
Sequential
Page Number
(a) Exhibits: -----------
11 Statements of Computation of Earnings Per Share For
the Three Months Ended March 31, 1997 and 1996. 14
(b) On February 18, 1997, the Company filed Form 8-K/A
relating to the acquisition of the KPI Group of Sparton
Corporation on December 5, 1996 to include the required
financial statements under Item 7.
-12-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: May 9, 1997 By /s/ David R. Bovee
-------------------------------------
David R. Bovee
Vice President, Chief Financial Officer
(principal accounting and financial
officer)
-13-
<PAGE>
EXHIBIT 11
DURA AUTOMOTIVE SYSTEMS, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net income $ 3,544 $ 1,347
-------- --------
-------- --------
Weighted average number of
Class A common stock 3,814 -
Weighted average number of
Class B common stock 4,987 5,002
Dilutive effect of outstanding
stock options after application
of the treasury stock method 55 27
-------- --------
Common and common equivalent
shares outstanding 8,856 5,029
-------- --------
-------- --------
Net income per common and
common equivalent share(1) $ 0.40 $ 0.27
-------- --------
-------- --------
</TABLE>
(1) The calculation of net income per common and common equivalent share for
the three month periods ended March 31, 1997 and 1996 are the same on a
primary and fully diluted basis.
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND ON PAGES 2 AND 3
OF THE COMPANY'S FORM 10-Q FOR THE YEAR TO DATE AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,027
<SECURITIES> 0
<RECEIVABLES> 61,002
<ALLOWANCES> (1,774)
<INVENTORY> 26,394
<CURRENT-ASSETS> 17,375
<PP&E> 79,071
<DEPRECIATION> (17,240)
<TOTAL-ASSETS> 304,548
<CURRENT-LIABILITIES> 66,112
<BONDS> 0
0
0
<COMMON> 88
<OTHER-SE> 90,955
<TOTAL-LIABILITY-AND-EQUITY> 304,548
<SALES> 107,367
<TOTAL-REVENUES> 107,367
<CGS> 91,453
<TOTAL-COSTS> 91,453
<OTHER-EXPENSES> 8,111
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,896
<INCOME-PRETAX> 5,907
<INCOME-TAX> 2,363
<INCOME-CONTINUING> 3,544
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,544
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
