<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1998.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
4508 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 342-2311
(Address, including zip code, and telephone number, including
area code, of registrant's principal offices)
STEPHEN E. K. GRAHAM
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
2791 RESEARCH DRIVE
ROCHESTER HILLS, MICHIGAN 48309
TELEPHONE: (248) 299-7500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
DENNIS M. MYERS, ESQ. DEWEY B. CRAWFORD, ESQ.
KIRKLAND & ELLIS GARDNER, CARTON & DOUGLAS
200 East Randolph Drive 321 North Clark Street
Chicago, Illinois 60601 Chicago, Illinois 60610
Telephone: (312) 861-2000 Telephone: (312) 644-3000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS 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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Class A Common Stock, par value $0.01
per share........................... 5,074,950 shares $38.125 $193,482,469 $57,077
</TABLE>
(1) Includes 661,950 shares that the Underwriters have the option to purchase
from the Company to cover over-allotments, if any.
(2) This estimate is based on the average of the high and low sales prices on
the Nasdaq National Market of the Class A Common Stock on May 22, 1998,
pursuant to Rule 457(c) under the Securities Act of 1933.
--------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 27, 1998
PROSPECTUS
, 1998
[LOGO]
4,413,000 SHARES
DURA AUTOMOTIVE SYSTEMS, INC.
CLASS A COMMON STOCK
Of the 4,413,000 shares of Class A Common Stock, par value $0.01 per share
("Class A Common Stock"), being offered (the "Offering"), 3,000,000 shares are
being sold by Dura Automotive Systems, Inc. (the "Company"), and 1,413,000
shares are being sold by the Selling Stockholders. See "Principal and Selling
Stockholders." The Company will not receive any part of the proceeds from the
sale of shares by the Selling Stockholders. The Class A Common Stock is traded
on the Nasdaq National Market ("Nasdaq") under the symbol "DRRA." On May 22,
1998, the last reported sale price of the Class A Common Stock on Nasdaq was
$38 1/8 per share. See "Market Price of Class A Common Stock."
Upon completion of the Offering, the Company will have 8,592,317 shares of
Class A Common Stock and 3,246,380 shares of Class B Common Stock, par value
$0.01 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 generally vote together as a single class on all matters submitted to a
vote of stockholders. See "Description of Capital Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 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 PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............. $ $ $ $
Total(3).............. $ $ $ $
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</TABLE>
(1) THE COMPANY, ITS PRINCIPAL OPERATING SUBSIDIARY AND THE SELLING STOCKHOLDERS
HAVE AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN LIABILITIES,
INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SEE
"UNDERWRITING."
(2) BEFORE DEDUCTING ESTIMATED EXPENSES OF $1,500,000, WHICH WILL BE PAID BY THE
COMPANY.
(3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS AN OPTION, EXERCISABLE WITHIN 30
DAYS HEREOF, TO PURCHASE UP TO AN AGGREGATE OF 661,950 ADDITIONAL SHARES OF
CLASS A COMMON STOCK 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 delivery of
the shares will be made in New York, on or about , 1998.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ROBERT W. BAIRD & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PIPER JAFFRAY INC.
<PAGE>
[DURA LOGO]
The inside front cover of the Prospectus folds out and contains a series of
multi-colored pictures of certain of the mechanical assemblies and systems
manufactured by the Company. The pictures depict and the captions read (in
clockwise rotation) "Hood Latch System," "Automatic Transmission Shifter
Mechanism," "Tire Carrier System," "Jack," "Column Shifter Switch Assembly,"
"Foot Brake Pedal System," "Foot-Operated Parking Brake System," "Column Shifter
Mechanism," "Hand-Operated Parking Brake System," "Hood Latch System," "Assorted
Driver Control Systems" and "Transfer Case Shifter." In addition, the foldout
includes two pie charts, one depicting the Company's pro forma 1997 revenues by
customer and the other depicting the Company's pro forma 1997 revenues by
product. The inside front cover of the Prospectus contains a multi-colored,
three-dimensional diagram of an automobile, with several of the various
mechanical assemblies and systems manufactured by the Company graphically
depicted within the automobile. In the center of the inside front cover, the
"Dura" logo appears in red.
The inside back cover of the Prospectus contains a map of the World
highlighting the Company's manufacturing and product development locations.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK AND THE COMPANY'S CONVERTIBLE TRUST PREFERRED SECURITIES, INCLUDING
STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY
BIDS. THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THIS OFFERING AND MAY
BID FOR AND PURCHASE SHARES OF CLASS A COMMON STOCK AND THE CONVERTIBLE TRUST
PREFERRED SECURITIES ON THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS, IF ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A
COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 UNDER
REGULATION M. SEE "UNDERWRITING."
<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, INCLUDING
TRIDENT AUTOMOTIVE PLC ("TRIDENT"), AND ITS AND THEIR RESPECTIVE PREDECESSORS
AND SUBSIDIARIES. EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS ASSUMES THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS IS
NOT EXERCISED. THE CLASS A COMMON STOCK AND CLASS B COMMON STOCK ARE
COLLECTIVELY REFERRED TO HEREIN AS THE "COMMON STOCK."
THE COMPANY
GENERAL
Dura Automotive Systems, Inc. is a leading designer and manufacturer of
driver control systems, cable-related systems and engineered mechanical
components for the global automotive industry. The Company's products include
parking brake systems, automotive cables, transmission shifter systems, latches,
underbody tire carriers, jacks, brake, clutch and accelerator pedals and other
mechanical assemblies. The Company sells its products to the major North
American, Japanese and European automotive original equipment manufacturers
("OEMs"). The Company has 38 manufacturing and product development facilities
located in the United States, Australia, Brazil, Canada, France, Germany,
Mexico, Spain and the United Kingdom and has strategic alliances in India and
Japan. On April 30, 1998, the Company acquired Trident (the "Trident
Acquisition"), a leading international designer and manufacturer of automotive
cables, and an established supplier of lighting products and door handles. The
acquisition of Trident, with revenues of approximately $300 million for its last
fiscal year, enhances the Company's position as the leading supplier of driver
control systems, broadens its product offerings and increases its ability to
supply customers on a global basis.
Since 1993, the Company's revenues have grown rapidly through a focused
strategy of internal growth and a highly disciplined acquisition program. During
the last four years, the Company has successfully completed nine acquisitions
and one joint venture. As a result of these acquisitions and internal growth,
the Company's revenues have increased from $129.3 million in 1993 to $828.0
million in 1997 on a pro forma basis, representing a compound annual growth rate
of approximately 59%. Over this same period, the Company's operating income
margin has improved from 2.8% of revenues to 7.2% of revenues.
The Company believes that it is the leading North American supplier of
parking brake mechanisms, transmission shifter mechanisms and automotive cables.
In addition, as a result of the Trident Acquisition, the Company believes that
it is a leading supplier of automotive cables in Europe. The Company is one of
the few suppliers to offer integrated parking brake, shifter and latch systems
worldwide. These systems, which consist of mechanisms and cables, require
significant design and engineering expertise because they are critical to the
vehicle's reliability, performance and safety. The Company believes that its
customers value its ability to design, manufacture and assemble complete
systems.
The automotive components supply industry is undergoing significant
consolidation and globalization as OEMs continue to reduce their supplier base.
In order to lower costs and improve quality, OEMs are awarding sole-source
contracts to full-service suppliers who are able to supply larger portions of a
vehicle on a global basis. OEMs' criteria for supplier selection include not
only cost, quality and responsiveness, but also full-service design, engineering
and program management capabilities. OEMs are seeking suppliers capable of
providing complete systems rather than suppliers who only provide separate
component parts. In addition, OEMs are increasingly requiring their suppliers to
have the capability to design and manufacture their products in multiple
geographic markets. As a full-service supplier with strong OEM relationships,
the Company expects to continue to benefit from these trends.
3
<PAGE>
On a pro forma basis, approximately 73% of the Company's 1997 revenues were
generated from sales to North American OEMs and certain foreign OEMs with
manufacturing operations in North America ("Transplants"), with its major
customers being Ford, GM, Chrysler, Toyota, Honda and Nissan. The Company
manufactures products for many of the most popular car, light truck and sport
utility models, including all ten of the top ten selling vehicles in North
America for 1997: the Ford Taurus, Explorer, Ranger and F-Series pickups, GM
Cavalier and C/K pickup, Dodge Ram pickup, Honda Accord and Civic, and Toyota
Camry. As a result of recent acquisitions, approximately 12% of the Company's
1997 pro forma revenues were generated from sales to European OEMs, including
Volkswagen, Mercedes, PSA (Peugeot and Citroen), BMW and Renault. 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's business objective is to capitalize on the trends in the
automotive supply industry in order to be the leading provider of driver control
systems, cable-related systems and engineered mechanical components to OEMs
worldwide. The Company's growth strategy focuses on the identification and
pursuit of (i) strategic acquisitions, (ii) systems opportunities, (iii)
increased customer and platform penetration, and (iv) increased penetration of
international markets, including "world car" opportunities.
The Company has broadened its acquisition scope from the original focus on
cable-driven controls to include other highly engineered automotive components.
As a result, the Company competes in what it believes to be a $6 billion, highly
fragmented market that provides numerous potential acquisition and joint venture
opportunities. The Company seeks acquisition and joint venture opportunities
that: (i) provide additional product, manufacturing and technical capabilities;
(ii) broaden the Company's geographic coverage and strengthen its ability to
supply products on a global basis; (iii) increase the number of models for which
the Company supplies products and increase the content supplied for existing
models; and (iv) add new customers.
THE TRIDENT ACQUISITION
Trident is a leading international designer and manufacturer of automotive
cables. Trident's products include parking brake and transmission shifter
cables, clutch, accelerator and speed control cables, lighting products and door
handles. In its last fiscal year, approximately 71% of Trident's total revenues
were derived from cables and approximately 29% were derived from lighting
products, door handles and other products. The Company believes that, prior to
the Trident Acquisition, Trident was one of the largest manufacturers in several
markets in which the Company competes, including parking brake cables in North
America and manual transmission shift cables in Europe. The Trident Acquisition
adds 12 major design and manufacturing facilities located in the United States,
Brazil, Canada, France, Germany and the United Kingdom and a strategic alliance
in Japan. Trident's customers include the three major North American OEMs as
well as Honda, Volkswagen, PSA, Toyota, Renault, Nissan, Mercedes and BMW.
The Company believes that the Trident Acquisition provides several strategic
benefits, including the following:
INCREASED CUSTOMER PENETRATION. The Trident Acquisition significantly
expands the Company's penetration with the North American OEMs, making it the
largest supplier of driver control systems and cable-related systems to Ford, GM
and Chrysler. The Trident Acquisition more than doubles sales to Honda,
Volkswagen and PSA, substantially increases sales to BMW, Mercedes and Renault
and adds new customers such as Fiat and Porsche.
EXPANDED PRODUCT OFFERINGS AND SYSTEMS OPPORTUNITIES. The Trident
Acquisition significantly expands the Company's offerings in automotive cables.
Trident's expertise in cables, combined with the Company's expertise in
mechanisms, will enhance the Company's ability to supply complete systems to
Trident's current customers.
4
<PAGE>
EXPANDED GLOBAL CAPABILITIES. OEMs increasingly demand that their suppliers
have global production capabilities. Trident's cable manufacturing facilities in
Brazil, Canada, France, Germany and the United Kingdom further enhance the
Company's strategic geographic position and its ability to service both
international and North American OEMs. The Trident Acquisition doubles the
Company's sales generated outside of North America.
OPERATIONAL EFFICIENCIES. The Trident Acquisition provides the Company with
a number of opportunities to reduce costs and improve operational efficiencies.
For example, the Company's and Trident's facilities are geographically located
in such a way as to allow the Company to optimize its manufacturing, technical
and administrative efforts. The increased size of the Company may also improve
the Company's ability to negotiate more favorable terms on its supply contracts,
as well as achieve other operational cost savings.
STRONG POSITION TO CAPITALIZE ON EUROPEAN CABLE TRENDS. The Trident
Acquisition enhances the Company's ability to benefit from the movement by OEMs
in Europe to replace linked rods in manual transmissions with cables. Management
estimates that approximately 90% of all automobiles sold in Europe have manual
transmissions, of which only 20% utilize manual transmission shifter cable
assemblies. The shift from rods to cables is expected to increase due to the
benefits of using cable assemblies, including (i) greater design flexibility,
(ii) enhanced performance, (iii) increased durability and (iv) lower weight. As
a result of Trident's strong European market share and established manufacturing
presence, the Company believes it is well positioned to meet this demand.
OTHER RECENT ACQUISITIONS
The following summarizes certain other recent acquisitions completed by the
Company:
- In August 1997, the Company acquired GT Automotive Systems, Inc. ("GT
Automotive"), a designer and manufacturer of column-mounted shifter systems and
turn signal and tilt lever assemblies. At the time of the acquisition, GT
Automotive had annual revenues of approximately $70 million and a substantial
share of the North American column-mounted shifter systems market. GT
Automotive's strong position in this market, combined with the Company's
existing position in console-based shifter systems, resulted in the Company
attaining the leading position in the North American shifter market. In
addition, the acquisition added Nissan as a customer.
- In January 1997, the Company acquired the VOFA Group ("VOFA"), a
manufacturer of shifter cables, brake cables and other light duty cables for the
European automotive and industrial markets. At the time of the acquisition, VOFA
had annual revenues of approximately $85 million. The acquisition provided the
Company with additional expertise in cables and a strong presence in Europe. In
addition, the acquisition added new customers, such as Mercedes, Volkswagen and
BMW.
- In December 1996, the Company acquired KPI Automotive Group ("KPI"), a
manufacturer of shifter systems, parking brake mechanisms, brake pedals and
underbody tire carriers. At the time of the acquisition, KPI had annual revenues
of approximately $95 million. The acquisition added significant market
penetration in console-based shifter systems, increased platform content and
added a significant new product line in underbody tire carriers.
In addition, the Company has successfully completed five other strategic
acquisitions and one joint venture since the initial public offering ("IPO") of
its Class A Common Stock in August 1996.
The Company was formed in 1990 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"). In August 1994, the Company combined its operations with the
automotive parking brake and cable business and light duty cable business (the
"Brake and Cable Business") of Alkin Co. ("Alkin"), which significantly expanded
the Company's size and capabilities.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock Offered by:
The Company............................... 3,000,000 shares (1)
Selling Stockholders...................... 1,413,000 shares (2)
Total................................... 4,413,000 shares
Common Stock to be Outstanding after the
Offering:
Class A Common Stock...................... 8,592,317 shares
Class B Common Stock...................... 3,246,380 shares
Total................................... 11,838,697 shares (3)
Use of Proceeds............................. The net proceeds to be received by the Company
from the Offering are expected to be used to
repay indebtedness incurred in connection with
the Trident Acquisition. The Company will not
receive any proceeds from the sale of the
shares by the Selling Stockholders. See "Use
of Proceeds."
Voting Rights............................... The Company has 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."
Nasdaq Symbol............................... DRRA
</TABLE>
- ------------------------
(1) Does not include the Underwriters' over-allotment option granted by the
Company for an aggregate of 661,950 shares of Class A Common Stock.
(2) The shares to be sold by the Selling Stockholders currently consist of
shares of Class B Common Stock. Such shares will be converted into shares of
Class A Common Stock prior to the consummation of the Offering.
(3) Does not include: (i) 515,318 shares of Class A Common Stock reserved for
issuance upon the exercise of outstanding options as of May 26, 1998; (ii)
an aggregate of 1,154,557 shares of Class A Common Stock reserved for
issuance under the Company's 1996 Key Employee Stock Option Plan (the "Stock
Option Plan"), Employee Discount Stock Purchase Plan (the "Employee Stock
Purchase Plan") and the Company's Independent Director Stock Option Plan
(the "Director Option Plan"); or (iii) 1,289,000 shares of Class A Common
Stock that are issuable upon the conversion of the 7 1/2% Convertible Trust
Preferred Securities (the "Trust Preferred Securities") issued by Dura
Automotive Capital Trust (the "Dura Trust").
6
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------------- --------------------
PRO FORMA
1993 1994 (1) 1995 (2) 1996 (3) 1997 (4) 1997 (5) 1997 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues............................ $ 129,328 $ 189,675 $ 253,726 $ 245,329 $ 449,111 $ 827,961 $ 107,367 $ 125,746
Gross profit........................ 12,717 19,050 34,167 37,519 74,025 137,842 16,582 21,275
Operating income.................... 3,587 7,875 17,560 19,326 37,610 59,704 7,803 10,864
Net income.......................... 1,118 2,580 10,126 10,128 16,642 22,589 3,544 4,576
Basic earnings per share (7)........ $ 0.41 $ 0.75 $ 2.04 $ 1.57 $ 1.89 $ 1.91 $ 0.40 $ 0.52
Diluted earnings per share (7)...... $ 0.41 $ 0.75 $ 2.03 $ 1.57 $ 1.88 $ 1.91 $ 0.40 $ 0.52
OTHER DATA:
Depreciation and amortization....... $ 2,409 $ 3,725 $ 5,578 $ 6,079 $ 12,303 $ 27,036 $ 2,905 $ 3,067
Capital expenditures, net........... 2,951 5,406 6,116 6,260 16,242 N/A 1,965 3,733
EBITDA (8).......................... 5,996 11,600 23,138 25,405 49,913 86,740 10,708 13,931
Net cash provided by (used in):
Operating activities.............. 3,724 (6,156) 13,138 19,792 8,516 N/A 7,285 (2,142)
Investing activities.............. (2,951) (46,878) 11,428 (95,093) (93,386) N/A (20,575) (22,311)
Financing activities.............. (787) 53,037 (22,851) 75,236 87,620 N/A 17,650 67,322
<CAPTION>
PRO FORMA
1998 (6)
<S> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues............................ $ 211,662
Gross profit........................ 37,458
Operating income.................... 17,727
Net income.......................... 7,065
Basic earnings per share (7)........ $ 0.60
Diluted earnings per share (7)...... $ 0.58
OTHER DATA:
Depreciation and amortization....... $ 6,366
Capital expenditures, net........... N/A
EBITDA (8).......................... 24,093
Net cash provided by (used in):
Operating activities.............. N/A
Investing activities.............. N/A
Financing activities.............. N/A
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------------------------
PRO PRO FORMA
ACTUAL FORMA (9) AS ADJUSTED(10)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................... $ 103,066 $ 35,654 $ 83,154
Total assets.............................................................. 500,606 762,653 762,653
Total debt................................................................ 194,438 372,800 265,300
Trust Preferred Securities (11)........................................... 55,250 55,250 55,250
Total stockholders' investment............................................ 105,769 101,269 208,769
</TABLE>
- ------------------------------
(1) In August 1994, the Company acquired the Brake and Cable Business of Alkin.
The results of operations of this acquired business have been included in
the consolidated financial statements of the Company from August 31, 1994,
the date of acquisition.
(2) In April 1995, the Company sold the net assets of its window regulator
business (the "Window Regulator Business") to Rockwell International
Corporation ("Rockwell"), realizing a pretax gain of approximately $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.
(3) Includes the results of operations of (i) the parking brake business
acquired from Rockwell (the "Rockwell Parking Brake Business") from October
1, 1996 and (ii) KPI from December 5, 1996, their respective dates of
acquisition. The Company issued an aggregate of 3,795,000 shares of its
Class A Common Stock in August 1996 in connection with the IPO.
(4) Includes the results of operations of (i) VOFA from January 1, 1997, (ii)
the parking brake business (the "Excel Parking Brake Business") of Excel
Industries Inc. ("Excel") from May 5, 1997, (iii) GT Automotive from August
29, 1997, and (iv) REOM Industries (Aust) Pty Ltd. ("REOM") from December
12, 1997, their respective dates of acquisition.
(5) The pro forma statement of operations data for the year ended December 31,
1997 give effect to (i) the acquisitions of GT Automotive, Universal Tool &
Stamping Co., Inc. ("Universal") and Trident, (ii) the March 1998 issuance
and sale of the Trust Preferred Securities and (iii) the Offering and the
application of the net proceeds to the Company as described in "Use of
Proceeds," as if such transactions had occurred on January 1, 1997. The
results of operations of the Excel Parking Brake Business prior to its
acquisition on May 5, 1997 and those of REOM prior to its acquisition on
December 12, 1997 have not been included in the Company's pro forma results
of operations for the year ended December 31, 1997 because such results are
not material to the Company's results of operations taken as a whole. Pro
forma operating income and EBITDA for the year ended December 31, 1997
include the effect of non-recurring charges totaling $3.4 million reflected
in the operating results of GT Automotive during the period from January 1,
1997 through August 29, 1997 (the date of the acquisition of GT Automotive).
These charges included $2.3 million associated with losses to be incurred on
certain future contracts and $1.1 million related to one-time increases in
certain asset valuation allowances and accrued liabilities. These charges
reduced pro forma diluted earnings per share by $0.15.
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(6) The pro forma statement of operations data for the three months ended March
31, 1998 give effect to (i) the acquisitions of Universal and Trident, (ii)
the March 1998 issuance and sale of the Trust Preferred Securities and (iii)
the Offering and the application of the net proceeds to the Company as
described in "Use of Proceeds," as if such transactions had occurred on
January 1, 1998.
(7) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A and Class B Common Stock
outstanding during the period. Diluted earnings per share include the
dilutive effects of outstanding stock options using the treasury stock
method and the Trust Preferred Securities. Pro forma diluted earnings per
share for the year ended December 31, 1997 assumes the conversion of the
Trust Preferred Securities into approximately 1,289,000 shares of Class A
Common Stock.
(8) "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, and the Company's calculation thereof may not be comparable to
that reported by other companies. The Company believes that it is widely
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness. This belief is based, on the
Company's negotiations with its lenders, who have required that the interest
payable under the Bank Credit Agreement (as defined below) be based, in
part, on the Company's ratio of consolidated funded indebtedness to EBITDA.
EBITDA does not take into account the Company's working capital
requirements, debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be available
for discretionary use.
(9) Gives effect to the Trident Acquisition as if it had occurred on March 31,
1998. See "Capitalization."
(10) Gives effect to (i) the Trident Acquisition and (ii) the Offering and the
application of the net proceeds to the Company as described in "Use of
Proceeds," as if such transactions had occurred on March 31, 1998. See
"Capitalization."
(11) Represents 7 1/2% Convertible Trust Preferred Securities issued by the Dura
Automotive Systems Capital Trust in March 1998.
RISK FACTORS
In analyzing an investment in the Class A Common Stock offered hereby,
prospective investors should carefully consider, along with other matters
referred to herein, the risks relating to: (i) the Company's reliance on major
customers and selected models; (ii) the cyclicality and seasonality of the
automotive market; (iii) obtaining new business on new and redesigned models;
(iv) product liability exposure; (v) the possible failure to realize the
benefits of the Trident Acquisition; (vi) automotive supply industry
consolidation; (vii) the degree to which the Company is leveraged; and (viii)
the Company's level of foreign operations. See "Risk Factors."
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RISK FACTORS
THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). ALSO, DOCUMENTS
SUBSEQUENTLY FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION") AND INCORPORATED HEREIN BY REFERENCE WILL CONTAIN
FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON THE
BELIEFS OF THE COMPANY'S MANAGEMENT AS WELL AS ON ASSUMPTIONS MADE BY AND
INFORMATION CURRENTLY AVAILABLE TO THE COMPANY AT THE TIME SUCH STATEMENTS WERE
MADE. WHEN USED IN THIS PROSPECTUS, THE WORDS "ANTICIPATE," "BELIEVE,"
"ESTIMATE," "EXPECT," "INTENDS" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO THE
COMPANY, ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH INCLUDE
STATEMENTS RELATING TO, AMONG OTHER THINGS, (I) THE INTEGRATION OF THE
OPERATIONS OF RECENTLY ACQUIRED COMPANIES WITH THOSE OF THE COMPANY; (II) THE
STRATEGIC BENEFITS OF SUCH ACQUISITIONS; AND (III) THE COMPANY'S ABILITY TO
CONTINUE TO IMPLEMENT ITS OPERATING AND GROWTH STRATEGY. ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A
RESULT OF THE RISK FACTORS SET FORTH BELOW, THE MATTERS SET FORTH OR
INCORPORATED IN THE PROSPECTUS GENERALLY AND CERTAIN ECONOMIC AND BUSINESS
FACTORS, SOME OF WHICH MAY BE BEYOND THE CONTROL OF THE COMPANY. THE COMPANY
CAUTIONS THE READER, HOWEVER, THAT THIS LIST OF FACTORS MAY NOT BE EXHAUSTIVE,
PARTICULARLY WITH RESPECT TO FUTURE FILINGS WITH THE COMMISSION. IN ANALYZING AN
INVESTMENT IN THE CLASS A COMMON STOCK OFFERED HEREBY, PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER, ALONG WITH THE OTHER MATTERS REFERRED TO HEREIN, THE
RISK FACTORS DESCRIBED BELOW.
RELIANCE ON MAJOR CUSTOMERS; REQUIRED PRICE REDUCTIONS
The Company's net sales to Ford, GM and Chrysler represented approximately
31%, 23% and 12%, respectively, of the Company's pro forma revenues in 1997 and
approximately 42%, 25% and 7%, respectively, of the Company's actual revenues in
1997. The loss of Ford, GM, Chrysler or any other significant customer could
have a material adverse effect on the Company. 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, usually 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 is 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 is unable to generate sufficient production cost
savings in the future to offset price reductions, the Company's gross margin
could be adversely affected. See "Business--Competition."
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 scheduled OEM plant shutdowns in July and August for vacations
and new model changeovers. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition--Quarterly Results of Operations and
Seasonality."
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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 Mondeo in Europe. The Company has agreed to pay 50% of the costs
of that recall not to exceed $1.0 million, which payments totaled $0.4 million
at December 31, 1997. The types of alleged failures that prompted the F-Series
recall have also led to a number of claims and lawsuits filed against Ford. To
date, two cases have been instituted directly against the Company or Alkin
relating to personal injury claims, and Ford has indicated that it 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 as of December 31, 1997, Ford had tendered its defense of 25 such
claims to the Company and Alkin. The Company 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. In November 1996, an insurance
carrier of the Company brought a declaratory judgment that its policy did not
provide coverage for an allegedly defective parking brake manufactured prior to
August 31, 1994. 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."
FAILURE TO REALIZE BENEFITS OF TRIDENT ACQUISITION
The Company believes the Trident Acquisition will significantly enhance its
competitive position and business prospects. There can be no assurance, however,
that such benefits will be realized, that the combination of the Company and
Trident will be successful, or that the Company will not experience difficulties
in integrating the operations of Trident with those of the Company. For example,
it is possible that, as a result of the Trident Acquisition, the Company may be
in the position of being the sole supplier of certain parts to certain of its
customers and, in response, such customers may divert some of their purchases to
another supplier in order to maintain an alternate source of supply. The
integration of Trident will require the experience and expertise of certain key
managers of Trident who are expected to be retained by the Company. There can be
no assurance that the Trident managers retained by the Company will remain with
the Company for the time period necessary to successfully integrate Trident into
the Company. See "Management."
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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 continue 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."
SUBSTANTIAL LEVERAGE
The Company has consolidated indebtedness that is substantial in relation to
its stockholders' investment. As of March 31, 1998, the Company had
approximately $194.4 million of outstanding debt, $55.3 million of outstanding
Trust Preferred Securities and approximately $105.8 million of stockholders'
investment. On a pro forma basis, the Company had approximately $265.8 million
of outstanding debt, $55.3 million of outstanding Trust Preferred Securities and
approximately $208.3 million of stockholders' investment as of March 31, 1998.
The Company's indebtedness will have several important consequences for the
holders of Class A Common Stock, including but not limited to the following: (i)
a substantial portion of the Company's cash flow from operations must be
dedicated to debt service requirements (principal and interest) relating to its
indebtedness and will not be available for other purposes; (ii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, or for general corporate purposes may be
impaired; (iii) the Company's leverage may increase its vulnerability to
economic downturns and limit its ability to withstand competitive pressures;
(iv) the Company's ability to capitalize on significant business opportunities
may be limited; and (v) a portion of the Company's indebtedness will be subject
to fluctuations in interest rates. See "Capitalization."
The Company's ability to satisfy its debt obligations will depend on its
future operating performance, which will be affected by prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control. The Company believes, based on current
circumstances, that the Company's cash flow, together with available borrowings
under the Bank Credit Agreement will be sufficient to permit the Company to meet
its operating expenses and to service its debt requirements as they become due.
Significant assumptions underlie this belief, including, among other things,
that the Company will succeed in implementing its business strategy and there
will be no material adverse developments in the business, liquidity or capital
requirements of the Company. If the Company is unable to service its
indebtedness, it will be forced to adopt an alternative strategy that may
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness or seeking additional
equity capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. In addition, there can be no
assurance that the Company will not increase its leverage to meet capital
requirements in the future. See "Management's Discussion and Analysis of Results
of Operations and Financial Condition--Liquidity and Capital Resources."
RISKS ASSOCIATED WITH FOREIGN OPERATIONS
The Company has significant international operations, specifically in
Europe, Canada and Latin America and, therefore, the Company is subject to
various political, economic and other uncertainties.
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Among other risks, the Company's operations are subject to the risks of taxation
policies, foreign exchange restrictions, foreign trade policies and regulations,
changing political conditions and governmental regulations. In addition, the
Company generates a significant portion of its revenues in currencies other than
U.S. dollars. Fluctuations in the exchange rates of these currencies could have
an adverse effect on the Company's financial results. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Foreign Currency Transactions," and "Business--Properties."
LABOR ISSUES
Approximately 2,700 of the Company's employees are unionized (representing
approximately 34% of the Company's employees at March 31, 1998 on a pro forma
basis). No assurance can be given that the Company will not encounter strikes,
further unionization efforts or other types of conflicts with labor unions or
the Company's employees. Any of these factors may have an adverse effect on the
Company or may limit the Company's flexibility in dealing with its workforce. In
addition, many OEMs and their suppliers have unionized work forces. Work
stoppages or slow-downs experienced by OEMs or their suppliers could result in
slow-downs or closures of assembly plants where the Company's products are
included in assembled vehicles. In such an event, the Company's results of
operations could be materially adversely affected. See "Business--Employees."
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
or 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."
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."
TECHNOLOGICAL AND REGULATORY CHANGES
Changes in legislative, regulatory or industry requirements or competitive
technologies may render certain of the Company's products obsolete. The
Company's ability to anticipate changes in technology and regulatory standards
and to develop and introduce new and enhanced products successfully on a timely
basis will be a significant factor in the Company's ability to grow and to
remain competitive. There can be no assurance that the Company will be able to
achieve the technological advances that may be necessary for it to remain
competitive or that certain of its products will not become obsolete. The
Company is also subject to the risks generally associated with new product
introductions and applications, including lack of market acceptance, delays in
product development and failure of products to operate properly. See
"Business--Competition" and "--Design and Engineering Support."
IMPACT OF ENVIRONMENTAL REGULATION
The Company is subject to the requirements of Federal, state, local and
foreign 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
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make capital and other expenditures to comply with environmental regulations. 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 addressing environmental contamination matters at its Mancelona and
Kentwood, Michigan and Butler, Indiana facilities and at certain of its Canadian
facilities. See "Business--Environmental Matters."
CONTROL BY CERTAIN STOCKHOLDERS
Onex DHC LLC (together with its affiliates, "Onex"), Alkin and certain other
stockholders associated with the Company or Hidden Creek 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. After giving effect to the Offering, shares of Class B Common Stock owned
by such stockholders will represent 79.1% of the combined voting power of the
outstanding Common Stock. In addition, all of such 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, these stockholders are 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 and Selling
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 on the Class A Common Stock 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, Dura Operating Corp. The
payment of dividends by such subsidiary to the Company for the purpose of paying
dividends to holders of Class A Common Stock is limited by the terms of the Bank
Credit Agreement. 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 completion of the Offering, an
aggregate of 3.2 million shares of Class B Common Stock convertible into shares
of Class A Common Stock will be eligible for sale under Rule 144 under the
Securities Act and are subject to certain rights to register such shares under
the Securities Act at the Company's expense. In addition, an aggregate of 1.3
million shares of Class A Common Stock has been reserved for issuance upon
conversion of the Trust Preferred Securities. See "Principal and Selling
Stockholders."
POSSIBLE VOLATILITY OF STOCK PRICE
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, the outlook for the automotive industry as a whole 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
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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. See "Market Price of
Class A Common Stock."
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS
Certain provisions of the Restated Certificate and the By-laws 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 is also subject to the
protections of Section 203 of the Delaware General Corporation Law, which could
have similar effects. See "Description of Capital Stock."
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THE COMPANY
Dura Automotive Systems, Inc. is a holding company whose predecessor 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. ("Dura"), with the Brake
and Cable Business of Alkin.
Since August 1994, the Company has completed the following strategic
acquisitions and joint venture:
TRIDENT. In April 1998, a wholly owned subsidiary of the Company acquired
Trident, a leading international designer and manufacturer of automotive cables,
for approximately $87.5 million. Trident is also an established supplier of
lighting products and door handles for the North American automotive
industry. At the time of the Trident Acquisition, Trident had annual revenues of
approximately $300 million and a substantial share of the North American and
European automotive cable markets.
Trident's various operations and subsidiaries continue to be owned, directly
or indirectly, by Trident. The Bank Credit Agreement provides for separate
tranches of borrowings to be allocated to Trident, and Trident remains subject
to certain restrictions and obligations contained in the Indenture covering the
10% Senior Subordinated Notes due 2005 (the "Trident Notes") issued by Trident
in December 1997. Pursuant to the Indenture under which the Trident Notes were
issued (the "Trident Notes Indenture"), Dura initiated a change-of-control offer
on May 8, 1998 to repurchase all of the outstanding Trident Notes at a cash
price of 101% of their aggregate principal amount, plus accrued and unpaid
interest thereon. The change-of-control offer will expire on June 22, 1998. Any
Trident Notes tendered to Dura will be repurchased using borrowings under the
Bank Credit Agreement. The Company has not guaranteed and does not otherwise
have any obligations under the Trident Notes.
UNIVERSAL. In March 1998, the Company acquired Universal, a manufacturer of
jacks for the North American automotive industry, for approximately $18.0
million. Universal had 1997 revenues of approximately $37.0 million. Universal's
customers include General Motors, Ford and Honda. The acquisition provided the
Company with a market presence for jacks in North America and added Honda as a
significant new customer.
REOM. In December 1997, the Company acquired REOM, an Australian designer
and manufacturer of jacks and parking brakes, for approximately $3.7 million.
The acquisition added market penetration in parking brakes, added a new product
(jacks) and established a presence in the Pacific Rim.
THIXOTECH. In December 1997, the Company purchased approximately 19% of the
outstanding common stock of Thixotech Inc. ("Thixotech") for approximately $0.5
million. The Company also loaned Thixotech an additional $2.8 million pursuant
to notes which are convertible into additional common stock of Thixotech at the
Company's option. If exercised, the Company could own a majority of Thixotech.
Thixotech is currently pursuing the development of an alternative manufacturing
technology for component parts.
GT AUTOMOTIVE. In August 1997, the Company acquired GT Automotive for
approximately $45.0 million in cash and assumed indebtedness, plus contingent
payments. GT Automotive designs and manufactures column-mounted shifter systems
and turn signal and tilt lever assemblies for North American OEMs. At the time
of the acquisition, GT Automotive had a substantial share of the North American
column-based shifter market. The acquisition of GT Automotive, combined with the
Company's existing position in console-based shifter systems, increased the
Company's share of the North American shifter market to the leading position. In
addition, the acquisition added Nissan as a customer.
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EXCEL. In May 1997, the Company acquired the Excel Parking Brake Business
from Excel for approximately $2.9 million. The acquisition increased the
Company's penetration of the parking brake market and expanded the Company's
relationship with Chrysler.
VOFA. In January 1997, the Company acquired VOFA for approximately $38.0
million in cash and assumed indebtedness, plus contingent payments. VOFA designs
and 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 acquisition added new
customers, such as Mercedes, Volkswagen and BMW, provided a strong European
position and established the Company's cable manufacturing capabilities
globally.
KPI. In December 1996, the Company acquired KPI from Sparton Corporation
for approximately $78.8 million. KPI manufactures shifter systems, parking brake
mechanisms, brake pedals, and underbody tire carriers for the North American
automotive industry from facilities in Indiana and Michigan. The acquisition
added significant market penetration in console-based shifter systems, increased
platform content and added a significant new product line in underbody tire
carriers.
ROCKWELL PARKING BRAKE BUSINESS. In October 1996, the Company acquired the
Rockwell Parking Brake Business for approximately $3.8 million. The parking
brake business, which is operated from a facility in Cluses, France, added a
manufacturing presence in Europe and PSA (Peugeot and Citroen) and Renault as
customers.
POLLONE. In August 1996, the Company formed a joint venture with Excel to
participate equally in the acquisition of a 25.5% interest in Pollone S.A.
("Pollone"), a manufacturer of automotive components and mechanical assemblies
headquartered in Sao Paulo, Brazil, for $5 million in total. The joint venture
also loaned Pollone an additional $10.5 million pursuant to notes which are
convertible into equity of Pollone at the joint venture's option. In January
1998, the joint venture increased its interest in Pollone to 51.0% through the
conversion of certain of these notes. This investment provided the Company with
a manufacturing presence in Latin America.
In order to focus on its higher margin products, the Company sold its Window
Regulator Business to Rockwell in April 1995 for approximately $18.0 million in
cash, resulting in a pretax gain of $4.2 million.
The principal executive offices of the Company are located at 4508 IDS
Center, Minneapolis, Minnesota 55402, and its telephone number is (612)
342-2311.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
3,000,000 shares of Class A Common Stock offered by the Company hereby (at an
assumed public offering price of $38.125 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by the Company) are estimated to be $107.5 million ($131.5 million if the
Underwriters' over-allotment option is exercised in full). The Company expects
to use the net proceeds to repay indebtedness outstanding under the Bank Credit
Agreement.
The Company entered into a replacement agreement (the "Bank Credit
Agreement") to its existing bank credit agreement (the "Old Bank Credit
Agreement") in connection with the Trident Acquisition, borrowing an aggregate
of $283.6 million to repay indebtedness under the Old Bank Credit Agreement and
to fund the purchase price in the Trident Acquisition. Proceeds from the
Offering will be used to repay indebtedness incurred under the Bank Credit
Agreement in connection with the Trident Acquisition. The interest rates on the
Company's initial borrowings outstanding under the Bank Credit Agreement as of
April 30, 1998 ranged from 4.0% to 8.6%. The Bank Credit Agreement has a five
year term. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition--Liquidity and Capital Resources."
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The Company is continually evaluating possible acquisitions and engages in
discussions with acquisition candidates from time to time. The Company does not
currently have any pending acquisitions that are probable.
The Company will not receive any of the proceeds from the sale of Class A
Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."
MARKET PRICE OF CLASS A COMMON STOCK
The Company's Class A Common Stock is traded on Nasdaq under the symbol
"DRRA." The following table sets forth, for the periods indicated, the high and
low closing prices for the Class A Common Stock as regularly quoted on Nasdaq.
The Class A Common Stock commenced trading on August 14, 1996. Prior thereto,
there was no public market for the Class A Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
FISCAL YEAR 1996:
Third Quarter (commencing August 14, 1996).................... $ 19 3/4 $ 17
Fourth Quarter................................................ 27 3/4 18 3/4
FISCAL YEAR 1997:
First Quarter................................................. $ 27 $ 23 1/8
Second Quarter................................................ 28 3/4 22 1/2
Third Quarter................................................. 33 3/8 27
Fourth Quarter................................................ 35 3/8 23 7/8
FISCAL YEAR 1998:
First Quarter................................................. $ 32 1/2 $ 24 3/8
Second Quarter (through May 22, 1998)......................... 40 1/4 30 3/8
</TABLE>
On May 22, 1998, the last reported sale price of the Class A Common Stock on
Nasdaq was $38 1/8 . As of March 31, 1998, there were approximately 100 holders
of record of the Class A Common Stock and 18 holders of record of the Class B
Common Stock. The Company believes that there are significantly more beneficial
owners of its Class A Common Stock.
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Class A 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
principal operating subsidiary. 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's ability to pay cash dividends on its Class A
Common Stock is limited by the terms of its Bank Credit Agreement.
17
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1998: (i) the actual
consolidated capitalization of the Company, (ii) the consolidated capitalization
of the Company on a pro forma basis giving effect to the Trident Acquisition and
(iii) the pro forma as adjusted capitalization giving effect to the Trident
Acquisition and the Offering and the application of the net proceeds therefrom
(after deducting the underwriting discounts and commissions 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>
AS OF MARCH 31, 1998
-----------------------------------------
PRO FORMA
AS ADJUSTED
ACTUAL PRO FORMA (1) (2)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents............................................. $ 46,938 $ 11,415 $ 11,415
---------- ------------- --------------
---------- ------------- --------------
Debt, including current maturities:
Old Bank Credit Agreement........................................... $ 180,193 $ -- $ --
Bank Credit Agreement (3):
Dura revolving credit facility.................................... -- 133,255 73,255
Dura term loan.................................................... -- 50,000 50,000
Dura interim term loan............................................ -- 47,500 --
Trident revolving credit facility................................. -- 2,800 2,800
Trident term loan................................................. -- 50,000 50,000
Trident acquisition facility...................................... -- -- --
Trident Notes (4)................................................... -- 75,000 75,000
Other............................................................... 14,245 14,245 14,245
---------- ------------- --------------
Total debt........................................................ 194,438 372,800 265,300
---------- ------------- --------------
Trust Preferred Securities (5)........................................ 55,250 55,250 55,250
Stockholders' investment:
Preferred Stock, $1.00 par value per share; 5,000,000 shares
authorized; none issued or outstanding............................ -- -- --
Class A Common Stock, $0.01 par value per share; 30,000,000 shares
authorized; 4,175,095 shares on an actual and pro forma basis; and
8,588,095 shares on a pro forma as adjusted basis (6)............. 42 42 86
Class B Common Stock, $0.01 par value per share; 10,000,000 shares
authorized; 4,654,380 shares on an actual and pro forma basis; and
3,246,380 shares on a pro forma as adjusted basis (6)............. 46 46 32
Additional paid-in capital.......................................... 63,754 63,754 171,224
Retained earnings................................................... 45,604 41,104 41,104
Cumulative translation adjustment................................... (3,677) (3,677) (3,677)
---------- ------------- --------------
Total stockholders' investment.................................... 105,769 101,269 208,769
---------- ------------- --------------
Total capitalization............................................ $ 355,457 $ 529,319 $ 529,319
---------- ------------- --------------
---------- ------------- --------------
</TABLE>
- ------------------------
(1) Gives effect to the Trident Acquisition.
(2) As adjusted to give effect to the Offering, but assuming no exercise of the
Underwriters' over-allotment option. Proceeds are net of the underwriting
discounts and commissions and estimated expenses of the Offering.
18
<PAGE>
(3) The Company entered into the Bank Credit Agreement as a replacement to the
Old Bank Credit Agreement in connection with the Trident Acquisition,
borrowing an aggregate of $283.6 million to repay indebtedness under its Old
Bank Credit Agreement and to fund the purchase price in the Trident
Acquisition. Proceeds from the Offering will be used to repay indebtedness
incurred under the Bank Credit Agreement in connection with the Trident
Acquisition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
(4) Represents 10% Senior Subordinated Notes due 2005 issued by Trident in
December 1997. Pursuant to the Trident Notes Indenture, Dura initiated a
change-of-control offer on May 8, 1998 to repurchase all of the outstanding
Trident Notes at a cash price of 101% of their aggregate principal amount,
plus accrued and unpaid interest thereon. The change-of-control offer will
expire on June 22, 1998. Any Trident Notes tendered to Dura will be
repurchased using borrowings under the Bank Credit Agreement. The Company
has not guaranteed and does not otherwise have any obligations under the
Trident Notes.
(5) Represents the Trust Preferred Securities issued by Dura Trust in March
1998. The sole assets of the Dura Trust are approximately $56.9 million
principal amount of the Company's 7 1/2% Convertible Subordinated Debentures
due March 31, 2028 (the "Debentures"), such amount being the sum of the
stated liquidation preference of the Trust Preferred Securities and the
capital contributed by the Company in exchange for the common securities of
the Dura Trust. The Company has guaranteed, on a limited and subordinated
basis, certain obligations of Dura Trust under the Trust Preferred
Securities.
(6) Reflects the conversion of 1,408,000 shares of Class B Common Stock into
shares of Class A Common Stock in connection with the shares to be sold by
the Selling Stockholders in the Offering.
19
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The Unaudited Pro Forma Statement of Operations for the year ended December
31, 1997 gives effect to (i) the acquisitions of Trident, Universal and GT
Automotive, (ii) the March 1998 issuance of the Trust Preferred Securities and
(iii) the Offering and the application of the net proceeds to the Company as
described in "Use of Proceeds," as if such transactions had occurred on January
1, 1997. The results of operations of Trident represent Trident's results of
operations for its fiscal year ended March 31, 1998. The results of operations
of VOFA, which was acquired in January 1997, are already included in the
Company's results of operations for the year ended December 31, 1997. The
results of operations of the Excel Parking Brake Business prior to its
acquisition on May 5, 1997 and those of REOM prior to its acquisition on
December 12, 1997 have not been included in the Company's pro forma results of
operations for the year ended December 31, 1997 because such results are not
material to the Company's results of operations taken as a whole.
The Unaudited Pro Forma Statement of Operations for the three months ended
March 31, 1998 gives effect to (i) the acquisitions of Trident and Universal,
(ii) the March 1998 issuance of the Trust Preferred Securities and (iii) the
Offering and the application of the net proceeds to the Company as described in
"Use of Proceeds," as if such transactions had occurred on January 1, 1998. The
results of operations for GT Automotive are included in the Company's results of
operations for the three months ended March 31, 1998. The Unaudited Pro Forma
Statement of Operations for the three months ended March 31, 1998 excludes an
extraordinary loss of $4.5 million, net of income taxes, that will be recorded
by the Company during the second quarter of 1998 representing the write off of
deferred financing fees related to the Old Bank Credit Agreement and the Trident
debt.
The Unaudited Pro Forma Balance Sheet as of March 31, 1998 gives effect to
(i) the Trident Acquisition and (ii) the Offering and the application of the net
proceeds to the Company as described in "Use of Proceeds," as if such
transactions had occurred on such date. The historical balance sheet of the
Company as of March 31, 1998 already reflects the acquisitions of Universal and
GT Automotive and the issuance of the Trust Preferred Securities.
The unaudited pro forma financial data presented herein are based on the
assumptions and adjustments described in the accompanying notes. The Unaudited
Pro Forma Statements of Operations do not purport to represent what the
Company's results of operations actually would have been if the events described
above had occurred as of the dates indicated or what such results will be for
any future periods. The Unaudited Pro Forma Financial Statements are based upon
assumptions and adjustments that the Company believes are reasonable. The
Unaudited Pro Forma Financial Statements, and the accompanying notes, should be
read in conjunction with the historical financial statements, including the
notes thereto, included elsewhere or incorporated by reference in this
Prospectus.
The acquisitions of Trident, Universal and GT Automotive have been accounted
for using the purchase method of accounting and, accordingly, the assets
acquired and liabilities assumed have been recorded at their fair values as of
the dates of their respective acquisitions. These amounts have been recorded
based upon preliminary estimates as of such dates. Further adjustments to the
acquired assets and assumed liabilities will be reflected as a change in
goodwill.
20
<PAGE>
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------------
TRIDENT APRIL TRIDENT
1, 1997 DECEMBER 13,
THROUGH 1997 THROUGH
GT DECEMBER 12, MARCH 31, PRO FORMA
COMPANY (1) AUTOMOTIVE (2) UNIVERSAL (3) 1997 (4) 1998 (5) ADJUSTMENTS
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues........................ $ 449,111 $ 40,641 $ 40,664 $ 211,203 $ 86,342 $ --
Cost of sales................... 375,086 37,450 34,376 176,760 71,295 (4,848)(6)
------------- -------------- ------------- -------------- ------------- ------------
Gross profit.................... 74,025 3,191 6,288 34,443 15,047 4,848
Selling, general and
administrative expenses....... 32,815 2,850 1,345 23,881 8,343 (1,407)(7)
Amortization expense............ 3,600 280 -- -- 1,267 5,164(8)
------------- -------------- ------------- -------------- ------------- ------------
Operating income................ 37,610 61 4,943 10,562 5,437 1,091
Interest expense, net........... 9,298 1,693 -- 52 3,887 9,170(9)
Exchange loss................... -- -- -- 126 922 --
------------- -------------- ------------- -------------- ------------- ------------
Income (loss) before provision
for income taxes and minority
interest...................... 28,312 (1,632) 4,943 10,384 628 (8,079)
Provision for income taxes...... 11,670 (549) 1,977 4,799 505 (4,406)(10)
Minority interest............... -- -- -- -- -- 2,486(12)
------------- -------------- ------------- -------------- ------------- ------------
Net income (loss)............... $ 16,642 $ (1,083) $ 2,966 $ 5,585 $ 123 $ (6,159)
------------- -------------- ------------- -------------- ------------- ------------
------------- -------------- ------------- -------------- ------------- ------------
Basic earnings per share........ $ 1.89
-------------
-------------
Basic shares outstanding (13)... 8,808
-------------
-------------
Diluted earnings per share(13).. $ 1.88
-------------
-------------
Diluted shares outstanding(13).. 8,869 1,289
------------- ------------
------------- ------------
<CAPTION>
OFFERING PRO FORMA AS
ADJUSTMENTS ADJUSTED
<S> <C> <C>
Statement of Operations Data:
Revenues........................ $ -- $ 827,961
Cost of sales................... -- 690,119
------------ ------------
Gross profit.................... -- 137,842
Selling, general and
administrative expenses....... -- 67,827
Amortization expense............ -- 10,311
------------ ------------
Operating income................ -- 59,704
Interest expense, net........... (7,524) 11) 16,576
Exchange loss................... -- 1,048
------------ ------------
Income (loss) before provision
for income taxes and minority
interest...................... 7,524 42,080
Provision for income taxes...... 3,009 (11 17,005
Minority interest............... -- 2,486
------------ ------------
Net income (loss)............... $ 4,515 $ 22,589
------------ ------------
------------ ------------
Basic earnings per share........ $ 1.91
------------
------------
Basic shares outstanding (13)... 3,000 11,808
------------ ------------
------------ ------------
Diluted earnings per share(13).. $ 1.91
------------
------------
Diluted shares outstanding(13).. 3,000 13,158
------------ ------------
------------ ------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Statement of Operations.
21
<PAGE>
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------- PRO FORMA OFFERING PRO FORMA
COMPANY (1) UNIVERSAL (3) TRIDENT (5) ADJUSTMENTS ADJUSTMENTS AS ADJUSTED
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $ 125,746 $ 7,836 $ 78,080 $ -- $ -- $ 211,662
Cost of sales.................. 104,471 6,593 64,330 (1,190)(6) -- 174,204
------------ ------------ ----------- ----------- ----------- -----------
Gross profit................... 21,275 1,243 13,750 1,190 -- 37,458
Selling, general and
administrative expenses...... 9,160 318 7,551 -- -- 17,029
Amortization expense........... 1,251 -- 977 474(8) -- 2,702
------------ ------------ ----------- ----------- ----------- -----------
Operating income............... 10,864 925 5,222 716 -- 17,727
Interest expense, net.......... 2,938 -- 3,430 (500)(9) (1,881) 11) 3,987
Exchange loss.................. -- -- 840 -- -- 840
------------ ------------ ----------- ----------- ----------- -----------
Income before provision for
income taxes and minority
interest................... 7,926 925 952 1,216 1,881 12,900
Provision for income taxes..... 3,274 370 583 235 (10 752 (11 5,214
Minority interest.............. 76 -- -- 545 (12 -- 621
------------ ------------ ----------- ----------- ----------- -----------
Net income..................... $ 4,576 $ 555 $ 369 $ 436 $ 1,129 $ 7,065
------------ ------------ ----------- ----------- ----------- -----------
------------ ------------ ----------- ----------- ----------- -----------
Basic earnings per share....... $ 0.52 $ 0.60
------------ -----------
------------ -----------
Basic shares outstanding (13).. 8,826 3,000 11,826
------------ ----------- -----------
------------ ----------- -----------
Diluted earnings per
share (13)................... $ 0.52 $ 0.58
------------ -----------
------------ -----------
Diluted shares
outstanding (13)............. 9,012 1,131 3,000 13,143
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Statement of Operations.
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
(1) Represents the results of operations of the Company for the period
presented. For the year ended December 31, 1997 also includes the results of
operations of VOFA, the Excel Parking Brake Business, GT Automotive and REOM
from the dates of their respective acquisition. For the three months ended
March 31, 1998 also includes the results of operations of Universal from its
date of acquisition.
(2) For the year ended December 31, 1997, represents the results of operations
for GT Automotive from January 1, 1997 through the date of acquisition,
August 29, 1997. Operating income and EBITDA for this period include the
effect of non-recurring charges totaling $3.4 million, including $2.3
million associated with losses to be incurred on certain future contracts
and $1.1 million related to one-time increases in selected asset valuation
allowances and accrued liabilities. These charges reduced pro forma diluted
earnings per share by $0.15.
(3) For the year ended December 31, 1997, represents the results of operations
for Universal for such period. For the three months ended March 31, 1998,
represents the results of operations of Universal from January 1, 1998
through the date of acquisition, March 8, 1998.
(4) For the year ended December 31, 1997, represents the results of operations
from Trident's predecessor, the FKI Automotive Group (the "FKI Automotive
Group") of FKI plc (together with its subsidiaries, "FKI") for the period
from April 1, 1997 to December 12, 1997. Trident acquired substantially all
the assets and operations of FKI Automotive Group from FKI on December 12,
1997.
(5) For the year ended December 31, 1997, represents the results of operations
from Trident for the period from December 13, 1997 to March 31, 1998.
Trident was formed on September 19, 1997 and had no operations prior to the
acquisition of the FKI Automotive Group on December 12, 1997. For the three
months ended March 31, 1998, represents the results of operations of Trident
for the period from January 1, 1998 to March 31, 1998.
(6) Reflects the change in depreciation expense resulting from adjustments to
the depreciable lives of property, plant and equipment of Trident, Universal
and GT Automotive to their estimated useful lives at the time of their
acquisition and from adjustments to value such property, plant and equipment
at fair value as of the date of acquisition as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH
DECEMBER 31, 1997 31,1998
(IN THOUSANDS)
<S> <C> <C>
Adjustments:
Trident................................................. $ 4,627 $ 1,157
Universal............................................... 200 33
GT Automotive........................................... 21 --
------ ------
$ 4,848 $ 1,190
------ ------
------ ------
</TABLE>
(7) Reflects adjustments for the period from April 1 to December 12, 1997 to
eliminate the corporate charges to the FKI Automotive Group by FKI of $2.3
million, offset by management's estimate of ongoing corporate costs of $0.9
million.
(8) Represents the additional amortization of goodwill for the year ended
December 31, 1997 and the three months ended March 31, 1998 arising from the
acquisitions of Trident, Universal and GT
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
Automotive, net of amortization of goodwill previously recorded by Trident
and GT Automotive as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, 1997 1998
(IN THOUSANDS)
<S> <C> <C>
Amortization of Goodwill:
Trident................................................. $ 5,492 $ 1,373
Universal............................................... 469 78
GT Automotive........................................... 750 --
------ ------
6,711 1,451
------ ------
Amortization previously recorded by:
Trident................................................. (1,267) (977)
GT Automotive........................................... (280) --
------ ------
(1,547) (977)
------ ------
Net increase.......................................... $ 5,164 $ 474
------ ------
------ ------
</TABLE>
Goodwill is amortized on a straight-line basis over a forty-year period.
(9) Represents the change in interest expense for the year ended December 31,
1997 and the three months ended March 31, 1998 arising from indebtedness
incurred in connection with the acquisitions of Trident, Universal and GT
Automotive, net of the interest expense previously recorded by Trident and
GT Automotive, and net of the interest expense reduction arising from the
application of the net proceeds of the offering of the Trust Preferred
Securities, as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH
DECEMBER 31, 1997 31, 1998
(IN THOUSANDS)
<S> <C> <C>
Interest expense arising from the acquisitions of:
Trident................................................. $ 15,036 $ 3,759
Universal............................................... 1,300 217
GT Automotive........................................... 2,147 --
------- -------
18,483 3,976
------- -------
Interest expense previously recorded by:
Trident................................................. (3,939) (3,430)
GT Automotive........................................... (1,693) --
------- -------
(5,632) (3,430)
------- -------
Reduction in interest expense as a result of the
application of the proceeds from the offering of Trust
Preferred Securities.................................... (3,681) (1,046)
------- -------
Net increase (decrease)................................... $ 9,170 $ (500)
------- -------
------- -------
</TABLE>
(10) Adjusts the provision for income taxes on a pro forma basis to reflect the
Company's incremental tax rate of 40.5%.
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS (CONTINUED)
(11) Represents the reduction in interest expense which results from the
application of the net proceeds from the Offering at an assumed interest
rate of 7% on the repaid borrowings and the increase in the income tax
provision resulting from the reduction in interest expense. See "Use of
Proceeds."
(12) Represents dividends, net of income taxes, on the Trust Preferred
Securities.
(13) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A and Class B Common Stock
outstanding during the year. Diluted earnings per share include the dilutive
effects of outstanding stock options using the treasury stock method and
assumes the conversion of the Trust Preferred Securities into shares of
Class A Common Stock.
25
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------- PRO FORMA OFFERING PRO FORMA
COMPANY TRIDENT ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
----------- --------- ------------ --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 46,938 $ 11,415 $ (46,938)(1) $ 11,415 $ -- $ 11,415
Accounts receivable, net....................... 89,385 48,875 -- 138,260 -- 138,260
Inventories.................................... 32,404 18,798 -- 51,202 -- 51,202
Other current assets........................... 24,943 10,526 -- 35,469 -- 35,469
----------- --------- ------------ --------- ------------- -----------
Total current assets......................... 193,670 89,614 (46,938) 236,346 -- 236,346
Property, plant and equipment, net............... 106,224 64,873 -- 171,097 -- 171,097
Goodwill, net.................................... 177,459 88,945 (39,845)(3) 318,559 -- 318,559
92,000 (2)
Other assets..................................... 23,253 15,398 5,500 (1) 36,651 -- 36,651
(7,500)(4)
----------- --------- ------------ --------- ------------- -----------
$ 500,606 $ 258,830 $ 3,217 $ 762,653 $ -- $ 762,653
----------- --------- ------------ --------- ------------- -----------
----------- --------- ------------ --------- ------------- -----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term
debt......................................... $ 2,193 $ 1,500 $ (1,500)(1) $ 49,693 $ (47,500)(5) $ 2,193
47,500 (1)
Accounts payable............................... 45,153 37,018 -- 82,171 -- 82,171
Accrued expenses............................... 43,258 28,570 (3,000)(4) 68,828 -- 68,828
----------- --------- ------------ --------- ------------- -----------
Total current liabilities.................... 90,604 67,088 43,000 200,692 (47,500) 153,192
Long-term debt, net of current maturities........ 192,245 126,300 (231,493)(1) 323,107 (60,000)(5) 263,107
236,055 (1)
Other noncurrent liabilities..................... 56,738 24,427 -- 81,165 -- 81,165
Minority interests............................... -- 1,170 -- 1,170 -- 1,170
Redeemable ordinary shares....................... -- 740 (740)(3) -- -- --
Trust Preferred Securities....................... 55,250 -- -- 55,250 -- 55,250
----------- --------- ------------ --------- ------------- -----------
Stockholders' investment:
Preferred stock................................ -- -- -- -- -- --
Common Stock, Class A.......................... 42 -- -- 42 44 (5) 86
Common Stock, Class B.......................... 46 -- -- 46 (14)(5) 32
Sterling ordinary shares....................... -- 85 (85(3) -- -- --
U.S. dollar ordinary shares.................... -- 16,704 (16,704(3) -- -- --
Additional paid-in capital..................... 63,754 23,556 (23,556(3) 63,754 107,470(5) 171,224
Retained earnings.............................. 45,604 123 (123(3) 41,104 -- 41,104
(4,500(4)
Cumulative translation adjustment.............. (3,677 ) (1,363) 1,363(3) (3,677) -- (3,677 )
----------- --------- ------------ --------- ------------- -----------
Total stockholders' investment............... 105,769 39,105 (43,605 ) 101,269 107,500 208,769
----------- --------- ------------ --------- ------------- -----------
$ 500,606 $ 258,830 $ 3,217 $ 762,653 $ -- $ 762,653
----------- --------- ------------ --------- ------------- -----------
----------- --------- ------------ --------- ------------- -----------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Balance Sheet.
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS)
(1) To reflect the financing transactions related to the Trident Acquisition.
The Company financed the Trident Acquisition with cash on hand and
borrowings under the Bank Credit Agreement. The following is a summary of
the sources and uses of funds in connection with the Trident Acquisition:
<TABLE>
<CAPTION>
SOURCES:
<S> <C>
Dura revolving credit facility............ $ 133,255
Dura term loan............................ 50,000
Trident term loan......................... 50,000
Trident revolving credit facility......... 2,800
---------
Total long-term sources................. 236,055
---------
Dura interim term loan.................... 47,500
Dura cash on hand......................... 46,938
---------
Total sources........................... $ 330,493
---------
---------
<CAPTION>
USES:
<S> <C>
Purchase equity of Trident................ $ 87,500
Transaction costs......................... 4,500
---------
92,000
Financing fees............................ 5,500
---------
Total purchase price and transaction
costs................................... 97,500
---------
Retire Old Bank Credit Agreement.......... 180,193
Retire Trident long-term debt............. 51,300
---------
Total long-term debt retired............ 231,493
---------
Retire Trident current maturities of
long-term debt.......................... 1,500
---------
Total uses.............................. $ 330,493
---------
---------
</TABLE>
(2) To reflect the incremental goodwill recognized in connection with the
Trident Acquisition. The adjustment represents the purchase price of the
Trident equity of $87,500 plus transaction costs of $4,500. The goodwill
will be amortized on a straight-line basis over a forty-year period.
(3) To eliminate Trident's historical redeemable ordinary shares and
stockholders' equity.
(4) Represents the write off of deferred financing fees of $7,500 related to the
Old Bank Credit Agreement and the Trident debt, net of income tax benefits
of $3,000. The net loss of $4,500 on the write off of the deferred financing
fees will be recorded as an extraordinary loss by the Company during the
second quarter of 1998.
(5) To reflect the application of the net proceeds of the Offering to the
Company and to reflect the conversion of 1,408,000 shares of Class B Common
Stock into shares of Class A Common Stock in connection with shares to be
sold by the Selling Stockholders in the Offering.
27
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
THE COMPANY
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, 1993
through 1997 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 three months ended March 31, 1997 and
1998 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 three months ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the entire
year. The selected historical 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>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1993 1994 (1) 1995 (2) 1996 (3) 1997 (4) 1997 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................. $ 129,328 $ 189,675 $ 253,726 $ 245,329 $ 449,111 $ 107,367 $ 125,746
Cost of sales............................ 116,611 170,625 219,559 207,810 375,086 90,785 104,471
--------- --------- --------- --------- --------- --------- ---------
Gross profit........................... 12,717 19,050 34,167 37,519 74,025 16,582 21,275
Selling, general and administrative
expenses............................... 8,643 10,485 15,513 17,157 32,815 7,896 9,160
Amortization expense..................... 487 690 1,094 1,036 3,600 883 1,251
--------- --------- --------- --------- --------- --------- ---------
Operating income....................... 3,587 7,875 17,560 19,326 37,610 7,803 10,864
Interest expense, net.................... 1,533 3,473 4,822 2,589 9,298 1,896 2,938
Other income (2)......................... -- -- (4,240) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes............. 2,054 4,402 16,978 16,737 28,312 5,907 7,926
Provision for income taxes............... 936 1,822 6,852 6,609 11,670 2,363 3,274
Minority interest (5).................... -- -- -- -- -- -- 76
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 1,118 $ 2,580 $ 10,126 $ 10,128 $ 16,642 $ 3,544 $ 4,576
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic earnings per share (6)............. $ 0.41 $ 0.75 $ 2.04 $ 1.57 $ 1.89 $ 0.40 $ 0.52
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings per share (6)........... $ 0.41 $ 0.75 $ 2.03 $ 1.57 $ 1.88 $ 0.40 $ 0.52
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER DATA:
Depreciation and amortization............ $ 2,409 $ 3,725 $ 5,578 $ 6,079 $ 12,303 $ 2,905 $ 3,067
Capital expenditures, net................ 2,951 5,406 6,116 6,260 16,242 1,965 3,733
EBITDA (7)............................... 5,996 11,600 23,138 25,405 49,913 10,708 13,931
Net cash provided by (used in):
Operating activities................... 3,724 (6,156) 13,138 19,792 8,516 7,285 (2,142)
Investing activities................... (2,951) (46,878) 11,428 (95,093) (93,386) (20,575) (22,311)
Financing activities................... (787) 53,037 (22,851) 75,236 87,620 17,650 67,322
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital.......................... $ 3,287 $ 18,631 $ 13,701 $ 27,528 $ 50,304 $ 42,912 $ 103,066
Total assets............................. 52,823 166,133 140,531 246,129 419,264 304,548 500,606
Total debt............................... 16,792 70,112 46,639 77,376 178,081 115,202 194,438
Total stockholders' investment........... 4,369 17,418 27,683 87,367 101,708 91,043 105,769
</TABLE>
- ------------------------------
(1) In August 1994, the Company acquired the Brake and Cable Business of Alkin.
The results of operations of this acquired business have been included in
the consolidated financial statements of the Company from August 31, 1994,
the date of acquisition.
(2) In April 1995, the Company sold the net assets of its Window Regulator
Business to Rockwell, realizing a pretax gain of approximately $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.
28
<PAGE>
(3) Includes the results of operations of (i) the Rockwell Parking Brake
Business from October 1, 1996, and (ii) KPI from December 5, 1996, their
respective dates of acquisition. The Company issued an aggregate of
3,795,000 shares of its Class A Common Stock in August 1996 in connection
with the IPO.
(4) Includes the results of operations of (i) VOFA from January 1, 1997, (ii)
the Excel Parking Brake Business from May 5, 1997, (iii) GT Automotive from
August 29, 1997, and (iv) REOM from December 12, 1997, their respective
dates of acquisition.
(5) Represents dividends, net of income taxes, on the Trust Preferred
Securities.
(6) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A and Class B Common Stock
outstanding during the year. Diluted earnings per share include the dilutive
effects of outstanding stock options using the treasury stock method and the
Trust Preferred Securities. See Note 3 to Notes to Consolidated Financial
Statements.
(7) "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, and the Company's calculation thereof may not be comparable to
that reported by other companies. The Company believes that it is widely
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness. This belief is based on the
Company's negotiations with its lenders, who have required that the interest
payable under the Bank Credit Agreement be based, in part, on the Company's
ratio of consolidated funded indebtedness to EBITDA. EBITDA does not take
into account the Company's working capital requirements, debt service
requirements and other commitments and, accordingly, is not necessarily
indicative of amounts that may be available for discretionary use.
TRIDENT AND THE FKI AUTOMOTIVE GROUP
The following table sets forth selected consolidated financial data with
respect to Trident and the FKI Automotive Group for each of the respective
periods indicated. The selected historical financial data for each of the
periods ended March 31, 1995, 1996 and 1997 have been derived from, and should
be read in conjunction with, the consolidated financial statements included
elsewhere herein. The audited balance sheet data as of March 31, 1995 and 1996
and the operating data for the period ended March 31, 1995 are included herein
but are not presented as part of the consolidated financial statements. The data
presented as of and for the periods ended March 31, 1993 and 1994 are derived
from the unaudited consolidated financial statements and include, in the opinion
of management, all adjustments, consisting of normal recurring adjustments,
necessary to fairly present the data for such periods. The selected historical
consolidated financial data should be read in conjunction with the consolidated
financial statements included elsewhere herein.
<TABLE>
<CAPTION>
FKI AUTOMOTIVE GROUP (1)
------------------------------------------------------------------------ TRIDENT
-----------------
YEAR ENDED MARCH 31, APRIL 1 DECEMBER 13, 1997
----------------------------------------------------- TO TO
1993 1994 1995 1996 1997 DECEMBER 12, 1997 MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues....................... $ 245,600 $ 257,000 $ 297,139 $ 288,054 $ 297,884 $ 211,203 $ 86,342
Cost of sales.................. 226,562 216,452 247,586 239,034 246,810 176,760 71,295
--------- --------- --------- --------- --------- -------- -----------------
Gross profit................... 19,038 40,548 49,553 49,020 51,074 34,443 15,047
Operating income (loss)........ (3,276) 11,480 14,932 13,943 19,379 10,562 5,437
Net income (loss).............. $ (1,781) $ 5,495 $ 9,684 $ 8,201 $ 11,757 $ 5,585 $ 123
OTHER DATA:
Depreciation and
amortization................. $ 10,053 $ 10,332 $ 10,348 $ 10,657 $ 12,531 $ 8,834 $ 3,547
Capital expenditures, net...... 6,139 9,677 15,997 15,355 13,323 9,853 7,810
EBITDA (2)..................... 6,777 21,812 25,280 24,600 31,910 19,396 8,984
Net cash provided by (used in):
Operating activities......... $ 11,823 $ 11,549 $ 22,466 $ 16,119 $ 24,009 $ 5,332 $ 6,196
Investing activities......... (6,139) (9,677) (15,696) (15,204) (12,855) (9,636) (163,276)
Financing activities......... (5,684) (77) (6,488) (844) (11,498) 2,781 168,885
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................ $ 26,621 $ 27,636 $ 27,417 $ 27,805 $ 28,150 $ 32,368 $ 22,526
Total assets................... 118,446 131,731 145,048 148,284 145,589 141,338 258,830
Total debt..................... 599 581 -- -- -- -- 127,800
Total stockholders' equity..... 67,436 71,136 78,290 87,119 88,685 92,653 39,105
</TABLE>
- ------------------------------
(1) Trident acquired substantially all the assets and operations of the FKI
Automotive Group from FKI on December 12, 1997.
(2) "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, and the Company's calculation thereof may not be comparable to
that reported by other companies. The Company believes that it is widely
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness. EBITDA does not take into
account working capital requirements, debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary use.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
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 products, (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 as they are recovered from the customer. 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.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
-------------------------------------------------- ------------------------
PRO FORMA
1995 1996 1997 1997 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Revenues................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.............................. 86.5 84.7 83.5 83.4 84.6 83.1
----- ----- ----- ----- ----- -----
Gross profit............................. 13.5 15.3 16.5 16.6 15.4 16.9
Selling, general and administrative
expenses................................. 6.1 7.0 7.3 8.2 7.3 7.3
Amortization expense....................... 0.5 0.4 0.8 1.2 0.8 1.0
----- ----- ----- ----- ----- -----
Operating income......................... 6.9 7.9 8.4 7.2 7.3 8.6
Interest expense, net...................... 1.9 1.1 2.1 2.0 1.8 2.3
Other expense (income)..................... (1.7) -- -- 0.1 -- --
----- ----- ----- ----- ----- -----
Income before provision for income taxes
and minority interest.................. 6.7 6.8 6.3 5.1 5.5 6.3
Provision for income taxes................. 2.7 2.7 2.6 2.1 2.2 2.6
Minority interest.......................... -- -- -- 0.3 -- 0.1
----- ----- ----- ----- ----- -----
Net income............................... 4.0 % 4.1 % 3.7 % 2.7 % 3.3 % 3.6 %
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
<CAPTION>
PRO FORMA
1998
<S> <C>
Revenues................................... 100.0%
Cost of sales.............................. 82.3
-----
Gross profit............................. 17.7
Selling, general and administrative
expenses................................. 8.0
Amortization expense....................... 1.3
-----
Operating income......................... 8.4
Interest expense, net...................... 1.9
Other expense (income)..................... 0.4
-----
Income before provision for income taxes
and minority interest.................. 6.1
Provision for income taxes................. 2.5
Minority interest.......................... 0.3
-----
Net income............................... 3.3 %
-----
-----
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 TO THREE MONTHS ENDED MARCH 31,
1997
REVENUES. Revenues for the three months ended March 31, 1998 increased by
$18.3 million, or 17%, to $125.7 million from $107.4 million for the three
months ended March 31, 1997. The increase in revenues is primarily the result of
the acquisitions of GT Automotive in August 1997, REOM in December 1997 and
Universal in March 1998.
COST OF SALES. Cost of sales for the three months ended March 31, 1998
increased by $13.7 million, or 15%, to $104.5 million from $90.8 million for the
three months ended March 31, 1997. Cost of sales as a percentage of revenues for
the three months ended March 31, 1998 was 83.1% compared to 84.6% for the three
months ended March 31, 1997. The improvement in gross margins is the result of
improved profitability at the Company's floor shifter operations, which were
acquired in December 1996, due to integration cost savings.
30
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $9.2 million for the three months ended March 31,
1998 compared to $7.9 million for the three months ended March 31, 1997. The
increase was due to increased support for worldwide engineering and marketing
efforts partially offset by consolidation opportunities at KPI, VOFA and GT
Automotive. As a percentage of revenues, selling, general and administrative
expenses were 7.3% for each of the three month periods ended March 31, 1998 and
1997.
INTEREST EXPENSE. Interest expense for the three months ended March 31,
1998 was $2.9 million compared to $1.9 million for the three months ended March
31, 1997. The increase was due principally to borrowings incurred related to the
acquisitions of GT Automotive and Universal.
INCOME TAXES. The effective income tax rate was 41.3% for the three months
ended March 31, 1998 and 40.0% for the three months ended March 31, 1997. The
effective rates differed from the statutory rates as a result of higher foreign
tax rates and the effects of state taxes and non-deductible goodwill
amortization.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
REVENUES. Revenues for 1997 increased by $203.8 million, or 83.1%, to
$449.1 million from $245.3 million for 1996. Approximately $179.0 million of the
increase relates to the acquisitions of KPI in December 1996, VOFA in January
1997 and GT Automotive in August 1997. The remaining increase is due to
increased production on models served by the Company and new program awards.
COST OF SALES. Cost of sales for 1997 increased by $167.3 million, or
80.5%, to $375.1 million from $207.8 million for 1996. As a percentage of
revenues, cost of sales decreased to 83.5% for 1997 from 84.7% for 1996,
resulting in an improved gross margin of 16.5% from 15.3% in the preceding year.
The higher margins are a result of continued cost reduction efforts, including
manufacturing process improvements such as cellular manufacturing, mistake
proofing, improved capacity utilization through rationalization and
consolidation of facilities and the effects of material cost reductions achieved
through the centralization of purchasing efforts and the resulting greater
purchasing power.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $15.7 million, or 91.3%, to $32.8 million
for 1997 from $17.2 million for 1996. This increase is due to incremental costs
from the acquisitions of KPI, VOFA and GT Automotive, engineering costs related
to new business and costs associated with the greater involvement in the design,
engineering and prototyping of systems for customers. As a percentage of
revenues, selling, general and administrative expenses were 7.3% for 1997
compared to 7.0% for 1996.
INTEREST EXPENSE. Interest expense for 1997 increased by $6.7 million to
$9.3 million from $2.6 million for 1996. The increase was due principally to
borrowings incurred related to the acquisitions of KPI, VOFA and GT Automotive.
INCOME TAXES. The effective income tax rate for 1997 was 41.2% for 1997
compared to 39.5% for 1996. The effective rates differed from the statutory
rates primarily as a result of an increased proportion of the Company's earnings
being derived in higher tax rate jurisdictions, such as Germany and Canada,
state taxes and an increase in non-deductible goodwill amortization.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
REVENUES. Revenues for 1996 decreased by $8.4 million, or 3.3%, to $245.3
million from $253.7 million for 1995. The decrease was due to the divestiture of
the Window Regulator Business to Rockwell in April 1995, which represented a
decrease of approximately $14.1 million, and the effects of the 1996 General
Motors strikes, which adversely impacted the Company's operations by
approximately $4.5 million. These decreases were offset by incremental new
business, including the benefits of the Chrysler mini-van tailgate latch
replacement program and the effects of the December 1996 acquisition of KPI.
31
<PAGE>
COST OF SALES. Cost of sales for 1996 decreased by $11.8 million, or 5.4%,
to $207.8 million from $219.6 million in 1995. As a percentage of revenues, cost
of sales decreased to 84.7% for 1996 from 86.5% for 1995, resulting in an
improved gross margin of 15.3% from 13.5% in the preceding year. The improvement
in gross margin is a result of (i) the divestiture of the Window Regulator
Business, which had lower margins, (ii) the Company's cost reduction efforts,
which included the implementation of more flexible cellular manufacturing
methods, (iii) the closing of an under-utilized facility, and (iv) improved
margins on various replacement business as a result of the Company's advanced
engineering process.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $1.7 million, or 11.0%, to $17.2 million
for 1996 from $15.5 million for 1995. As a percentage of revenues, selling,
general and administrative expenses increased to 7.0% for 1996 from 6.1% for
1995, primarily as a result of the increased costs incurred in providing a
greater level of design and engineering services to customers and the increased
expenses related to the KPI acquisition.
INTEREST EXPENSE. Interest expense for 1996 decreased by $2.2 million, or
45.8%, to $2.6 million from $4.8 million for 1995. The decrease was primarily
due to the repayment of debt with the net proceeds from the sale of the Window
Regulator Business in April 1995 and the 1996 IPO.
INCOME TAXES. The effective income tax rate for 1996 was 39.5% compared to
40.4% for 1995. The effective rates were higher than Federal statutory rates
primarily as a result of state income taxes and nondeductible goodwill
amortization.
LIQUIDITY AND CAPITAL RESOURCES
On August 14, 1996, the Company completed the IPO 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 $50.0 million from such offering.
On March 20, 1998, Dura Trust issued the Trust Preferred Securities with an
aggregate liquidation preference amount of $55.3 million. The sole assets of the
Dura Trust are approximately $56.9 million principal amount of the Company's
Debentures, such amount being the sum of the stated liquidation preference of
the Trust Preferred Securities and the capital contributed by the Company in
exchange for the common securities of the Dura Trust. The Company has
guaranteed, on a limited and subordinated basis, certain obligations of Dura
Trust under the Trust Preferred Securities.
The Company's principal source of funds has been, and is anticipated to
continue to be, its cash flows from operations. During 1997, the Company
generated $30.5 million from operations, before the effects of changes in
working capital, compared to $19.5 million in 1996. The cash generated from
operations combined with borrowings under the Company's Bank Credit Agreement
were used to fund capital expenditures of $16.2 million, to provide working
capital and to finance the acquisitions of KPI, VOFA and GT Automotive.
The Company entered into the Bank Credit Agreement in connection with the
Trident Acquisition, borrowing an aggregate of $283.6 million to repay
indebtedness under the Old Bank Credit Agreement and to fund the purchase price
in the Trident Acquisition. Proceeds from the Offering will be used to repay
indebtedness incurred under the Bank Credit Agreement.
The Bank Credit Agreement provides for borrowings of up to $402.5 million,
consisting of (i) a revolving credit facility allocated to the Company's
principal operating subsidiary, Dura of $200.0 million (the "Dura Revolver"),
(ii) a term loan facility allocated to Dura of $50.0 million (the "Dura Term
Loan"), (iii) a twelve month interim credit facility of $47.5 million to be
repaid from the proceeds of an equity offering (the "Interim Facility"), (iv) a
revolving credit facility allocated to Trident of $25.0 million (the "Trident
Revolver"), (v) a term loan facility allocated to Trident of $50.0 million (the
"Trident Term Loan") and (vi) an acquisition facility allocated to Trident of
$30.0 million (the "Trident Acquisition Facility"). The Bank Credit Agreement
has a term of five years and the facilities bear interest at (i) the
32
<PAGE>
higher of the U.S. Federal Funds rate plus 0.5% or lender's reference rate or
(ii) at a Eurocurrency rate, plus a margin ranging from 0.0% to 2.5%, depending
on the Company's ratio of consolidated funded indebtedness to EBITDA.
The Bank Credit Agreement provides the Company with the ability to
denominate a portion of its borrowings in foreign currencies up to an amount
equal to $100.0 million. As of March 31, 1998 on a pro forma basis, the Company
had outstanding borrowings under the Bank Credit Agreement of approximately
$283.6 million (of which approximately $5.6 million were denominated in Canadian
dollars and approximately $3.8 million were denominated in Deutsche Marks). The
Bank Credit Agreement requires the Company to pay a facility fee on the
commitment amount ranging from 0.2% to 0.5%, depending on the Company's
consolidated ratio of total funded indebtedness to EBITDA, and contains various
restrictive covenants, which, among other things, require the Company to
maintain certain financial ratios, including minimum liquidity, interest
coverage and net worth. The Bank Credit Agreement contains customary events of
default, including cross defaults among the different facilities. The interest
rate on the Company's initial borrowings outstanding under the Bank Credit
Agreement as of April 30, 1998 ranged from 4.0% to 8.6%.
Borrowings under the Dura Revolver, the Dura Term Loan and the Interim
Facility are guaranteed by, and secured by substantially all the assets of, the
Company, Dura and, to the extent such guarantee or security does not result in
material adverse tax consequences and to the extent permitted by law, all of
Dura's material subsidiaries (other than Trident and its subsidiaries).
Borrowings under the Trident Revolver, the Trident Term Loan and the Trident
Acquisition Facility are, to the extent such guarantee or security does not
result in material adverse tax consequences and to the extent permitted by law,
guaranteed by, and secured by substantially all of the assets of, the Company,
Dura, Trident and their material subsidiaries.
In December 1997, Trident issued $75 million aggregate principal amount of
the Trident Notes. The Trident Notes bear interest, payable semiannually, at 10%
and become due in December 2005. Pursuant to the Trident Notes Indenture, Dura
initiated a change-of-control offer on May 8, 1998 to repurchase all of the
outstanding Trident Notes at a cash price of 101% of their aggregate principal
amount, plus accrued and unpaid interest thereon. The change-of-control offer
will expire on June 22, 1998. Any Trident Notes tendered to Dura will be
repurchased using borrowings under the Bank Credit Agreement. The Company has
not guaranteed and does not otherwise have any obligations under the Trident
Notes.
The Company estimates that it will fund approximately $27.0 million in
capital expenditures in 1998, including capital expenditures relating to
Trident. 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 over the next twelve months. 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
OEMs for model changeovers and vacations.
EFFECTS OF INFLATION
Inflation potentially affects the Company in two principal ways. First, a
portion of the Company's debt is tied to prevailing short-term interest rates
which may change as a result of inflation rates, translating into
33
<PAGE>
changes in interest expense. Second, general inflation can impact material
purchases, labor and other costs. In many cases, the Company has limited ability
to pass through inflation-related cost increases due to the competitive nature
of the markets that the Company serves. In the past few years, however,
inflation has not been a significant factor for the Company.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of the Company's revenues during the year ended
December 31, 1997 and the three months ended March 31, 1998 were derived from
manufacturing operations in Europe, Latin America and Canada. The results of
operations and the financial position of the Company's operations in these
countries are principally measured in their respective currency and translated
into U.S. dollars. The effects of foreign currency fluctuations in such
countries are somewhat mitigated by the fact that expenses are generally
incurred in the same currencies in which revenues are generated. The reported
income of these subsidiaries will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the respective foreign currency.
A significant portion of the Company's assets at March 31, 1998 are based in
its foreign operations and are translated into U.S. dollars at foreign currency
exchange rates in effect as of the end of each period, with the effect of such
translation reflected as a separate component of stockholders' investment.
Accordingly, the Company's consolidated stockholders' investment will fluctuate
depending upon the weakening or strengthening of the U.S. dollar against the
respective foreign currency.
The Company's strategy for management of currency risk relies primarily upon
conducting its operations in such countries' respective currency and the Company
may, from time to time, engage in hedging programs intended to reduce its
exposure to currency fluctuations.
YEAR 2000
The Company is in the process of replacing and upgrading its computer
systems, which, among other things, will accommodate the year 2000. The Company
currently expects its computer systems to be fully operational prior to the year
2000 so as not to adversely affect its operations. During 1998 and 1999, the
Company expects to incur costs of approximately $1.5 million and $2.5 million,
respectively, to make these replacements and upgrades, including costs relating
to Trident. Failure of the Company to make required modifications on a timely
basis or the inability of other companies with which the Company does business
to complete their year 2000 modifications on a timely basis, could adversely
affect the Company's operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires disclosure of business and geographic segments in the consolidated
financial statements of the Company. The Company will adopt SFAS No. 131 in 1998
and is currently analyzing the impact it will have on the disclosures in its
financial statements.
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits." This statement revises standards for
disclosures about pension and other postretirement benefit plans and is
effective for fiscal years beginning after December 15, 1997. This standard
expands or modifies disclosure and, accordingly, will have no impact on the
Company's reported financial position, results of operations and cash flows.
34
<PAGE>
BUSINESS
GENERAL
Dura Automotive Systems, Inc. is a leading designer and manufacturer of
driver control systems, cable-related systems and engineered mechanical
components for the global automotive industry. The Company's products include
parking brake systems, automotive cables, transmission shifter systems, latches,
underbody tire carriers, jacks, brake, clutch and accelerator pedals and other
mechanical assemblies. The Company sells its products to the major North
American, Japanese and European automotive OEMs. The Company has 38
manufacturing and product development facilities located in the United States,
Australia, Brazil, Canada, France, Germany, Mexico, Spain and the United Kingdom
and has strategic alliances in India and Japan. On April 30, 1998, the Company
acquired Trident, a leading international designer and manufacturer of
automotive cables, and an established supplier of lighting products and door
handles. The acquisition of Trident, with revenues of approximately $300 million
for its latest fiscal year, enhances the Company's position as the leading
supplier of driver control systems, broadens its product offerings and increases
its ability to supply customers on a global basis.
Since 1993, the Company's revenues have grown rapidly through a focused
strategy of internal growth and a highly disciplined acquisition program. During
the last four years, the Company has successfully completed nine acquisitions
and one joint venture. As a result of these acquisitions and internal growth,
the Company's revenues have increased from $129.3 million in 1993 to $828.0
million in 1997 on a pro forma basis, representing a compound annual growth rate
of approximately 59%. Over this same period, the Company's operating income
margin has improved from 2.8% of revenues to 7.2% of revenues.
The Company believes that it is the leading North American supplier of
parking brake mechanisms, transmission shifter mechanisms and automotive cables.
In addition, as a result of the Trident Acquisition, the Company believes that
it is a leading supplier of automotive cables in Europe. The Company is now one
of the few suppliers to offer integrated parking brake, shifter and latch
systems worldwide. These systems, which consist of mechanisms and cables,
require significant design and engineering expertise because they are critical
to the vehicle's reliability, performance and safety. The Company believes that
its customers value its ability to design, manufacture and assemble complete
systems.
The automotive components supply industry is undergoing significant
consolidation and globalization as OEMs continue to reduce their supplier base.
In order to lower costs and improve quality, OEMs are awarding sole-source
contracts to full-service suppliers who are able to supply larger portions of a
vehicle on a global basis. OEMs' criteria for supplier selection include not
only cost, quality and responsiveness, but also full-service design, engineering
and program management capabilities. OEMs are seeking suppliers capable of
providing complete systems rather than suppliers who only provide separate
component parts. In addition, OEMs are increasingly requiring their suppliers to
have the capability to design and manufacture their products in multiple
geographic markets. As a full-service supplier with strong OEM relationships,
the Company expects to continue to benefit from these trends.
On a pro forma basis, approximately 73% of the Company's 1997 revenues were
generated from sales to North American OEMs and Transplants with its major
customers being Ford, GM, Chrysler, Toyota, Honda and Nissan. The Company
manufactures products for many of the most popular car, light truck and sport
utility models, including all ten of the top ten selling vehicles in North
America for 1997: the Ford Taurus, Explorer, Ranger and F-Series pickups, GM
Cavalier and C/K pickup, Dodge Ram pickup, Honda Accord and Civic, and Toyota
Camry. As a result of recent acquisitions, approximately 12% of the Company's
1997 pro forma revenues were generated from sales to European OEMs, including
Volkswagen, Mercedes, PSA (Peugeot and Citroen), BMW and Renault. 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.
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<PAGE>
The Company's business objective is to capitalize on the trends in the
automotive supply industry in order to be the leading provider of driver control
systems, cable-related systems and engineered mechanical components to OEMs
worldwide. The Company's growth strategy focuses on the identification and
pursuit of (i) strategic acquisitions, (ii) systems opportunities, (iii)
increased customer and platform penetration, and (iv) increased penetration of
international markets, including "world car" opportunities.
The Company has broadened its acquisition scope from the original focus on
cable-driven controls to include other highly engineered automotive components.
As a result, the Company competes in what it believes to be a $6 billion, highly
fragmented market that provides numerous potential acquisition and joint venture
opportunities. The Company seeks acquisition and joint venture opportunities
that: (i) provide additional product, manufacturing and technical capabilities;
(ii) broaden the Company's geographic coverage and strengthen its ability to
supply products on a global basis; (iii) increase the number of models for which
the Company supplies products and increase the content supplied for existing
models; and (iv) add new customers.
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.
SUPPLIER CONSOLIDATION. During the 1990s, OEMs have continued 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 supplies a greater proportion of the total vehicle. These requirements
can best be met by suppliers with sufficient size, geographic scope and
financial resources to meet such demands. For full-service suppliers such as the
Company, this 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 generally 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, many
with relatively small market shares.
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.
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 multiple geographic markets.
36
<PAGE>
The Company has 17 manufacturing facilities located in Australia, Brazil,
Canada, France, Mexico, Germany, Spain and the United Kingdom. In addition, the
Company has formed, or is in the process of forming, strategic alliances with
other suppliers throughout the world. 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 five
technical centers located at its facilities in Europe and it 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 expand on its international
presence.
THE TRIDENT ACQUISITION
Trident is a leading international designer and manufacturer of automotive
cables. Trident's products include parking brake and transmission shifter
cables, clutch, accelerator and speed control cables, lighting products and door
handles. In its last fiscal year, approximately 71% of Trident's total revenues
were derived from cables and approximately 29% were derived from lighting
products, door handles and other products. The Company believes that, prior to
the Trident Acquisition, Trident was one of the largest manufacturers in several
markets in which the Company competes, including parking brake cables in North
America and manual transmission shift cables in Europe. The Trident Acquisition
adds 12 major design and manufacturing facilities located in the United States,
Brazil, Canada, France, Germany and the United Kingdom and a strategic alliance
in Japan. Trident's customers include the three major North American OEMs as
well as Honda, Volkswagen, PSA, Toyota, Renault, Nissan, Mercedes and BMW.
The Company believes that the Trident Acquisition provides several strategic
benefits, including the following:
INCREASED CUSTOMER PENETRATION. The Trident Acquisition significantly
expands the Company's penetration with the North American OEMs, making it the
largest supplier of driver control systems and cable-related systems to Ford, GM
and Chrysler. The Trident Acquisition more than doubles sales to Honda,
Volkswagen and PSA, substantially increases sales to BMW, Mercedes and Renault
and adds new customers such as Fiat and Porsche.
EXPANDED PRODUCT OFFERINGS AND MODULAR OPPORTUNITIES. The Trident
Acquisition significantly expands the Company's offerings in automotive cables.
Trident's expertise in cables, combined with the Company's expertise in
mechanisms, will enhance the Company's ability to supply complete systems to
Trident's current customers.
EXPANDED GLOBAL CAPABILITIES. OEMs increasingly demand that their suppliers
have global production capabilities. Trident's cable manufacturing facilities in
Brazil, Canada, France, Germany and the United Kingdom further enhance the
Company strategic geographic position and its ability to service both
international and North American OEMs. The Trident Acquisition doubles the
Company's sales generated outside of North America.
OPERATIONAL EFFICIENCIES. The Trident Acquisition provides the Company with
a number of opportunities to reduce costs and improve operational efficiencies.
For example, the Company's and Trident's facilities are geographically located
in such a way as to allow the Company to optimize its manufacturing, technical
and administrative efforts. The increased size of the Company may also improve
the Company's ability to negotiate more favorable terms on its purchasing and
supply contracts, as well as achieve other operational cost savings.
STRONG POSITION TO CAPITALIZE ON EUROPEAN CABLE TRENDS. The Trident
Acquisition enhances the Company's ability to benefit from the movement by OEM's
in Europe to replace linked rods in manual transmissions with cables. Management
estimates that approximately 90% of all automobiles sold in
37
<PAGE>
Europe have manual transmissions, of which only 20% utilize manual transmission
shifter cable assemblies. The shift from rods to cables is expected to increase
due to the benefits of using cable assemblies, including (i) greater design
flexibility, (ii) enhanced performance, (iii) increased durability and (iv)
lower weight. As a result of Trident's strong European market share and
established manufacturing presence, the Company believes it is well positioned
to meet this demand.
STRATEGY
The Company's business objective is to capitalize on the consolidation,
globalization and system/ modular sourcing trends in the automotive supply
industry in order to be the leading provider of driver control systems, cables
and engineered mechanical components to OEMs worldwide. Key elements of the
Company's operating and growth strategies are outlined below:
OPERATING STRATEGY
FULL-SERVICE DESIGN AND ENGINEERING CAPABILITIES. The Company has
maintained a technological advantage through its investment in product
development and advanced engineering. 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. The Company
continues to implement strategic initiatives 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. Manufacturing
flexibility enables the Company's facilities to produce modules and systems in a
cost-effective manner and strengthens the Company's ability to meet the
just-in-time and in-line sequence delivery schedules of many of its customers.
In addition, the Company utilizes the Dura Operating System, which is a common
set of key metrics used in all facilities, to measure actual performance in
comparison to standards and goals.
STRONG CUSTOMER RELATIONSHIPS. The Company has developed strong customer
relationships with over 20 OEMs based on its long history of high-quality
manufacturing and full system customer support. Significant investment in design
and engineering capabilities drive new product development, lower costs and
provide the capabilities necessary to produce complete systems. Access to and
relationships with OEMs' engineering and purchasing personnel allow the Company
to identify business opportunities and react to customer needs in the early
stages of vehicle design and give it a competitive advantage in securing new
business.
DECENTRALIZED, PARTICIPATORY CULTURE. The Company's decentralized approach
to managing its manufacturing facilities encourages decision making and employee
participation in areas such as manufacturing processes and customer service.
This "team" approach enhances communication of strategic direction and goals
while facilitating a greater success rate in reaching and exceeding its
objectives and fosters a unified culture. The Company provides equity incentives
to managers and salaried and hourly employees through grants under the Company's
stock option plan and participation in the employee stock purchase plan.
GROWTH STRATEGY
STRATEGIC ACQUISITIONS. Since August 1994, the Company has successfully
completed nine strategic acquisitions and one joint venture. The Company seeks
to make acquisitions that: (i) provide additional product, manufacturing and
technical capabilities; (ii) broaden the Company's geographic coverage and
strengthen its ability to supply products on a global basis; (iii) increase the
number of models for which the Company supplies products and increase the
content level on existing models; and (iv) add new customers.
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<PAGE>
The Company competes in what it believes to be a $6 billion, highly fragmented
market that provides numerous potential acquisition and joint venture
opportunities.
FOCUS ON HIGHER VALUE-ADDED SYSTEMS. OEMs continue to seek suppliers
capable of manufacturing complete systems for a vehicle rather than suppliers
that produce only the component parts which comprise a system. Systems
manufacturing offers OEMs the opportunity for significant cost savings and
improved product quality and consistency. By capitalizing on the Company's
existing product portfolio and through the combination of multifunctional
mechanical and cable products, the Company intends to continue to expand its
capabilities to provide additional integrated systems.
INCREASE PLATFORM AND CUSTOMER PENETRATION. The Company's strategy is to
increase volume by adding new customers and to strengthen existing customer
relationships by broadening its range of products through internal development
efforts and acquisitions. During 1997, the Company established important new
customer relationships with Mercedes, Volkswagen and BMW through the acquisition
of VOFA. While maintaining its strong relationships with Ford and GM, the
Company has also successfully increased its participation in the supply of its
other customers' model lines. For example, during 1991, the Company participated
in only a limited number of Toyota's production models. By 1997, the Company had
established a supply relationship that covers a full range of Toyota vehicles,
including two models manufactured in Japan. The Company has also increased the
sales content on popular vehicle platforms such as Ford's Taurus/Sable and
Escort, Chrysler's mini-van and Grand Cherokee, Dodge Ram and Dakota pickups, by
providing additional products which were developed by the Company or added to
its product line through acquisition.
EXPAND PENETRATION OF INTERNATIONAL MARKETS. In 1997, over 70% of total
worldwide passenger vehicle production occurred outside North America. To meet
OEMs' increasing preference for suppliers with global capabilities, the Company
has expanded its manufacturing operations into new geographic markets through
strategic acquisitions and a joint venture. Consistent with this strategy, the
Company believes that the VOFA (Germany and Spain), Rockwell Parking Brake
Business (France), REOM (Australia) and Trident (United Kingdom, France, Brazil,
Germany) acquisitions as well as the Pollone (Brazil) joint venture will expand
its ability to serve its customers globally. The Company believes that increased
international sales will allow the Company to mitigate the effects of cyclical
downturns in a given geographic region and further diversify the Company's OEM
customer base. In addition, the Company believes that its increased
international presence will provide a competitive advantage in the pursuit of
certain "world car" supply opportunities.
PRODUCTS
The Company's product offerings include: automotive cables (such as parking
brake, shifter, throttle, oil level, hood release, and fuel door); parking brake
mechanisms (foot and hand operated); transmission shifter mechanisms (manual and
automatic console-based and column-mounted); latches (primary, secondary, and
combination hood, deck lid and tail gate); and other engineered mechanical
components (such as underbody tire carriers, jacks, brake, clutch and
accelerator pedals, and turn signal and tilt lever assemblies). The Company also
designs and manufactures cables for the industrial, marine, defense and
aerospace markets. The Company manufactures lighting products and door handles.
The Company believes that it is a leading North American supplier of parking
brake mechanisms, transmission shifter mechanisms and automotive cables. In
addition, as a result of the Trident Acquisition, the Company believes that it
is a leading supplier of automotive cables in Europe. The Company offers
individual components as well as integrated parking brake, shifter and latch
systems, which consist of mechanisms and cables.
39
<PAGE>
The following table sets forth the approximate composition by product
category of the Company's revenues for the last three fiscal years and for 1997
on a pro forma basis:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
PRO FORMA
PRODUCT CATEGORY 1995 1996 1997 1997
<S> <C> <C> <C> <C>
Automotive cables................................... 29% 39% 44% 48%
Parking brake mechanisms............................ 57 39 26 14
Transmission shifter mechanisms..................... 3 4 13 14
Jacks............................................... -- -- -- 5
Automotive lighting products........................ -- -- -- 4
Latches............................................. 9 12 5 2
Other body hardware................................. 2 6 12 13
--- --- --- ---
Total........................................... 100% 100% 100% 100%
--- --- --- ---
--- --- --- ---
</TABLE>
CUSTOMERS AND MARKETING
The North American automotive market is dominated by Ford, GM and Chrysler,
with Japanese and foreign manufacturers accounting for approximately 20% of the
market. In North America, the Company supplies its products primarily to Ford,
GM, Chrysler, Toyota and Honda. As a result of recent acquisitions, the Company
added Mercedes, Volkswagen, BMW, Renault and PSA as new customers in 1997.
The following is a summary of the Company's customers that accounted for a
significant portion of consolidated revenues in the last three fiscal years and
for 1997 on a pro forma basis:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
PRO FORMA
CUSTOMER 1995 1996 1997 1997
<S> <C> <C> <C> <C>
Ford................................................ 52% 49% 42% 31%
GM.................................................. 35 36 25 23
Chrysler............................................ 6 8 7 12
Volkswagen.......................................... -- -- 4 5
Toyota.............................................. 5 5 4 4
Mercedes............................................ -- -- 4 2
BMW................................................. -- -- 3 2
Honda............................................... -- -- -- 2
PSA (Peugeot and Citroen)........................... -- -- -- 2
Renault............................................. -- -- -- 1
Nissan.............................................. -- -- -- 1
Other............................................... 2 2 11 15
--- --- --- ---
Total........................................... 100% 100% 100% 100%
--- --- --- ---
--- --- --- ---
</TABLE>
The Company's customers award contracts for a particular car platform, which
may include more than one car model. Such contracts range from one year to the
life of the models, 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 in North America and Europe.
Although not comprehensive,
40
<PAGE>
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:
<TABLE>
<CAPTION>
CUSTOMER CAR MODELS* TRUCK AND VAN MODELS*
<S> <C> <C>
Ford.................. Continental/Town Car, Aerostar, AUTOEUROPA MPV,
Contour/ Mystique/MONDEO, Bronco, Econoline, ESCORT
Cougar, Thunderbird, Crown VAN, Expedition/Navigator,
Victoria/ Grand Marquis, F-Series,
Escort/Tracer, FIESTA, Navajo/Explorer/Mountaineer,
Mark/Mark VIII, Mazda 626, PAMPA, Ranger, TRANSIT,
Mustang, Ka, Taurus/Sable Villager, Windstar
GM.................... Achieva/Grand Am, ASTRA, Blazer/Jimmy/Bravada, C/K
Aurora/Riviera/Park Avenue, Pickup/Tahoe/Sierra/Yukon,
Beretta, Century, Concours, Silhouette/TransSport/Venture,
CORSA, Corvette, CORSA PICKUP, D-20, D-40,
Deville/Seville/ Eldorado, D-60, Express, P-Truck
Firebird/Camaro, KADETT, Chassis, Postal, S-10
Lumina/Monte Carlo/ Pickup/Sonoma, Safari/ Astro,
Regal/Intrigue, Savana, Silhouette/
Malibu/Cutlass/ Grand Prix, TransSport/Venture,
Olds 88/Bonneville/ LeSabre, Silverado, Suburban, UPS
Omega, Saturn, Innovate,
Skylark, Sunfire/ Cavalier,
VECTRA
Chrysler.............. Breeze, Cirrus, Intrepid/ Caravan/Voyager/Town &
Concorde/LHS/300M, Neon, Country, Cherokee/Grand
Prowler, Sebring JX Viper, Cherokee, Dakota/Durango,
Stratus EUROSTAR, Grand Wagoneer,
RamVan & Pickup, Wrangler
Toyota................ Avalon, Camry, Carina, Sienna, Toyota Pickup
COROLLA, LEXUS, PRIZM, SOLARA
Mercedes.............. A, C, E, M AND S CLASS, L-608 D, L709E, LS 1935, SKN,
CABRIO SPRINTER
Volkswagen/Audi....... A4, A8, GOL, GOLF, LUPO, BUS, KOMBI, SAVEIRO,
PARATI, PASSAT, POLO, TRANSPORTER
QUANTUM, SANTANA, SUB-POLO
BMW................... 3, 5, 7 AND 8 SERIES --
Citroen............... EVASION, SAXO, XSARA, XANTIA, BERLINGO, JUMPER
XM, ZX
Fiat S.P.A............ ULYSSE --
Honda................. Accord, Acura, Civic --
Nissan................ MICRA, PRIMERA --
Peugeot............... 106, 306, 406, 605, 806 EXPERT, PARTNER
Porsche AG............ 968, 986, 996 --
Renault............... CLIO, ESPACE, LAGUNA, MEGANE, KANGOO, MASTER
SAFRANE, TWINGO
Rover Group Limited... METRO, ROVER 800 --
SEAT, S.A............. AROSA, CORDOBA, IBIZA, TOLEDO --
</TABLE>
- ------------------------
* Models manufactured outside of North America are italicized.
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<PAGE>
Most of the parts the Company produces have a lead time of two to five years
from product development to production. Although not comprehensive, the
following table presents an overview of the major models for which the Company
has been awarded new business (i.e., parts not currently supplied by the
Company):
<TABLE>
<CAPTION>
MODEL YEAR MODEL*
<S> <C>
1999.......... GM CORSA parking brake and door cables
GM Innovate shifter system
GM Lumina/Monte Carlo/Regal/Intrigue jack
GM C/K pickup hood latch
Chrysler Grand Cherokee parking brake system and shifter and hood
release cables
PEUGEOT T1 parking brake
Cami Sidekick shifter
BMW E53 hood and door cables
2000.......... GM Impala/Monte Carlo shifter
GM Deville hood latch
GM Bonneville/LeSabre/Antares hood latch
PEUGEOT Z8 parking brake
FORD TRANSIT parking brake system
Toyota Avalon 900T accelerator pedal
2001.......... Ford Explorer shifter
Ford Lincoln LS seat release cable, parking brake and hood latch
systems
Ford U204 SUV window latch and hood release cable
Toyota 887T SUV accelerator pedal
</TABLE>
- ------------------------
* Models manufactured outside of North America are italicized.
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
efficient product development from program conception through product launch.
The advanced technology development group focuses on enhancing product and
process technology.
The Company has nine Technical Centers, four in Michigan, two in Germany,
one in the United Kingdom and two in France. 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, including many features which were developed in
conjunction with the Company's customers. The Company utilizes Computer Aided
Design ("CAD") in the design process, which enables the Company to share data
files with its customers via compatible systems during the design stage, thereby
improving function, fit and performance within the total vehicle. The Company
also utilizes CAD links with its manufacturing engineers to enhance
manufacturability and quality of the designs early in the development process.
The Company has more than 360 patents granted or in the application process.
The patents granted expire over several years beginning in June 1998. 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.
42
<PAGE>
MANUFACTURING
The Company uses a number of different manufacturing processes. The Company
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 product output
consistent with its customers' requirements and reduce the level of inventory.
In addition, the Company utilizes high volume production lines for final
assembly of its automotive lighting and door handle products.
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 hot or cold forging machines, plastic injection
molding, 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, a process which 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, which range 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 up
to 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.
Headlamps and tail lamp housings are manufactured through injection molding
of a variety of resins on molding machines of various sizes and types. The
interior of the housings are then coated and at times vacuum metalized to obtain
the proper reflective qualities. Lenses are added to the housings on a semi-
automated production line. Handles are either molded on-site from various resins
or die cast at a separate third-party location. Certain of the components are
then passed through a nine-stage washer system, painted a variety of body colors
and finally cured. The handles are then assembled and tested on a highly
automated production line.
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 in 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
43
<PAGE>
advanced capabilities have helped to further reduce scrap rates, ensure superior
product quality and increase efficiency.
The automotive industry has adopted a quality rating system known as
QS-9000, a rigorous inspection of a supplier's facilities and operating systems
performed by independent certified auditors. Certification and on-going
maintenance of certification is mandatory for future supply consideration. The
Company has received QS-9000 certification at all of its facilities, except the
facilities associated with the Rockwell Parking Brake Business, which is
scheduled for certification in 1998, the Kentwood facility and the Blytheville
facility.
The Company's plants have been recognized by its customers with various
awards, such as the Chrysler Gold Pentastar Award, GM Target for Excellence,
Nummi Delivery Performance Award, Isuzu Quality Achievement Award, and Calsonic
Supplier of the Year Award. The Company has also received an "A" rating at
Peugeot and Renault. The Company has received Ford Q-1 certification at all
facilities shipping current model Ford products.
COMPETITION
The Company principally competes for new business 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 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. 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's primary competitors in mechanisms are
Adwest Incorporated, Scharwaechter GmbH & Co., Teleflex Incorporated
("Teleflex"), Ficosa International, S.A., Ventra Group, Inc., and Aries
Industries. The Company's primary competitors in cables are Teleflex
Incorporated, Ficosa International, S.A. and Nippon Cable System Inc.
SUPPLIERS AND RAW MATERIALS
The principal raw materials used by the Company include (i) coil steel and
resin in mechanism production, (ii) metal wire and resin in cable production,
(iii) resins and lighting components in automotive lighting production and (iv)
resins, paints and die cast zinc components in door handle production. 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 and production of shifter
components, as well as its automotive lighting and door handle products. 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.
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 may "spot buy" steel from
service centers to meet customer demand, engineering changes or new part tool
trials.
44
<PAGE>
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 March 31, 1998, on a pro forma basis, the Company had approximately
7,850 employees, approximately 1,600 of whom are salaried and the balance of
whom are paid on an hourly basis.
Approximately 2,700 employees located at the Company's facilities are
currently covered by collective bargaining agreements as follows:
<TABLE>
<CAPTION>
LOCATION COLLECTIVE BARGAINING AGREEMENT EXPIRATION
<S> <C> <C>
Australia......... Australian Metals Workers No term
Canada............ CAW December 1998; June 1999;
September 1999
Germany........... IG-Metall December 1998
Confederacion de Trabajadores de Annually
Mexico............ Mexico
Spain............. Comisiones Oberera December 1999
United States..... UAW December 2000
</TABLE>
In addition, the Company's employees in Brazil and the United Kingdom are
covered by collective bargaining agreements, both of which have recently
expired. The Company is currently negotiating new collective bargaining
agreements at these locations.
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.
PROPERTIES
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 Company's Bank Credit Agreement.
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
<S> <C> <C> <C>
Kentwood, Michigan...................... 750,000 Leased Manufacturing
Stratford, Ontario, Canada (1).......... 250,000 Owned Manufacturing
Barcelona, Spain........................ 179,000 Owned Manufacturing
Mancelona, Michigan..................... 167,000 Owned Manufacturing
Moberly, Missouri....................... 165,000 Owned Manufacturing
Butler, Indiana......................... 162,000 Owned Manufacturing
Fremont, Michigan....................... 160,000 Owned Manufacturing
Daun, Germany........................... 140,000 Owned Manufacturing
East Jordan, Michigan................... 135,000 Owned Manufacturing
Gehren, Germany......................... 129,000 Owned Manufacturing
Le Mans, France......................... 120,000 Leased Manufacturing
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
<S> <C> <C> <C>
Dusseldorf, Germany..................... 113,000 Leased Manufacturing/Product
Development
Sao Paulo, Brazil....................... 108,000 Leased Manufacturing
Stourport-on-Severn, United Kingdom..... 100,000 Owned Manufacturing
Blytheville, Arkansas................... 100,000 Owned Manufacturing
Spring Lake, Michigan................... 95,000 Owned Manufacturing
White Cloud, Michigan (2)............... 94,000 Leased Manufacturing
Hannibal, Missouri (South).............. 90,000 Owned Manufacturing
Stourport-on-Severn, United Kingdom..... 85,000 Owned Manufacturing
Windsor, Ontario, Canada (2 84,000 Owned Manufacturing
locations)..............................
Livonia, Michigan....................... 84,000 Owned Manufacturing
Milan, Tennessee........................ 78,000 Owned Manufacturing
Melbourne, Australia.................... 77,500 Leased Manufacturing
Milan, Tennessee........................ 74,000 Owned Manufacturing
Hartford City, Indiana.................. 70,000 Owned Manufacturing
Brownstown, Indiana..................... 68,000 Owned Manufacturing
Brantford, Ontario, Canada.............. 66,000 Owned Manufacturing
Rochester Hills, Michigan............... 65,000 Leased Product Development/
Operating Headquarters
Hannibal, Missouri (North).............. 64,000 Owned Manufacturing
Gladwin, Michigan....................... 60,000 Owned Manufacturing
Brookfield, Missouri.................... 51,000 Owned Manufacturing
Aumenau, Germany........................ 49,000 Owned Manufacturing
Grand Haven, Michigan (2)............... 48,000 Leased Product Development
Matamoros, Mexico....................... 42,000 Owned Manufacturing
Warren, Michigan (2).................... 40,000 Leased Manufacturing
Wixom, Michigan......................... 20,000 Leased Trident North American
Sales, Engineering
Center and Executive
Offices
Evry, France............................ 12,000 Leased Sales and Engineering
Cluses, France.......................... 10,000 Leased Manufacturing
Vaux le Penil, France................... 9,000 Leased Manufacturing
Lechlade, United Kingdom................ 7,700 Owned Warehouse
Minneapolis, Minnesota.................. 5,700 Leased Corporate Headquarters
</TABLE>
- ------------------------
(1) The facility consists of approximately 100,000 square feet occupied by the
Company for its production facilities, approximately 65,400 square feet
leased to unaffiliated third parties and approximately 84,600 square feet of
space available for use by the Company which is currently used for
warehousing or storage or is vacant.
(2) Manufacturing at these facilities will be consolidated into the Fremont,
Michigan facility in 1998.
46
<PAGE>
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.
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 pickups to repair the self-adjust parking brakes originally
manufactured by the Brake and Cable Business. 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 Mondeo in Europe. The Company has agreed to pay 50% of the
costs of that recall not to exceed $1.0 million, which payments totaled $0.4
million as of December 31, 1997.
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 were brought
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. The claims that purport to
seek recovery for personal injury allegedly as a result of the recall condition,
with several exceptions, have generally involved relatively minor injuries,
suffered principally while occupants were trying to stop or jump out of rolling
vehicles. 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. As of December 31, 1997, Ford had tendered its defense of 25 such
claims to the Company and Alkin, and indicated that it would look to the Company
and Alkin for indemnification were Ford ultimately found to be liable and
required to make any payments relating to such claims. The Company and Alkin
have submitted these claims to their insurance carriers. The Company has
attempted to work with Ford to address the claims arising from the self-adjust
parking brakes originally manufactured by the Brake and Cable Business 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. Chrysler has notified the Company that as many
as 60,000 vehicles may be affected. The Company is working with Chrysler to
resolve this matter and does not believe the ultimate cost of resolution will
have a material effect on the Company's results of operations and financial
position. In addition, Chrysler has alleged that KPI produced mini-van brake
pedals with improper pedal pad reinforcements, resulting in some failures as a
consequence of pedal pads bending. It is possible that Chrysler could seek
contribution from the Company for costs it incurs if recalls were undertaken for
these or similar matters or for costs associated with possible repairs.
47
<PAGE>
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 was referred to the
Company's insurance carrier. Chrysler 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.
The plaintiffs have not made such an allegation and the Company was dismissed
from the claim. A second claim was served on the Company in February 1998
containing similar allegations. Chrysler has agreed to provide similar defense
and indemnification with respect to such claim.
In early November 1996, the Company was served with a lawsuit brought by
affiliates of AIG, the Company's excess insurance carrier, in Toronto, Canada
seeking a declaratory judgment that the umbrella and excess liability policies
that it had issued to Onex do not provide coverage in connection with allegedly
defective self-adjust parking brakes manufactured by Alkin prior to August 31,
1994. The AIG policies at issue provided (a) the first layer of excess coverage
(beyond the Company's $3 million primary policy per year) for claims arising
from August 31, 1994 to April 1, 1996 in the amount of $20 million per year, and
(b) an additional layer of excess coverage at $33 to $53 million per year. In
principal part, the AIG affiliates claim that the policies do not provide
coverage with respect to products manufactured prior to August 31, 1994 or
liabilities assumed by the Company pursuant to purchase agreements. The AIG
affiliates also claim that the policies should be voided with respect to
self-adjust parking brake claims for inadequate disclosure at the time the
policies were applied for. The Company and Onex dispute the allegations of the
Ontario lawsuit and have filed a counterclaim against the AIG affiliates for
breach of contract.
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.
In February 1998, the Company was contacted by an attorney for the Lemelson
Medical, Education & Research Foundation Limited Partnership (the "Foundation"),
alleging that the Company's operations implicate the fields of machine vision,
gauging, location analysis, flaw detection, verification and recognition in a
manner that allegedly infringes the Foundation's patents. Attorneys for the
Foundation have threatened to initiate litigation against the Company unless the
Company agrees to pay royalty fees pursuant to a negotiated license agreement.
The Company's investigation of this matter is still in its preliminary stages.
The Company has received notice from an attorney representing Teleflex
alleging that a shifter cable manufactured by VOFA infringes a U.S. patent held
by Teleflex. The Company is currently in the process of investigating this
matter and believes, based on the information available at this time, that this
matter will not have a material adverse effect on the Company.
ENVIRONMENTAL MATTERS
DURA AUTOMOTIVE
The Company is subject to the requirements of Federal, state, local and
foreign 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 1998 and 1999. 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.
48
<PAGE>
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 an adjacent property retained by Wickes.
Wickes and the Company jointly completed the requested investigation in January
of 1996. In 1997, Wickes and the Company undertook additional investigatory work
requested by MDEQ. The investigation found varying levels of trichlorethylene at
levels above acceptable drinking water levels in wells located off the Company's
premises. While the source of the contamination has yet to be identified, the
Company immediately assumed the lead to establish acceptable sources of drinking
water for residents. The Company expanded its investigatory work to delineate
the extent of the contamination. Additional work plans and test results have
been reported to the MDEQ. Depending upon the results of this work, the Company
may incur additional costs to further investigate, monitor or remediate the
contamination, or to provide additional alternative drinking water supplies.
In 1993, the Company received requests for information pursuant to CERCLA
from the U.S. Environmental Protection Agency ("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 ceased operations prior to
the formation of the Company in 1990. In October 1996, the Company received
notice that a motion had been filed to add the Company as a defendant in a suit
by the City of Toledo involving one of the sites. As of August 22, 1997, the
Company has received no word of the disposition of the motion, the time period
for services has expired and the Company has received no indication that the
plaintiff intends to pursue a claim against it. The City alleges that the
Company is liable as the successor-in-interest to Dura Corporation. The Company
has written to the City denying that the Company is a successor and urging that
the claim against the Company be dropped. The Company has been advised that it
will not be added to the suit.
In connection with the Company's acquisition of certain assets from Wickes
in 1990, and subject to a $750,000 threshold (which has been reached) up to a
$2.5 million cap, 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 paragraphs) 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
or that such costs will not exceed the indemnification cap. The Company does not
currently believe that any liability associated with the foregoing matters will
have a material adverse effect on the Company.
In December 1996, the Company acquired the stock of KPI from Sparton
Corporation ("Sparton"). In connection with the acquisition, the subsidiaries of
Sparton retained their liability under CERCLA with respect to certain waste
disposal sites, subject to indemnification by Sparton for liability in excess of
a $1 million aggregate threshold amount, up to a $15 million aggregate cap. Of
these sites, the sites as to which the subsidiaries' liability has not yet been
resolved through a settlement are the Third Site in Zionsville, Indiana and the
Northeast Gravel Site in Grand Rapids, Michigan. Based upon estimates provided
by Sparton, the cost to resolve the liability of the acquired subsidiaries at
the Sparton-related sites is not currently expected to be material to the
Company.
In January 1997, the Company acquired the stock of VOFA. The sellers agreed
to indemnify the Company for environmental liabilities arising from the
operation of the acquired facilities prior to the acquisition up to a $10
million aggregate cap. The sellers gave notice to the Company of potential
environmental liabilities at the Dusseldorf facility that, subject to the
limitations set forth in the agreement, should be covered by the
indemnification. There can be no assurance, however, that all costs associated
with such matters will ultimately be reimbursed by the sellers. The Company does
not currently believe that any liability associated with the foregoing matters
will be material to the Company.
49
<PAGE>
In August 1997, the Company acquired GT Automotive. In connection with the
acquisition, a clean up report was commissioned to determine whether hazardous
materials or hazardous substances were present in the soil, surface water or
ground water at the Brantford and Windsor, Ontario facilities. The Company
believes that the cost of any environmental remediation with respect to this
matter will not be material to the Company.
In March 1998, the Company acquired Universal. Universal is in the process
of addressing certain environmental concerns, including the remediation of
trichlorethylene contamination at or near its Butler, Indiana facility. The
sellers in the Universal acquisition have agreed to indemnify the Company for
environmental liabilities arising from the operation of the acquired facilities
prior to the acquisition of Universal, including the present remediation
efforts. There can be no assurance, however, that all costs associated with such
matters will ultimately be reimbursed by the sellers in the Universal
acquisition. The Company does not currently believe that any liability
associated with such matters will be material to the Company.
TRIDENT
In connection with the acquisition of Trident from FKI (the "FKI
Acquisition"), Phase I environmental assessments were performed at Trident's
major facilities. The Phase I environmental assessments performed at the
Kentwood, Michigan facility leased by Trident from FKI, indicated that this
facility has chromium contamination of soil and groundwater, that is believed to
have resulted from leakage from plastic plating operations in the 1970s. FKI has
been performing remediation of chromium contamination in site groundwater under
the supervision of the MDEQ and is proposing to install an expanded and upgraded
groundwater containment system at the Kentwood facility. Remedial activities
associated with the chromium contamination have been ongoing for approximately
15 years, and it is anticipated that such activities will continue in the near
future.
Under the terms of the Kentwood lease, FKI will be responsible for capital
expenditures for certain agreed improvements to the groundwater containment
system and Trident will pay the annual costs of operating and monitoring that
system. In addition, the Kentwood lease provides that FKI will be solely
responsible for the costs of remediation for any contamination by all hazardous
substances that FKI caused. Trident, in turn, will be solely responsible for the
costs of remediation for any contamination by all hazardous substances that it
causes subsequent to the FKI Acquisition. However, if it cannot be determined
whether FKI or Trident caused such contamination, Trident and FKI will jointly
share such remediation costs as follows: (i) during the first five years of the
Kentwood lease, Trident will pay 20% of such costs and (ii) such percentage will
increase to 38% in the sixth year, 41% in the seventh year, 44% in the eighth
year, 47% in the ninth year and 50% in the tenth and any subsequent year of the
Kentwood lease. The Kentwood lease provides that Trident's remediation
responsibility for such joint remedial efforts will be capped at $3.0 million
for the first seven and one-half years and $5.0 million for the balance of the
lease term. FKI will indemnify Trident for such joint remediation costs in
excess of these caps.
With the exception of the Kentwood facility, the Phase I environmental
assessments conducted in connection with the FKI Acquisition did not reveal
environmental matters involving actual or potential liabilities that Trident
believes are reasonably likely to be material to the Company. Under the terms of
the FKI Acquisition agreement, in addition to the indemnification and other
provisions contained in the Kentwood lease, FKI has agreed to indemnify Trident
for any liabilities related to pre-closing disposal of hazardous materials at
certain identified off-site locations by the Kentwood facility and for certain
potential environmental liabilities at the Stratford, Ontario, Canada facility.
50
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Directors and executive officers of the Company as of May 26, 1998:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION(S)
<S> <C> <C>
S. A. (Tony) Johnson....... 57 Chairman and Director
J. Richard Jones........... 55 Vice Chairman and Director
President, Chief Executive Officer and
Karl F. Storrie............ 60 Director
David R. Bovee............. 48 Vice President
Joe A. Bubenzer............ 46 Senior Vice President
Stephen E. K. Graham....... 40 Vice President and Chief Financial Officer
Robert R. Hibbs............ 35 Vice President and Director
John J. Knappenberger...... 51 Vice President
Milton D. Kniss............ 50 Vice President
Scott D. Rued.............. 41 Vice President
Robert E. Brooker, Jr...... 60 Director
W. H. Clement.............. 70 Director
Jack K. Edwards............ 53 Director
John C. Jorgensen.......... 60 Director
James L. O'Loughlin........ 52 Director
Robert J. Orscheln......... 45 Director
William L. (Barry)
Orscheln................. 47 Director
Eric J. Rosen.............. 37 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.
J. RICHARD JONES has served as Vice Chairman and a Director of the Company
since May 1998. Prior to the Trident Acquisition, Mr. Jones served as Group
President and Chief Executive Officer of Trident's predecessor from June 1992
until December 1997 and as Chairman, Chief Executive Officer and Director of
Trident from December 1997 until April 1998. From 1988 to June 1992, he served
as President and Chief Operating Officer of the Process Automation Group of FKI
(formerly known as the Process Control Group of FKI). In 1990, while serving in
such capacity, he assumed the responsibility for the reorganization of the FKI
Automotive Group. Prior thereto, Mr. Jones was Division President of Bristol
Babcock, Inc., a process control company involved in the design and manufacture
of telemetry equipment for
51
<PAGE>
the gas and water industry, and held a variety of positions in engineering,
vehicular systems and operational management for the Varity Corporation.
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 of the Company since November
1990 and Chief Financial Officer of the Company from November 1990 to May 1997.
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 had responsibility for European operations since June
1997. From October 1993 to May 1997, Mr. Bubenzer served as Vice President
Sales/Engineering and was named Senior Vice President in 1995. Prior to joining
the Company in October 1993, 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.
STEPHEN E. K. GRAHAM has served as Vice President and Chief Financial
Officer since joining the Company in June 1997. From 1996 to May 1997, Mr.
Graham was Chief Financial Officer of Cambridge Industries, Inc., a North
American supplier of components to the automotive industry. From 1994 to 1996,
Mr. Graham was Chief Financial Officer of Truck Components, Inc., a supplier of
components to the automotive and heavy truck industry. From 1989 to 1994, Mr.
Graham held several positions with Magna International, Inc., an automotive
components supplier.
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 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.
JOHN J. KNAPPENBERGER has served as Vice President of Quality and Materials
of the Company since December 1995. Mr. Knappenberger assumed the responsibility
for sales and engineering in June 1997. 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.
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
52
<PAGE>
director of The Rottlund Company, Inc., a corporation engaged in the development
and sale of residential real estate.
ROBERT E. BROOKER, JR. has served as a Director of the Company since
September 1996. From 1993 to 1995, Mr. Brooker was President and Chief Operating
Officer of Connell Limited Partnership. Prior thereto, Mr. Brooker served six
years as President and Chief Executive Officer at Lord Corporation. Mr. Brooker
is also a director of Full Circle Investments, a private investment company.
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.
JACK K. EDWARDS has served as a Director of the Company since December 1996.
Mr. Edwards joined Cummins Engine Co., Inc. in 1972 and has served as Executive
Vice President and Group President-- Power Generation and International since
March 1996. Mr. Edwards is also a director of David J. Joseph Co., a processor
and trader of steel scrap.
JOHN C. JORGENSEN has served as a Director of the Company since May 1998.
Mr. Jorgensen has served as President of Ortech Co. since March 1992, Senior
Vice President of Manufacturing for Orscheln Management Co. since April 1996 and
Executive Vice President of Orscheln Products L.L.C. since March 1992. Prior to
1992, Mr. Jorgensen was responsible for the operations at Orscheln Co.
Manufacturing.
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.
ROBERT J. ORSCHELN has served as a Director of the Company since May 1998.
Mr. Orscheln has served as President of Orbseal Holding Co. since its founding
in 1983. During the past two years, the holding company was reorganized and Mr.
Orscheln also became President of Orbseal L.L.C., Orbseal-Australia L.L.C.,
Orbseal-Europe I L.L.C. and DeNovus L.L.C.
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 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.
The Company currently has twelve Directors. 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 except that Messrs. Robert and Barry Orscheln are
brothers.
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 "Principal and Selling Stockholders--Stockholders
Agreement."
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<PAGE>
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 Barry 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. Clement, Brooker and Edwards, 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 Class A Common Stock of the Company. The Audit Committee is
currently composed of Messrs. Hibbs, O'Loughlin and Rosen. 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.
54
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information regarding the equity
ownership of the Company as of May 26, 1998 by (i) each person or entity known
to the Company who beneficially owns five percent or more of a class of 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 Securities Exchange Act of 1934, as amended
(the "Exchange Act").
<TABLE>
<CAPTION>
PRIOR TO THE OFFERING NUMBER AFTER THE OFFERING
---------------------------------- OF ----------------------------------
NUMBER NUMBER PERCENT CLASS A NUMBER NUMBER PERCENT
OF OF OF SHARES OF OF OF
DIRECTORS, OFFICERS AND 5% CLASS A CLASS B VOTING OFFERED CLASS A CLASS B VOTING
STOCKHOLDERS SHARES SHARES POWER HEREBY SHARES SHARES POWER
<S> <C> <C> <C> <C> <C> <C> <C>
Onex DHC LLC (1)(2)................... -- 2,501,990 49.3% 500,000 -- 1,893,990 46.1%
Alkin Co. (2)(3)...................... -- 2,166,810 42.7 800,000 -- 1,366,810 33.3
J2R Corporation (2)(4)................ -- 408,211 8.1 100,000 -- 308,211 7.5
S. A. Johnson (2)(4).................. -- 417,879 8.2 100,000 -- 317,879 7.7
Karl F. Storrie (2)(5)................ 44,400 115,531 2.4 5,000 39,400 115,531 2.9
David R. Bovee (2).................... 2,500 31,308 * -- 2,500 31,308 *
Joe A. Bubenzer (2)................... 3,900 35,814 * 8,000 3,900 27,814 *
Stephen E. K. Graham.................. -- -- -- -- -- -- --
Robert R. Hibbs (2)(6)................ -- 416,160 8.2 100,000 -- 316,160 7.7
John J. Knappenberger................. 30,959 -- * -- 30,959 -- *
Milton D. Kniss (2)................... 2,550 8,961 * -- 2,550 8,961 *
Robert E. Brooker, Jr................. 22,500 -- * -- 22,500 -- *
W. H. Clement (2)..................... 2,000 -- * -- 2,000 -- *
Jack K. Edwards....................... 2,500 -- * -- 2,500 -- *
John C. Jorgenson (2)(3).............. -- 2,166,810 42.7 800,000 -- 1,366,810 33.3
James L. O'Loughlin (2)(3)............ -- 2,166,810 42.7 800,000 -- 1,366,810 33.3
Robert J. Orscheln (2)(3)............. -- 2,166,810 42.7 800,000 -- 1,366,810 33.3
William L. Orscheln (2)(3)............ -- 2,166,810 42.7 800,000 -- 1,366,810 33.3
Eric J. Rosen (1)(2).................. 5,000 2,501,990 49.3 500,000 5,000 1,893,990 46.1
Scott D. Rued (2)(7).................. -- 412,109 8.1 100,000 -- 312,109 7.6
American Express Company (8).......... 695,000 -- 1.4 -- 695,000 -- 1.7
Dresdner RCM Global Investors LLC
(9)................................. 396,500 -- * -- 396,500 -- *
The TCW Group, Inc. (10).............. 366,000 -- * -- 366,000 -- *
State of Wisconsin Investment Board
(11)................................ 237,000 -- * -- 237,000 -- *
Frontier Capital Management Company,
Inc. (12)........................... 216,700 -- * -- 216,700 -- *
The Northwestern Mutual Life Insurance
Company (13)........................ 206,900 -- * -- 206,900 -- *
All Directors and Officers as a group
(18 persons)........................ 116,309 4,583,063 90.6 1,413,000 111,309 3,175,063 77.6
</TABLE>
- ------------------------
* Less than one percent.
(1) Reflects shares of Class B Common Stock held by Onex DHC LLC prior to the
Offering, which has shared voting power over 2,501,990 shares of Class B
Common Stock (see footnote (2)) and sole
55
<PAGE>
dispositive power over 1,794,913 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 Class B 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, Kniss, 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 Class B 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 has voting control of approximately 49.3%
of the Common Stock. All of the holders of the Company's Class B Common
Stock, including Alkin, have entered into an agreement providing for the
election of the Board. As a result, such stockholders collectively have
voting control over 91.8% of the Common Stock. Following the completion of
the Offering, such stockholders will retain approximately 79.1% of the
voting power.
(3) Includes 14,420 shares issuable upon the exercise of currently exercisable
options issued to Alkin in connection with the Company's acquisition of the
Brake and Cable Business from Alkin. Alkin has granted Mr. O'Loughlin
options to acquire 13,218 shares of the Class B Common Stock owned by Alkin.
Messrs. Jorgenson, O'Loughlin and Robert and William Orscheln are officers
of Alkin and, other than Messrs. Robert and William Orscheln, each disclaims
beneficial ownership of the shares owned by Alkin other than the shares
subject to 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 408,211 shares owned by J2R, of which Mr. Johnson is President, and
9,668 shares owned by Mr. Johnson. Mr. Johnson disclaims beneficial
ownership of the shares owned by J2R in which he does not have a pecuniary
interest. The 100,000 shares listed as being offered by such stockholder are
being sold by J2R. The address for Mr. Johnson and J2R is c/o Dura
Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota 55402.
(5) Includes 1,400 shares owned by Mr. Storrie's wife. Mr. Storrie disclaims
beneficial ownership of such shares.
(6) Includes 408,211 shares owned by J2R, of which Mr. Hibbs is a stockholder,
and 7,949 shares owned by Mr. Hibbs. Mr. Hibbs disclaims beneficial
ownership of the shares owned by J2R in which he does not have a pecuniary
interest. The 100,000 shares listed as being offered by such stockholder are
being sold by J2R. The address for Mr. Hibbs is c/o Dura Automotive Systems,
Inc., 4508 IDS Center, Minneapolis, Minnesota 55402.
(7) Includes 408,211 shares owned by J2R, of which Mr. Rued is a stockholder,
and 3,898 shares owned by Mr. Rued. Mr. Rued disclaims beneficial ownership
of the shares owned by J2R in which he does not have a pecuniary interest.
The 100,000 shares listed as being offered by such stockholder are being
sold by J2R. The address for Mr. Rued is c/o Dura Automotive Systems, Inc.,
4508 IDS Center, Minneapolis, Minnesota 55402.
(8) American Express Company ("AEC") and American Express Financial Corporation
("AEFC") each reported as of December 31, 1997 shared dispositive power with
respect to 695,000 shares of Class A Common Stock, representing 16.7% of the
outstanding shares of Class A Common Stock. IDS Discovery Fund Inc. reported
as of December 31, 1997 shared dispositive power with respect to 475,000
shares of Class A Common Stock, representing 11.4% of the outstanding shares
of Class A Common Stock. The address for AEC is American Express Tower, 200
Vesey Street, New York, New York
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<PAGE>
10285 and the address for AEFC and IDS Discovery Fund Inc. is IDS Tower 10,
Minneapolis, Minnesota 55440.
(9) Dresdner RCM Global Investors LLC, RCM Limited L.P. and RCM General
Corporation each reported as of December 31, 1997 sole voting power with
respect to 354,600 shares of Class A Common Stock and sole dispositive power
with respect to 396,500 shares of Class A Common Stock, representing 8.5%
and 9.5%, respectively, of the outstanding shares of Class A Common Stock.
The address for these entities is Four Embarcadero Center, Suite 2900, San
Francisco, California 94111.
(10) The TCW Group, Inc. ("TCW") and Robert Day each reported as of December 31,
1997 sole voting and dispositive power with respect to 366,000 shares of
Class A Common Stock, representing 7.2% of the outstanding shares of Class A
Common Stock. The address for TCW is 865 South Figueroa Street, Los Angeles,
California 90017 and the address for Robert Day is 200 Park Avenue, Suite
2200, New York, New York 10166.
(11) State of Wisconsin Investment Board ("SWIB") reported as of December 31,
1997 sole voting and dispositive power with respect to 237,000 shares of
Class A Common Stock, representing 5.7% of the outstanding shares of Class A
Common Stock. The address for SWIB is P.O. Box 7842, Madison, Wisconsin
53707.
(12) As of December 31, 1997, represents 5.2% of the outstanding shares of Class
A Common Stock. The address for Frontier Capital Management Company, Inc. is
99 Summer Street, Boston, Massachusetts 02110.
(13) The Northwestern Mutual Life Insurance Company ("NWMI") reported as of
December 31, 1997 shared voting and dispositive power with respect to
206,900 shares of Class A Common Stock, representing 5.0% of the outstanding
shares of Class A Common Stock. The address for NWMI is 720 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202. NWMI indirectly owns a majority of the
outstanding capital stock of Robert W. Baird & Co. Incorporated.
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"). The
Stockholders Agreement requires 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.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The total amount of authorized capital stock of the Company consists 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"). As of
March 31, 1998, 4,175,095 shares of Class A Common Stock, 4,654,380 shares of
Class B Common Stock and no shares of Preferred Stock were issued and
outstanding. 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.
The Restated Certificate and By-laws 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
All of the outstanding shares of Class A Common Stock are, and the shares of
Class A Common Stock to be issued by the Company in connection with the Offering
will be, 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 are 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 are
not convertible and the holders thereof 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 are 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 is 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 vote
together on all matters submitted to a vote of the stockholders, including the
election of Directors.
The Class A Common Stock is traded on Nasdaq under the symbol "DRRA."
CLASS B COMMON STOCK
The issued and outstanding shares of Class B Common Stock generally 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 is
entitled to ten votes on all matters submitted to a vote of stockholders, as
compared to one vote for each share of Class A Common Stock. Class B Common
Stock is 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 Class A Common Stock, into Class A
Common Stock on a share-for-share basis. The Class B Common Stock is not
registered under the Securities Act and is not listed for trading on any
national securities exchange or on Nasdaq.
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,
58
<PAGE>
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 Class A 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 Class A 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 Class A
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 provides 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 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 are
not permitted to call a special meeting or to require the Board to call a
special meeting.
The By-laws 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 do 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 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
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 Class A 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--Control by Certain Stockholders."
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<PAGE>
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is 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 limits the liability of Directors to the fullest
extent permitted by the Delaware General Corporation Law. In addition, the
Restated Certificate provides that the Company shall indemnify Directors and
officers of the Company to the fullest extent permitted by such law. The Company
has entered into indemnification agreements with its current Directors and
executive officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A Common Stock is Firstar
Trust Company.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company, Dura, the Selling Stockholders and the Underwriters named below (the
"Underwriting Agreement"), Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Robert W. Baird & Co. Incorporated, PaineWebber Incorporated and Piper
Jaffray Inc. (together, the "Underwriters") have severally agreed to purchase
from the Company and the Selling Stockholders the respective number of shares of
Class A Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
UNDERWRITER CLASS A COMMON STOCK
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation....................
Robert W. Baird & Co. Incorporated.....................................
PaineWebber Incorporated...............................................
Piper Jaffray Inc......................................................
----------
Total.............................................................. 4,413,000
----------
----------
</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 Company has been advised 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 public offering, the public offering price and other selling terms may
be changed by the Underwriters. 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 661,950
additional shares of Class A Common Stock at the price to the public 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.
The Company, its Directors and executive officers and the Selling
Stockholders have agreed with the Underwriters not to offer, sell, contract to
sell, grant any other option to purchase or otherwise dispose of any shares of
the Class A Common Stock or any securities convertible into or exercisable for,
or warrants, rights or options to acquire, shares of Class A Common Stock for a
period of 90 days without the prior written consent of DLJ, other than sales of
Class A Common Stock under the Underwriting Agreement,
61
<PAGE>
the issuance of shares of Class A Common Stock upon the exercise of outstanding
options and certain transfers to affiliates.
The Company, Dura and the Selling Stockholders 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.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Class A Common
Stock or the Trust Preferred Securities. Specifically, the Underwriters may
overallot the Offering, creating a syndicate short position. Underwriters may
bid for and purchase shares of Class A Common Stock or the Trust Preferred
Securities in the open market to cover syndicate short positions. In addition,
the Underwriters may bid for and purchase shares of Class A Common Stock or the
Trust Preferred Securities in the open market to stabilize the price of the
Class A Common Stock or the Trust Preferred Securities. These activities may
stabilize or maintain the market price of the Class A Common Stock or the Trust
Preferred Securities above independent market levels. The Underwriters are not
required to engage in these activities and may end these activities at any time.
The Underwriters and dealers may engage in passive market making
transactions in the Class A Common Stock in accordance with Rule 103 of
Regulation M promulgated by the Commission. In general, a passive market maker
may not bid for, or purchase, the Class A Common Stock at a price that exceeds
the highest independent bid. In addition, the net daily purchases made by any
passive market maker generally may not exceed 30% of its average daily trading
volume in the Class A Common Stock during a specified two-month prior period, or
200 shares, whichever is greater. A passive market maker must identify passive
market making bids as such on Nasdaq electronic inter-dealer reporting system.
Passive market making may stabilize or maintain the market price of the Class A
Common Stock above independent market levels. Underwriters and dealers are not
required to engage in passive market making and may end passive market making
activities at anytime.
The Underwriters have performed investment banking services for the Company
in the past for which they has received customary compensation.
LEGAL MATTERS
Certain legal matters for the Company will be passed upon by Kirkland &
Ellis, a partnership including professional corporations, Chicago, Illinois.
Certain legal matters will be passed upon for the Underwriters by Gardner,
Carton & Douglas, Chicago, Illinois.
EXPERTS
The audited financial statements included in the Prospectus and Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included or incorporated by reference herein in reliance upon the authority of
said firm as experts in giving said reports.
62
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits and schedules thereto,
to which reference is hereby made. Statements made in this Prospectus as to the
contents of any agreement or other documents are not necessarily complete; with
respect to each such agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by this reference.
The Company is subject to the information requirements of the Exchange Act
(Commission File No. 0-21139), and in accordance therewith files periodic
reports, proxy statements and other information with the Commission relating to
its business, financial statements and other matters. The Registration
Statements, as well as such reports, proxy statements and other information, may
be inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and should be available for inspection and copying at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New York,
New York 10048 and at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates by
writing to the Commission Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a Web site that contains
reports, proxy statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Such material can also be inspected at the reading room of
the library of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., 2nd Floor, Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this Offering shall be deemed incorporated by reference in
this Prospectus and a part hereof from the respective date of filing each such
document. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY UNDERTAKES TO PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM A
COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF
ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE THAT
HAVE BEEN INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO
SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO DURA AUTOMOTIVE
SYSTEMS, INC., 4508 IDS CENTER, MINNEAPOLIS, MINNESOTA 55402, TELEPHONE (612)
342-2311.
The following documents filed by the Company with the Commission under the
Exchange Act are incorporated herein by reference: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997; (ii) the
Company's Proxy Statement dated April 6, 1998; (iii) the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1998; (iv) the Company's
Current Report on Form 8-K dated September 2, 1997, as amended by its Current
Report on Form 8-K/A dated November 11, 1997; (v) the Company's Current Report
on Form 8-K dated May 14, 1998; and (vi) the description of the Company's Class
A Common Stock contained in the Company's registration statement on Form 8-A
filed under the Exchange Act.
63
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997............................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1995, 1996 and 1997................. F-4
Consolidated Statements of Stockholders' Investment for the years ended December 31, 1995, 1996 and 1997... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
Condensed Consolidated Balance Sheets as of December 31, 1997 and March 31, 1998 (Unaudited)............... F-23
Condensed Consolidated Statements of Operations for the three months ended March 31, 1997 and 1998
(Unaudited).............................................................................................. F-24
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1998
(Unaudited).............................................................................................. F-25
Notes to Condensed Consolidated Financial Statements (Unaudited)........................................... F-26
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
Report of Independent Public Accountants................................................................... F-31
Consolidated Balance Sheet as of March 31, 1998............................................................ F-32
Consolidated Statement of Operations for the period from inception (September 19, 1997) to March 31,
1998..................................................................................................... F-33
Consolidated Statement of Shareholders' Equity for the period from inception (September 19, 1997) to March
31, 1998................................................................................................. F-34
Consolidated Statement of Cash Flows for the period from inception (September 19, 1997) to March 31,
1998..................................................................................................... F-35
Notes to Consolidated Financial Statements................................................................. F-36
FKI AUTOMOTIVE GROUP
Reports of Independent Public Accountants.................................................................. F-48
Statement of Net Assets to be Sold as of March 31, 1997.................................................... F-50
Statements of Operations to be Sold for the years ended March 31, 1996 and 1997 and for the period from
April 1 to December 12, 1997............................................................................. F-51
Statements of Cash Flows from Operations to be Sold for the years ended March 31, 1996 and 1997 and for the
period from April 1 to December 12, 1997................................................................. F-52
Notes to Statements of Net Assets and Operations to be Sold................................................ F-53
</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) and Subsidiaries as of
December 31, 1996 and 1997 and the related consolidated statements of
operations, stockholders' investment and cash flows for each of the three years
in the period ended December 31, 1997. 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, the financial position of Dura Automotive Systems,
Inc. and Subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
January 30, 1998
F-2
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................................... $ 1,667 $ 4,148
Accounts receivable..................................................................... 49,490 79,032
Inventories............................................................................. 18,093 30,301
Other current assets.................................................................... 14,678 24,800
---------- ----------
Total current assets................................................................ 83,928 138,281
---------- ----------
Property, Plant and Equipment:
Land and buildings...................................................................... 16,926 44,553
Machinery and equipment................................................................. 42,800 73,892
Construction in progress................................................................ 2,811 6,616
Less-accumulated depreciation........................................................... (15,190) (23,523)
---------- ----------
Net property, plant and equipment................................................... 47,347 101,538
---------- ----------
Goodwill, net of accumulated amortization of $2,415 and $5,653............................ 103,885 160,063
Other Assets, net of accumulated amortiztion of $556 and $918............................. 10,969 19,382
---------- ----------
$ 246,129 $ 419,264
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable........................................................................ $ 30,230 $ 49,153
Accrued liabilities..................................................................... 26,090 36,583
Current maturities of long-term debt.................................................... 80 2,241
---------- ----------
Total current liabilities........................................................... 56,400 87,977
Long-Term Debt, net of current maturities................................................. 77,376 178,081
Other Noncurrent Liabilities.............................................................. 24,986 51,498
---------- ----------
Commitments and Contingencies (Notes 3, 8, 9 and 10)
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; 3,795,000 and
4,161,657 shares issued and outstanding............................................... 38 42
Common stock, Class B; par value $.01; 10,000,000 shares authorized; 4,998,254 and
4,654,380 shares issued and outstanding............................................... 50 46
Additional paid-in capital.............................................................. 62,893 63,402
Retained earnings....................................................................... 24,386 41,028
Cumulative translation adjustment....................................................... -- (2,810)
---------- ----------
Total stockholders' investment...................................................... 87,367 101,708
---------- ----------
$ 246,129 $ 419,264
---------- ----------
---------- ----------
</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>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1996 1997
<S> <C> <C> <C>
Revenues..................................................................... $ 253,726 $ 245,329 $ 449,111
Cost of sales................................................................ 219,559 207,810 375,086
---------- ---------- ----------
Gross profit........................................................... 34,167 37,519 74,025
Selling, general and administrative expenses................................. 15,513 17,157 32,815
Amortization expense......................................................... 1,094 1,036 3,600
---------- ---------- ----------
Operating income....................................................... 17,560 19,326 37,610
Interest expense............................................................. 4,822 2,589 9,298
Gain on sale of window regulator business.................................... 4,240 -- --
---------- ---------- ----------
Income before income taxes............................................. 16,978 16,737 28,312
Provision for income taxes................................................... 6,852 6,609 11,670
---------- ---------- ----------
Net income............................................................. $ 10,126 $ 10,128 $ 16,642
---------- ---------- ----------
---------- ---------- ----------
Basic earnings per share (Note 3)............................................ $ 2.04 $ 1.57 $ 1.89
---------- ---------- ----------
---------- ---------- ----------
Diluted earnings per share (Note 3).......................................... $ 2.03 $ 1.57 $ 1.88
---------- ---------- ----------
---------- ---------- ----------
</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 CUMULATIVE
----------------------- ----------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994................. -- $ -- 4,904,186 $ 49 $ 13,237 $ 4,132 $ --
Repurchase of common stock, net.......... -- -- (46,204) -- (136) -- --
Issuance of common stock................. -- -- 149,325 1 274 -- --
Net income............................... -- -- -- -- -- 10,126 --
---------- --- ---------- --- ----------- --------- -----------
BALANCE, December 31, 1995................. -- -- 5,007,307 50 13,375 14,258 --
Initial public offering of common stock,
net.................................... 3,795,000 38 -- -- 49,537 -- --
Repurchase of common stock, net.......... -- -- (9,053) -- (19) -- --
Net income............................... -- -- -- -- -- 10,128 --
---------- --- ---------- --- ----------- --------- -----------
BALANCE, December 31, 1996................. 3,795,000 38 4,998,254 50 62,893 24,386 --
Sale of stock under Employee Stock
Discount Purchase Plan................. 16,922 -- -- -- 383 -- --
Exercise of options...................... 5,861 -- -- -- 85 -- --
Collection of common stock subscriptions
receivable............................. -- -- -- -- 41 -- --
Conversion from Class B to Class A....... 343,874 4 (343,874) (4) -- -- --
Change in cumulative translation
adjustment............................. -- -- -- -- -- -- (2,810)
Net income............................... -- -- -- -- -- 16,642 --
---------- --- ---------- --- ----------- --------- -----------
BALANCE, December 31, 1997................. 4,161,657 $ 42 4,654,380 $ 46 $ 63,402 $ 41,028 $ (2,810)
---------- --- ---------- --- ----------- --------- -----------
---------- --- ---------- --- ----------- --------- -----------
</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>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................... $ 10,126 $ 10,128 $ 16,642
Adjustments required to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization........................................ 5,578 6,079 12,303
Deferred income tax provision........................................ 5,067 3,331 1,521
Gain on sale of window regulator business............................ (4,240) -- --
Change in other operating items:
Accounts receivable................................................ 11,772 (2,248) (12,841)
Inventories........................................................ 2,167 458 2,512
Other current assets............................................... (1,405) 3,038 (7,803)
Accounts payable and accrued liabilities........................... (15,927) (994) 3,479
Other assets and liabilities....................................... -- -- (7,297)
----------- ---------- -----------
Net cash provided by operating activities........................ 13,138 19,792 8,516
----------- ---------- -----------
INVESTING ACTIVITIES:
Capital expenditures, net................................................ (6,116) (6,260) (16,242)
Acquisitions, net........................................................ -- (83,850) (70,481)
Net proceeds from sale of window regulator business...................... 18,006 -- --
Investments in joint ventures and other.................................. (462) (4,983) (6,663)
----------- ---------- -----------
Net cash provided by (used in) investing activities................ 11,428 (95,093) (93,386)
----------- ---------- -----------
FINANCING ACTIVITIES:
Borrowings under revolving credit facility............................... 95,500 145,500 267,987
Repayments of revolving credit facility.................................. (105,750) (68,500) (174,869)
Repayments of debt....................................................... (12,740) (51,320) (6,008)
Stock offering proceeds, net............................................. -- 49,575 --
Sale (repurchase) of common stock, net................................... 139 (19) 510
----------- ---------- -----------
Net cash provided by (used in) financing activities................ (22,851) 75,236 87,620
----------- ---------- -----------
EFFECT OF EXCHANGE RATE ON CASH............................................ -- -- (269)
----------- ---------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS.................................. 1,715 (65) 2,481
CASH AND CASH EQUIVALENTS, beginning of period............................. 17 1,732 1,667
----------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of period................................... $ 1,732 $ 1,667 $ 4,148
----------- ---------- -----------
----------- ---------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for--
Interest............................................................... $ 4,822 $ 3,195 $ 8,715
----------- ---------- -----------
----------- ---------- -----------
Income taxes........................................................... $ 2,285 $ 2,087 $ 5,589
----------- ---------- -----------
----------- ---------- -----------
</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
1. ORGANIZATION AND BASIS OF PRESENTATION:
Dura Automotive Systems, Inc. (the Company) and subsidiaries design and
manufacture driver control systems, engineered mechanical components and
cable-related systems for the global automotive industry. The Company has
manufacturing facilities located in Indiana, Michigan, Missouri, Australia,
Canada, France, Germany, Mexico and Spain, and in Brazil through its joint
venture interest in Pollone S.A. (See Note 4).
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
FISCAL YEAR:
The Company reports its operating results based on a 52-/53-week fiscal
year. For presentation purposes, the Company uses December 31 as its fiscal
year-end.
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,
--------------------
1996 1997
<S> <C> <C>
Raw materials............................................................. $ 9,384 $ 15,562
Work in process........................................................... 4,767 9,126
Finished goods............................................................ 3,942 5,613
--------- ---------
$ 18,093 $ 30,301
--------- ---------
--------- ---------
</TABLE>
OTHER CURRENT ASSETS:
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Excess of cost over billings on uncompleted tooling projects.............. $ 7,541 $ 12,603
Deferred income taxes..................................................... 6,067 9,350
Prepaid expenses.......................................................... 1,070 2,847
--------- ---------
$ 14,678 $ 24,800
--------- ---------
--------- ---------
</TABLE>
F-7
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Excess of cost over billings on uncompleted tooling projects represents
costs incurred by the Company in the 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.
Forecast losses on incomplete projects are recognized currently.
PROPERTY, PLANT AND EQUIPMENT:
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
3 to 20
Machinery and equipment....................................... 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 40
years. Other assets principally consist of transaction 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 and other long-lived assets. If such events or
circumstances were to indicate that the carrying amount of these assets would
not be recoverable, the Company would estimate the future cash flows expected to
result from the use of the assets and their eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) were
less than the carrying amount of goodwill, the Company would recognize an
impairment loss.
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 method over the life
of the related tool. Amounts capitalized and included in other assets were $2.9
million at December 31, 1996 and $4.2 million at December 31, 1997. If the
Company forecasts that the amount of capitalized tooling and design costs
exceeds the amount to be realized through the sale of product, a loss is
recognized currently. Research and development and start-up costs, which are not
material, are expensed as incurred.
F-8
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Compensation and benefits................................................................... $ 9,663 $ 17,170
Medical insurance........................................................................... 5,641 7,012
Other....................................................................................... 10,786 12,401
--------- ---------
$ 26,090 $ 36,583
--------- ---------
--------- ---------
</TABLE>
OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Plant closure and consolidation costs....................................................... $ 5,205 $ 23,724
Legal and environmental..................................................................... 8,477 7,496
Post-retirement medical benefits............................................................ 6,097 7,188
Other....................................................................................... 5,207 13,090
--------- ---------
$ 24,986 $ 51,498
--------- ---------
--------- ---------
</TABLE>
REVENUE RECOGNITION AND SALES COMMITMENTS:
The Company recognizes revenue as its products are shipped to its customers.
The Company enters into agreements with its customers at the beginning of a
given vehicle's life to produce products. Once such agreements are entered into
by the Company, fulfillment of the customers' purchasing requirements is
generally the obligation of the Company for the entire production life of the
vehicle, generally with terms of up to 7 years. In certain instances, the
Company may be committed under existing agreements to supply product to its
customers at selling prices which are not sufficient to cover the direct cost to
produce such product. In such situations, the Company records a liability for
the estimated future amount of such losses. Such losses are recognized at the
time that the loss is probable and reasonably estimable.
INCOME TAXES:
The Company accounts for income taxes under the liability method, which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities 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)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
STOCK OPTIONS:
The Company accounts for stock options under the provisions of Accounting
Principles Board Opinion (APB) No. 25, under which no compensation expense is
recognized when the stock options are granted. The pro forma effects had the
Company followed the provisions of Statement of Financial Accounting Standards
(SFAS) No. 123 are included in Note 3.
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The ultimate results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of the Company's foreign operations are translated
using the year-end rates of exchange. Results of operations are translated using
the average rates prevailing throughout the period. Translation gains or losses
are accumulated as a separate component of stockholders' investment.
RECLASSIFICATIONS:
Certain amounts previously reported in the 1995 and 1996 consolidated
financial statements have been reclassified to conform to the 1997 presentation.
The reclassifications had no effect on previously reported net income or
stockholders' investment.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
During June 1997, the Financial Accounting Standards Board released SFAS No.
130, "Reporting Comprehensive Income", effective for fiscal years beginning
after December 15, 1997. SFAS No. 130 establishes standards for reporting and
display in the financial statements of total net income and the components of
all other nonowner changes in equity, referred to as comprehensive income. The
Company will adopt SFAS No. 130 in 1998 and is currently analyzing the impact it
will have on the disclosures in the financial statements.
During June 1997, the Financial Accounting Standards Board released SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information",
effective for fiscal years beginning after December 15, 1997. SFAS No. 131
requires disclosure of business and geographic segments in the consolidated
financial statements of the Company. The Company will adopt SFAS No. 131 in 1998
and is currently analyzing the impact it will have on the disclosures in its
financial statements.
3. STOCKHOLDERS' INVESTMENT:
INITIAL PUBLIC OFFERING OF CLASS A COMMON STOCK:
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
F-10
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' INVESTMENT: (CONTINUED)
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 8,793,254 shares of common stock outstanding. 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
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.
EARNINGS PER SHARE:
Basic earnings per share were computed by dividing net income by the
weighted average number of Class A and Class B common shares outstanding during
the year. Diluted earnings per share include the dilutive effects of outstanding
stock options using the treasury stock method as follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
<S> <C> <C> <C>
Net income................................................... $ 10,126 $ 10,128 $ 16,642
--------- --------- ---------
--------- --------- ---------
Weighted average number of Class A common shares
outstanding................................................ -- 1,434 3,907
Weighted average number of Class B common shares
outstanding................................................ 4,967 5,000 4,901
Dilutive effect of outstanding stock options after
application of the treasury stock method................... 22 28 61
--------- --------- ---------
Diluted shares outstanding................................... 4,989 6,462 8,869
--------- --------- ---------
--------- --------- ---------
Basic earnings per share..................................... $ 2.04 $ 1.57 $ 1.89
--------- --------- ---------
--------- --------- ---------
Diluted earnings per share................................... $ 2.03 $ 1.57 $ 1.88
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company adopted SFAS No. 128, "Earnings per Share," effective December
15, 1997. As a result, the Company's reported earnings per share (EPS) for 1995
and 1996 have been restated as follows:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Primary EPS as reported...................................................... $ 2.03 $ 1.57
Effect of SFAS No. 128....................................................... 0.01 --
--------- ---------
Basic EPS as restated........................................................ $ 2.04 $ 1.57
--------- ---------
--------- ---------
Fully diluted EPS as reported................................................ $ 2.03 $ 1.57
Effect of SFAS No. 128....................................................... -- --
--------- ---------
Diluted EPS as restated...................................................... $ 2.03 $ 1.57
--------- ---------
--------- ---------
</TABLE>
F-11
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' INVESTMENT: (CONTINUED)
STOCK OPTION PLAN:
Prior to consummation of the Offering, the board of directors and
stockholders of the Company approved the 1996 Key Employee Stock Option Plan
(the "Stock Option Plan"). Certain people who are full-time, salaried employees
of the Company are eligible to participate in the Stock Option Plan (an
"Employee Participant"). A committee of the board of directors selects the
Employee Participants and determines the terms and conditions of the options.
The Stock Option Plan provides for the issuance of options to Employee
Participants covering up to 600,000 shares of Class A common stock of the
Company, subject to certain adjustments reflecting changes in the Company's
capitalization. Information regarding the Stock Option Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE
UNDER EXERCISE EXERCISE
OPTION PRICES PRICE
<S> <C> <C> <C>
Outstanding, December 31, 1995.................................... -- $ -- $ --
Granted......................................................... 108,134 14.50 14.50
Granted......................................................... 76,100 20.75 20.75
Granted......................................................... 3,500 23.50 23.50
--------- -------------- -----------
Outstanding, December 31, 1996.................................... 187,734 14.50-23.50 17.20
Granted......................................................... 20,000 28.00 28.00
Granted......................................................... 80,000 24.50 24.50
Granted......................................................... 44,300 25.75 25.75
Exercised....................................................... (5,861) 14.50-20.75 14.61
Forfeited....................................................... (9,500) 20.75 20.75
--------- -------------- -----------
Outstanding, December 31, 1997.................................... 316,673 $ 14.50-28.00 $ 20.86
--------- -------------- -----------
--------- -------------- -----------
</TABLE>
Of the outstanding options at December 31, 1997, options covering 89,798
shares are currently exercisable with a weighted average exercise price of
$16.84 per share.
The weighted average fair value of options granted during 1996 was $8.92 and
during 1997 was $14.05.
As of December 31, 1997, the outstanding stock options granted in 1996 have
a remaining contractual life of 9 years and the outstanding stock options
granted in 1997 have a remaining contractual life of 10 years.
INDEPENDENT DIRECTOR STOCK OPTION PLAN:
Prior to consummation of the Offering, the board of directors and
stockholders of the Company approved the Dura Automotive Systems, Inc.
Independent Director Stock Option Plan (the "Director Option Plan") that
provides for the issuance of options to Independent Directors, as defined, to
acquire up to 100,000 shares of the Company's Class A common stock, subject to
certain adjustments reflecting changes in the Company's capitalization. The
option exercise price must be at least 100 percent of the fair value of the
Class A common stock at the time the option is issued. Such option grants vest
six months from the date of grant. As of December 31, 1997, the Company had
granted options under the Director Option Plan to acquire 21,000 shares of the
Company's Class A common stock at an exercise price of $24.50 to $25.50 per
share. As of December 31, 1997, 5,000 of these options were exercisable.
F-12
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' INVESTMENT: (CONTINUED)
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN:
Prior to consummation of the Offering, the board of directors and
stockholders of the Company approved the Dura Automotive Systems, Inc. Employee
Stock Discount Purchase Plan (the "Employee Stock Purchase Plan") which provides
for the sale of up to 500,000 shares of the Company's Class A common stock at
discounted purchase prices, subject to certain limitations. The cost per share
under this plan is 85% of the market value of the Company's Class A common stock
at the date of purchase, as defined. No shares of Class A common stock were
issued to employees pursuant to this plan during the year ended December 31,
1996 and 16,922 shares of Class A common stock were issued during the year ended
December 31, 1997. The weighted average fair value of shares sold in 1997 was
$22.63.
STOCK-BASED COMPENSATION PLANS:
As discussed above, the Company has two stock option plans, the Stock Option
Plan and the Director Option Plan, and the Employee Stock Purchase Plan. The
Company has elected to continue to account for these plans under APB No. 25,
under which no compensation cost has been recognized. Had compensation cost for
these plans been determined as allowed under SFAS No. 123 the Company's pro
forma net income and pro forma earnings per share would have been as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
<S> <C> <C> <C> <C>
Net income.................................. As Reported $ 10,126 $ 10,128 $ 16,642
Pro Forma $ 10,126 $ 10,093 $ 16,504
Basic earnings per share.................... As Reported $ 2.04 $ 1.57 $ 1.89
Pro Forma $ 2.04 $ 1.57 $ 1.87
Diluted earnings per share.................. As Reported $ 2.03 $ 1.57 $ 1.88
Pro Forma $ 2.03 $ 1.56 $ 1.86
</TABLE>
The effect of the stock offered under the Employee Stock Purchase Plan was
not material for 1996 and 1997.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rates of 6.1% to 6.6% in 1996 and 5.7% to 6.5%
in 1997; expected life of seven years for 1996 and 1997; expected volatility of
19%, 24% and 28% in 1996 and 38% and 45% in 1997.
DIVIDENDS:
The Company has not declared or paid any cash dividends in the past. As
discussed in Note 5, the Company's debt agreement restricts the amount of
dividends the Company can declare or pay. As of December 31, 1997, under the
most restrictive debt covenants, the Company could not have paid any cash
dividends.
F-13
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS AND DIVESTITURE:
In August 1996, the Company formed a joint venture with Excel Industries,
Inc. (Excel) to participate equally in the acquisition of a 26 percent interest
in Pollone S.A. (Pollone), a manufacturer of automotive components and
mechanical assemblies headquartered in Brazil, for $5 million in total. The
Company has accounted for its portion of this investment using the cost method
of accounting. The joint venture has also loaned Pollone an additional $10.5
million pursuant to notes which bear interest at approximately 7% and mature
from August 1998 through August 2000. Certain of these notes are convertible
into equity of Pollone, at the joint venture's option. The investment and the
notes are included in other assets in the accompanying consolidated balance
sheets.
In October 1996, the Company acquired the parking brake business of Rockwell
Light Vehicle Systems France S.A. (the French Operations). The aggregate
purchase price was approximately $3.75 million. The parking brake business is
operated from a facility in Cluses, France. The pro forma effects of this
transaction are not material to the Company's results of operations for the year
ended December 31, 1997.
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
revolving credit facility.
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 cash portion of the purchase price 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.
In May 1997, the Company acquired the automotive parking brake business from
Excel for approximately $2.9 million. The pro forma effects of this transaction
are not material to the Company's results of operations for the year ended
December 31, 1997.
In August 1997, the Company acquired GT Automotive Systems, Inc. (GT
Automotive), headquartered in Livonia, Michigan. GT Automotive has manufacturing
facilities in Livonia and Warren, Michigan and Windsor and Brantford, Ontario,
Canada, with annual revenues of approximately $70 million. Initial consideration
for the acquisition of GT Automotive was $45 million in cash and assumed
indebtedness. The Company will also make additional payments of up to $15
million if certain operating targets are achieved by GT Automotive in the first
two years following the acquisition. The acquisition was financed with proceeds
from borrowings under the Company's bank credit agreement, as amended.
In December 1997, the Company acquired all of the outstanding common stock
of REOM Industries, an Australian designer and manufacturer of jacks and parking
brakes, for approximately $3.7 million. The pro forma effects of this
transaction are not material to the Company's results of operations for the year
ended December 31, 1997.
The acquisitions of the French Operations, KPI, VOFA, the Excel parking
brake business and GT Automotive have been accounted for using the purchase
method of accounting and, accordingly, the assets acquired and liabilities
assumed have been recorded at their fair values as of the dates of the
acquisitions.
F-14
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITIONS AND DIVESTITURE: (CONTINUED)
The excess of the purchase price over the fair value of the assets acquired and
liabilities assumed has been recorded as goodwill. The assets acquired and
liabilities assumed of the Excel parking brake business and GT Automotive have
been recorded based upon preliminary estimates of fair value as of the dates of
acquisition. The Company does not believe the final allocation of purchase price
will be materially different from preliminary allocations. Any changes to the
preliminary estimates will be reflected as an adjustment to goodwill. Additional
purchase liabilities recorded included approximately $13.6 million for costs
associated with the shutdown and consolidation of certain acquired facilities
and $16.6 million for severance and related costs. At December 31, 1997
liabilities for approximately $11.6 million for facility related costs and $14.9
million in severance costs remain on the consolidated balance sheet. Results of
operations for these acquisitions have been included in the accompanying
consolidated financial statements since the dates of acqusition.
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 unaudited consolidated pro forma results of operations for the
year ended December 31, 1997 giving effect to the acquisition of GT Automotive
as if it were completed at the beginning of the period (in thousands, except per
share data):
<TABLE>
<CAPTION>
PRO FORMA FOR
THE YEAR ENDED
DEC. 31, 1997
<S> <C>
Revenues...................................................................... $ 489,752
--------------
--------------
Net income.................................................................... $ 14,830
--------------
--------------
Basic earnings per share...................................................... $ 1.68
--------------
--------------
Diluted earnings per share.................................................... $ 1.67
--------------
--------------
</TABLE>
The unaudited pro forma consolidated financial information does not purport
to represent what the Company's financial position or results of operations
would actually have been if these transactions had occurred at such dates or to
project the Company's future results of operations.
F-15
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DEBT:
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
<S> <C> <C>
Revolving credit facility, due August 2002, interest at the lender's
prevailing reference rate plus .5% or the Eurocurrency rate plus .5%,
at the discretion of the Company (6.06% to 8.25% at December 31, 1996
and 3.94% to 8.5% at December 31, 1997)............................... $ 77,000 $ 165,158
Other.................................................................. 456 15,164
--------- ----------
77,456 180,322
--------- ----------
Less--Current maturities............................................... (80) (2,241)
--------- ----------
$ 77,376 $ 178,081
--------- ----------
--------- ----------
</TABLE>
Future maturities of long-term debt as of December 31, 1997 are as follows
(in thousands):
<TABLE>
<S> <C>
1998.............................................................. $ 2,241
1999.............................................................. 5,006
2000.............................................................. 2,004
2001.............................................................. 1,156
2002.............................................................. 169,915
---------
$ 180,322
---------
---------
</TABLE>
The Company's bank credit agreement, as amended, consists of a revolving
credit facility with a committed amount of $200 million and is collateralized by
substantially all assets of the Company. The agreement also provides the Company
with the ability to denominate a portion of its borrowings in foreign currencies
up to an amount equivalent to $50 million ($30 million sub-limit for Deutsche
Marks). As of December 31, 1997, $158.8 million of borrowings outstanding under
the revolving credit facility are denominated in U.S. dollars, $2.8 million of
borrowings are denominated in Canadian dollars and $3.6 million of borrowings
are denominated in Deutsche Marks. The bank credit agreement requires the
Company to pay a facility fee on the commitment amount of .25% and contains
various restrictive covenants, which, among other matters, require the Company
to maintain certain financial ratios, including minimum liquidity and interest
coverage. The bank credit agreement also limits additional indebtedness,
investments, rental obligations and cash dividends. The Company was in
compliance with all such covenants at December 31, 1997. In addition, the
Company has outstanding letters of credit in the amount of approximately $3
million expiring through July 2000.
F-16
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES:
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
<S> <C> <C> <C>
Current......................................................... $ 1,785 $ 3,278 $ 10,149
Deferred........................................................ 5,067 3,331 1,521
--------- --------- ---------
Total......................................................... $ 6,852 $ 6,609 $ 11,670
--------- --------- ---------
--------- --------- ---------
</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>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
<S> <C> <C> <C>
Federal provision at statutory rates............................ $ 5,898 $ 5,858 $ 9,909
State taxes, net of federal benefit............................. 685 652 990
Foreign provision in excess of US tax rate...................... -- -- 444
Amortization of non-deductible goodwill......................... 255 224 440
Foreign sales corporation benefit............................... -- (192) (260)
Other, net...................................................... 14 67 147
--------- --------- ---------
Total......................................................... $ 6,852 $ 6,609 $ 11,670
--------- --------- ---------
--------- --------- ---------
</TABLE>
A summary of deferred tax assets (liabilities) is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Accrued legal and insurance costs........................................ $ 5,306 $ 6,150
Accrued plant closure and consolidation costs............................ 1,332 5,560
Depreciation and property basis differences.............................. (3,539) (4,100)
Deferred design costs.................................................... (1,251) (1,480)
Inventory valuation adjustments.......................................... 307 1,330
Postretirement benefit obligations....................................... 1,247 1,280
Accrued compensation cost................................................ 798 1,230
Other reserves and accruals not deductible for tax purposes.............. 1,867 568
Canadian net operating loss carryforwards................................ -- 1,475
Valuation allowance...................................................... -- (1,475)
--------- ---------
Net deferred income tax asset............................................ $ 6,067 $ 10,538
--------- ---------
--------- ---------
</TABLE>
The valuation allowance was established for the Canadian net operating
losses acquired in connection with the acquisition of GT Automotive as their
realization is not assured.
F-17
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. MAJOR CUSTOMERS:
The Company sells its products directly to automobile manufacturers.
Following is a summary of customers that accounted for a significant portion of
consolidated revenues for each of the three years in the period ended December
31, 1997:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
<S> <C> <C> <C>
Ford.............................................................. 52% 49% 42%
GM................................................................ 35% 36% 25%
Chrysler.......................................................... 6% 8% 7%
</TABLE>
As of December 31, 1996 and 1997, receivables from these customers
represented 89 percent and 71 percent of total accounts receivable.
8. EMPLOYEE BENEFIT PLANS:
PENSION PLANS:
The Company sponsors two defined benefit pension plans which cover certain
hourly and salary employees. The Company's policy is to make annual
contributions to the plans to fund the normal cost and the unfunded frozen
initial liability over 11.5 years. The salaried employee related plan was
curtailed during 1996. The Company agreed to provide certain additional benefits
to a defined group of individuals who were included in the salaried employee
plan under a separate defined contribution plan, and has accrued the present
value of such benefits. The net effect of the curtailment and the provision for
benefits under the separate defined contribution plan was not material.
Net pension expense consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
<S> <C> <C> <C>
Service cost-benefits earned during the year........................ $ 413 $ 236 $ 185
Interest cost on projected benefit obligation....................... 277 243 252
Return on plan assets............................................... (150) (237) (232)
Net amortization and deferral....................................... 26 65 42
--------- --------- ---------
Net pension expense............................................... $ 566 $ 307 $ 247
--------- --------- ---------
--------- --------- ---------
</TABLE>
Pursuant to Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions," the Company has recorded deferred pension costs of
$194,000, $393,000 and $347,000 at December 31, 1995, 1996 and 1997,
respectively, related to the minimum pension liability, which are classified as
other assets in the accompanying consolidated balance sheets.
F-18
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation................................................ $ 2,825 $ 3,491
--------- ---------
--------- ---------
Accumulated benefit obligation........................................... $ 3,393 $ 4,157
--------- ---------
--------- ---------
Projected benefit obligation............................................. $ 3,393 $ 4,157
Plan assets at fair value.................................................. 2,732 3,206
--------- ---------
Projected benefit obligation in excess of plan assets.................... 661 951
Unrecognized net loss...................................................... (31) (527)
Prior service cost......................................................... (393) (347)
Adjustment to recognize minimum liability.................................. 660 874
--------- ---------
Accrued pension costs.................................................... $ 897 $ 951
--------- ---------
--------- ---------
</TABLE>
The accumulated and projected benefit obligations were determined using an
assumed discount rate of 7.5 percent for the years ended December 31, 1996 and
1997. The assumed long-term rate of return on assets was 8.0 percent at December
31, 1996 and 1997. 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
based on the Company's performance and other factors. Such employer
contributions totaled $976,000, $1.6 million and $2.2 million during fiscal
1995, 1996 and 1997.
F-19
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED)
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,
-------------------------------
1995 1996 1997
<S> <C> <C> <C>
Service cost-benefits earned during the year................................ $ 74 $ 84 $ 101
Interest cost on projected benefit obligation............................... 679 558 433
Net amortization and deferral............................................... 124 127 (97)
--------- --------- ---------
Net periodic postretirement benefit cost.................................. $ 877 $ 769 $ 437
--------- --------- ---------
--------- --------- ---------
</TABLE>
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Accumulated benefit obligation....................................................... $ 4,544 $ 5,755
Plan assets at fair value............................................................ -- --
--------- ---------
Projected benefit obligation in excess of plan assets.............................. 4,544 5,755
Prior service cost................................................................... 97 89
Unrecognized net gain................................................................ 1,456 1,344
--------- ---------
Accrued postretirement benefits.................................................... $ 6,097 $ 7,188
--------- ---------
--------- ---------
</TABLE>
For measurement purposes, a 7 percent annual rate of increase for the
healthcare cost trend was assumed for 1997. The rate was assumed to decrease 1
percent annually to 5 percent and remain level thereafter. Increasing the
assumed healthcare cost trend assumption by one percentage point would increase
the accumulated postretirement benefit obligation by approximately $510,000 and
the net periodic postretirement expense by approximately $89,000 for the year
ended December 31, 1997.
9. COMMITMENTS AND CONTINGENCIES:
ALKIN SERVICE AND SUPPLY AGREEMENTS:
In connection with the 1994 acquisition of Alkin Co. (Alkin), the Company
entered into agreements with Alkin whereby the Company receives services related
to data processing, payroll and personnel administration, and other
administrative matters. Amounts paid under these service agreements were $1.8
million, $1.3 million and $1.1 million for the years ended December 31, 1995,
1996 and 1997. Future minimum commitments under the service agreements are
approximately $80,000 in 1998. In addition, the Company and Alkin 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-20
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES: (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, 1997 under these operating leases are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
1998............................................................. $ 1,306
1999............................................................. 930
2000............................................................. 631
2001............................................................. 471
2002............................................................. 353
Thereafter....................................................... 869
---------
$ 4,560
---------
---------
</TABLE>
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.
10. RELATED PARTY TRANSACTIONS:
The Company paid fees to Hidden Creek Industries (HCI), an affiliate of the
Company, of approximately $250,000 in 1995 in connection with the divestiture,
$750,000 in 1996 in connection with the acquisitions and the Offering and
$850,000 in 1997 in connection with the acquisitions of VOFA and GT Automotive.
In addition, under the terms of a management agreement, which was terminated in
August 1996, the Company paid HCI monthly management fees for certain
administrative services. Total management fees of approximately $733,000 for the
year ended December 31, 1995 and $881,000 for the year ended December 31, 1996
are included in selling, general and administrative expenses in the accompanying
consolidated statements of operations. See Note 4 for discussion of acquisitions
and divestiture.
F-21
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a condensed summary of actual quarterly results of
operations for 1996 and 1997 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
BASIC DILUTED
GROSS OPERATING NET EARNINGS EARNINGS
REVENUES PROFIT INCOME INCOME PER SHARE PER SHARE
<S> <C> <C> <C> <C> <C> <C>
1996:
First...................................... $ 59,303 $ 7,732 $ 3,336 $ 1,347 $ 0.27 $ 0.27
Second..................................... 68,054 10,952 6,822 3,607 0.72 0.72
Third...................................... 57,130 7,552 3,250 1,746 0.25 0.25
Fourth..................................... 60,842 11,283 5,918 3,428 0.39 0.39
---------- --------- ----------- --------- ----- -----
$ 245,329 $ 37,519 $ 19,326 $ 10,128 $ 1.57 $ 1.57
---------- --------- ----------- --------- ----- -----
---------- --------- ----------- --------- ----- -----
1997:
First...................................... $ 107,367 $ 16,582 $ 7,803 $ 3,544 $ 0.40 $ 0.40
Second..................................... 115,350 19,239 10,769 5,100 0.58 0.58
Third...................................... 101,862 15,449 6,920 2,657 0.30 0.30
Fourth..................................... 124,532 22,755 12,118 5,341 0.61 0.60
---------- --------- ----------- --------- ----- -----
$ 449,111 $ 74,025 $ 37,610 $ 16,642 $ 1.89 $ 1.88
---------- --------- ----------- --------- ----- -----
---------- --------- ----------- --------- ----- -----
</TABLE>
The sum of per share amounts for the quarters does not necessarily equal the
total for the year due to the timing of the Offering and its effects on the
computation of weighted average number of shares outstanding.
12. ACQUISITION AND OFFERINGS (UNAUDITED):
ACQUISITION:
In April 1998, a wholly owned subsidiary of the Company acquired Trident, a
leading international designer and manufacturer of automotive cables, for
approximately $87.5 million in cash and assumed indebtedness. Trident had annual
revenues of approximately $300 million at the time of the acquisition. The
acquisition was financed with proceeds from borrowings under a new bank credit
agreement.
CONVERTIBLE TRUST PREFERRED SECURITIES OFFERING:
In March 1998, Dura Automotive Systems Capital Trust, a wholly owned
statutory business trust of the Company, completed the offering of $55.3 million
of its 7 1/2% Convertible Trust Preferred Securities ("Preferred Securities"),
resulting in net proceeds of approximately $52.6 million. The Preferred
Securities are redeemable, in whole or part, on or after March 31, 2001, and all
Preferred Securities must be redeemed no later than March 31, 2028. The
Preferred Securities are convertible, at the option of the holder, into Class A
common stock of the Company at a rate of 0.5831 shares of Class A common stock
for each Preferred Security, which is equivalent to a conversion price of
$42 7/8 per share. The net proceeds of the offering were used to repay
outstanding indebtedness during April 1998.
PUBLIC OFFERING:
On May 21, 1998, the Company's board of directors approved the filing of a
Form S-3 Registration Statement with the Securities and Exchange Commission for
the sale of up to 3,661,950 shares of the Company's Class A common stock to the
public (the "Offering"). In addition, certain stockholders of the Company are
selling up to 1,413,000 shares of Class A common stock in the Offering. The
Company intends to use the net proceeds of the Offering to repay certain
outstanding indebtedness.
F-22
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1997 MARCH 31,
1998
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 4,148 $ 46,938
Accounts receivable................................................................. 79,032 89,385
Inventories......................................................................... 30,301 32,404
Other current assets................................................................ 24,800 24,943
------------ -----------
Total current assets.............................................................. 138,281 193,670
Property, plant and equipment, net.................................................... 101,538 106,224
Goodwill, net......................................................................... 160,063 177,459
Other assets, net..................................................................... 19,382 23,253
------------ -----------
$ 419,264 $ 500,606
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt................................................ $ 2,241 $ 2,193
Accounts payable.................................................................... 49,153 45,153
Accrued liabilities................................................................. 36,583 43,258
------------ -----------
Total current liabilities......................................................... 87,977 90,604
Long-term debt, net of current maturities............................................. 178,081 192,245
Other noncurrent liabilities.......................................................... 51,498 56,738
Mandatorily redeemable convertible trust preferred securities......................... -- 55,250
------------ -----------
Stockholders' investment:
Preferred stock..................................................................... -- --
Common stock--Class A............................................................... 42 42
Common stock--Class B............................................................... 46 46
Additional paid-in capital.......................................................... 63,402 63,754
Retained earnings................................................................... 41,028 45,604
Cumulative translation adjustment................................................... (2,810) (3,677)
------------ -----------
Total stockholders' investment.................................................... 101,708 105,769
------------ -----------
$ 419,264 $ 500,606
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
F-23
<PAGE>
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 1998
<S> <C> <C>
Revenues.......................................................................... $ 107,367 $ 125,746
Cost of sales..................................................................... 90,785 104,471
---------- ----------
Gross profit.................................................................... 16,582 21,275
Selling, general and administrative expenses...................................... 7,896 9,160
Amortization expense.............................................................. 883 1,251
---------- ----------
Operating income................................................................ 7,803 10,864
Interest expense, net............................................................. 1,896 2,938
---------- ----------
Income before provision for income taxes and minority interest.................. 5,907 7,926
Provision for income taxes........................................................ 2,363 3,274
Minority interest................................................................. -- 76
---------- ----------
Net income...................................................................... $ 3,544 $ 4,576
---------- ----------
---------- ----------
Basic earnings per share.......................................................... $ 0.40 $ 0.52
---------- ----------
---------- ----------
Basic shares outstanding.......................................................... 8,801 8,826
---------- ----------
---------- ----------
Diluted earnings per share........................................................ $ 0.40 $ 0.52
---------- ----------
---------- ----------
Diluted shares outstanding........................................................ 8,856 9,012
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-24
<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 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net income....................................................................... $ 3,544 $ 4,576
Adjustments to reconcile net income to net cash provided by (used in) operating
activities--
Depreciation and amortization.................................................. 2,905 3,067
Changes in other operating items............................................... 836 (9,785)
---------- ----------
Net cash provided by (used in) operating activities............................ 7,285 (2,142)
---------- ----------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired............................................... (18,610) (18,578)
Capital expenditures, net........................................................ (1,965) (3,733)
---------- ----------
Net cash used in investing activities.......................................... (20,575) (22,311)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from borrowings......................................................... 81,542 67,903
Repayment of debt................................................................ (64,018) (53,403)
Proceeds from issuance of common stock........................................... -- 256
Proceeds from issuance of preferred securities................................... -- 52,566
Other............................................................................ 126 --
---------- ----------
Net cash provided by financing activities...................................... 17,650 67,322
---------- ----------
EFFECT OF EXCHANGE RATE ON CASH.................................................... -- (79)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS.......................................... 4,360 42,790
CASH AND CASH EQUIVALENTS:
Beginning of period.............................................................. 1,667 4,148
---------- ----------
End of period.................................................................... $ 6,027 $ 46,938
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-25
<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 1997 Annual Report to
Stockholders.
Revenues and operating results for the three months ended March 31, 1998 are
not necessarily indicative of the results to be expected for the full year.
2. Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
<S> <C> <C>
Raw materials....................................... $ 15,562 $ 17,224
Work in process..................................... 9,126 10,052
Finished goods...................................... 5,613 5,128
------------ -----------
$ 30,301 $ 32,404
------------ -----------
------------ -----------
</TABLE>
3. On March 20, 1998, Dura Automotive Systems Capital Trust (the "Issuer"), a
wholly owned statutory business trust of the Company, completed the offering
of $55.3 million of its 7 1/2% Convertible Trust Preferred Securities
("Preferred Securities"), resulting in net proceeds of approximately $52.6
million. The Preferred Securities are redeemable, in whole or part, on or
after March 31, 2001 and all Preferred Securities must be redeemed no later
than March 31, 2028. The Preferred Securities are convertible, at the option
of the holder, into Class A common stock of the Company at a rate of 0.5831
shares of Class A common stock for each Preferred Security, which is
equivalent to a conversion price of $42 7/8 per share. The net proceeds of
the offering were used to repay outstanding indebtedness during April 1998.
No separate financial statements of the Issuer have been included herein.
The Company does not consider that such financial statements would be
material to holders of Preferred Securities because (i) all of the voting
securities of the Issuer will be owned, directly or indirectly, by the
Company, a reporting company under the Exchange Act, (ii) the Issuer has no
independent operations and exists for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of the Issuer and
investing the proceeds thereof in 7 1/2% Convertible Subordinated Debentures
due March 31, 2028 issued by the Company and (iii) the obligations of the
Issuer under the Preferred Securities are fully and unconditionally
guaranteed by the Company.
4. Basic earnings per share were computed by dividing net income by the
weighted average number of Class A and Class B common shares outstanding
during the quarter. Diluted earnings per share include (i) the effects of
outstanding stock options using the treasury stock method and (ii) the
F-26
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
conversion of the Preferred Securities from their date of issuance on March
20, 1998 as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
------------------------
1997 1998
<S> <C> <C>
Net income.................................................. $ 3,544 $ 4,576
Interest expense on mandatorily redeemable convertible
preferred securities, net of tax.......................... -- 76
------------ ----------
Net income applicable to common stockholders-- diluted...... $ 3,544 $ 4,652
------------ ----------
------------ ----------
Weighted average number of Class A common shares
outstanding............................................... 3,814 4,172
Weighted average number of Class B common shares
outstanding............................................... 4,987 4,654
Dilutive effect of outstanding stock options after
application of the treasury stock method.................. 55 28
Dilutive effect of mandatorily redeemable convertible
preferred securities, assuming conversion................. -- 158
------------ ----------
Diluted shares outstanding.................................. 8,856 9,012
------------ ----------
------------ ----------
Basic earnings per share.................................... $ 0.40 $ 0.52
------------ ----------
------------ ----------
Diluted earnings per share.................................. $ 0.40 $ 0.52
------------ ----------
------------ ----------
</TABLE>
5. Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
<S> <C> <C>
Revolving credit facility................................... $ 165,158 $ 180,193
Other....................................................... 15,164 14,245
------------ ----------
180,322 194,438
Less-current maturities..................................... (2,241) (2,193)
------------ ----------
Total long-term debt...................................... $ 178,081 $ 192,245
------------ ----------
------------ ----------
</TABLE>
As of March 31, 1998, the Company's bank credit agreement, as amended,
consisted of a revolving credit facility with a committed amount of $200
million, was collateralized by substantially all assets of the Company and
interest accrued at the lender's prevailing reference rate plus 0.5% or the
Eurocurrency rate plus 0.5%, at the discretion of the Company. The agreement
also provided the Company with the ability to denominate a portion of its
borrowings in foreign currencies up to an amount equivalent to $50 million
($30 million sub-limit for Deutsche Marks). As of March 31, 1998, $170.8
million of borrowings outstanding under the revolving credit facility were
denominated in U.S. dollars, $5.6 million of borrowings were denominated in
Canadian dollars and $3.8 million of borrowings were denominated in Deutsche
Marks. The bank credit agreement required the Company to pay a facility fee
on the commitment amount of 0.25% and contained various restrictive
covenants, which, among other matters, required the Company to maintain
certain financial ratios, including minimum liquidity and interest coverage.
The bank credit agreement also limited additional indebtedness, investments,
rental obligations and cash dividends. The Company was in compliance with
all
F-27
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
such covenants at March 31, 1998. In addition, the Company had outstanding
letters of credit in the amount of approximately $3.0 million expiring
through July 2000.
In connection with the acquisition of Trident Automotive plc ("Trident")
discussed below, the Company entered into a new $402.5 million secured
credit facility. The facility provides for revolving credit facilities of
$225 million, term loans of $100 million, an acquisition facility of $30
million and a twelve month interim loan of $47.5 million. The interim loan
must be repaid with the proceeds of an equity offering or a debt offering
that is junior in priority to the credit facility. The remaining facilities
have terms of five years and bear interest at the lender's reference rate or
Eurocurrency rate. The credit facilities contain various restrictive
covenants which limit additional indebtedness, investments, rental
obligations and cash dividends. The credit facilities also require the
Company to maintain certain financial ratios including minimum liquidity and
interest coverage. Borrowings are collateralized by the assets of the
Company.
6. In May 1997, the Company acquired the automotive parking brake business from
Excel Industries Inc. for approximately $2.9 million. The pro forma effects
of this transaction are not material to the Company's results of operations
for the three months ended March 31, 1997.
In August 1997, the Company acquired GT Automotive Systems, Inc. ("GT
Automotive"), for approximately $45.0 million in cash and assumed
indebtedness, plus contingent payments. GT Automotive designs and
manufactures column-mounted shifter systems and turn signal and tilt lever
assemblies for North American OEMs.
In December 1997, the Company purchased approximately 19% of the outstanding
common stock of Thixotech Inc. ("Thixotech") for approximately $0.5 million.
The Company also loaned Thixotech an additional $2.8 million pursuant to
notes which are convertible into additional common stock of Thixotech at the
Company's option. If exercised, the Company could own a majority of
Thixotech.
In December 1997, the Company acquired REOM Industries (Aust) Pty Ltd.
("REOM"), an Australian designer and manufacturer of jacks and parking
brakes, for approximately $3.7 million. The pro forma effects of this
transaction are not material to the Company's results of operations for the
three months ended March 31, 1997.
In March 1998, the Company acquired Universal Tool & Stamping Co., Inc.
("Universal"), a manufacturer of jacks for the North American automotive
industry, for approximately $18.0 million.
In April 1998, the Company completed its acquisition of Trident. Trident had
revenues of approximately $300.0 million in 1997, of which 69 percent was
derived from sales of cable assemblies, principally to the automotive OEM
market, and the balance from door handle assemblies, lighting and other
products. Approximately 68 percent of Trident's revenues were generated in
North America, 27 percent in Europe and the remainder in Latin America.
Trident's operations are headquartered in Michigan with manufacturing and
technical facilities in Michigan, Tennessee, Arkansas, Canada, the United
Kingdom, Germany, France and Brazil. Pursuant to the terms of the agreement,
the Company acquired all of the outstanding equity interests of Trident for
total consideration of $87.5 million in cash. In addition, the Company
assumed $75.0 million of Trident's outstanding 10% Senior Subordinated Notes
due 2005. The Company also repaid Trident's outstanding senior indebtedness
of approximately $53.0 million.
The acquisition of Trident has been accounted for as a purchase and,
accordingly, Trident's assets and liabilities have been recorded at fair
values as of the acquisition date. Following is an unaudited pro forma
balance sheet of, based on a preliminary allocation of the purchase price,
as if the acquisition of
F-28
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Trident and the new credit facility described above had been completed on
March 31, 1998 (in thousands):
<TABLE>
<S> <C>
ASSETS
Current assets............................................ $ 236,346
Property, plant and equipment, net........................ 171,097
Other assets, net......................................... 355,210
---------
$ 762,653
---------
---------
</TABLE>
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities....................................... $ 200,692
Long-term debt, net of current maturities................. 323,107
Other noncurrent liabilities.............................. 82,335
Preferred Securities...................................... 55,250
Stockholders' investment.................................. 101,269
---------
$ 762,653
---------
---------
</TABLE>
The following unaudited condensed consolidated pro forma results of
operations for the three months ended March 31, 1997 give effect to the
acquisitions of GT Automotive, Universal and Trident and the offering of the
Preferred Securities as if they had occurred at the beginning of the period.
The following unaudited condensed consolidated pro forma results of
operations for the three months ended March 31, 1998 give effect to the
acquisitions of Universal and Trident and the offering of the Preferred
Securities as if they had occurred at the beginning of the period. The
unaudited pro forma financial information does not purport to represent what
the Company's results of operations would actually have been if such
transactions had occurred at such dates or to project the results of future
operations (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1998
<S> <C> <C>
Revenues............................................ $ 212,348 $ 211,662
---------- ----------
---------- ----------
Operating income.................................... $ 16,470 $ 17,727
---------- ----------
---------- ----------
Net income.......................................... $ 5,690 $ 5,936
---------- ----------
---------- ----------
Basic earnings per share............................ $ 0.65 $ 0.67
---------- ----------
---------- ----------
Diluted earnings per share.......................... $ 0.62 $ 0.65
---------- ----------
---------- ----------
</TABLE>
7. Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement established standards for reporting
and display of comprehensive income and its components. Comprehensive income
reflects the change in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. For
the Company, comprehensive income represents net income adjusted for foreign
currency translation adjustments. Comprehensive income was approximately
$3.5 million for the three months ended March 31, 1997 and approximately
$3.7 million for the three months ended March 31, 1998.
8. During February 1998, the Financial Accounting Standards Board issued SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," effective for fiscal years beginning
F-29
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
after December 31, 1997. SFAS No. 132 revises certain of the disclosure
requirements, but does not change the measurement or recognition of those
plans. SFAS No. 132 superceded SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The adoption of SFAS No. 132
will result in revised and additional disclosures, but will have no effect
on the financial position, results of operations, or liquidity of the
Company.
9. Supplemental cash flow information (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1998
<S> <C> <C>
Cash paid for--
Interest.......................................... $ 1,273 $ 3,032
Income taxes...................................... 275 2,410
</TABLE>
F-30
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trident Automotive plc:
We have audited the accompanying consolidated balance sheet of Trident
Automotive plc (a company registered under the laws of England) and subsidiaries
as of March 31, 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for the period from inception (September 19,
1997) to March 31, 1998. 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 audit.
We conducted our audit 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 audit provides 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 Trident Automotive plc and
subsidiaries as of March 31, 1998, and the results of their operations and their
cash flows for the period from inception (September 19, 1997) to March 31, 1998
in conformity with generally accepted accounting principles.
Grand Rapids, Michigan,
May 22, 1998
F-31
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents....................................................... $ 11,415
Accounts receivable, less allowance for doubtful accounts of $1,745............. 48,875
Inventories..................................................................... 18,798
Other current assets............................................................ 10,526
---------
Total current assets.......................................................... 89,614
---------
Other Assets:
Property and equipment, net..................................................... 64,873
Goodwill........................................................................ 88,945
Deferred financing costs........................................................ 6,426
Other assets.................................................................... 8,972
---------
Total assets.................................................................. $ 258,830
---------
---------
Current Liabilities:
Current portion of long-term debt............................................... $ 1,500
Accounts payable................................................................ 37,018
Accrued expenses................................................................ 28,570
---------
Total current liabilities..................................................... 67,088
---------
Noncurrent Liabilities:
Long-term debt, less current portion above...................................... 126,300
Accrued pension and other postretirement liabilities............................ 12,891
Other noncurrent liabilities.................................................... 11,536
---------
Total liabilities............................................................. 217,815
---------
Commitments and Contingencies.....................................................
Minority Interests in Subsidiary Company.......................................... 1,170
---------
Redeemable U.S. Dollar Ordinary Shares;
$1.00 par value; 296,000 shares issued and outstanding; valued at redemption
value 740
---------
Shareholders' Equity:
Common --
Sterling ordinary shares; $1.70 par value; 50,000 shares issued and
outstanding.................................................................. 85
U.S. Dollar ordinary shares; $1.00 par value; 25,000,000 shares authorized;
16,704,000 shares issued and outstanding.................................... 16,704
Additional paid-in-capital........................................................ 23,556
Retained earnings................................................................. 123
Cumulative translation adjustment................................................. (1,363)
---------
Total shareholders' equity.................................................. 39,105
---------
Total liabilities and shareholders' equity.................................. $ 258,830
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-32
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1997) TO MARCH 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
Net sales.......................................................................... $ 86,342
Cost of sales...................................................................... 71,295
---------
Gross profit..................................................................... 15,047
Selling, general and administrative expenses....................................... 8,343
Amortization expense............................................................... 1,267
---------
Operating income................................................................. 5,437
Interest expense................................................................... 4,092
Interest income.................................................................... (205)
Unrealized exchange loss........................................................... 922
---------
Income before provision for income taxes......................................... 628
Provision for income taxes......................................................... 505
---------
Net income....................................................................... $ 123
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-33
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1997) TO MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------
STERLING U.S. DOLLAR ADDITIONAL CUMULATIVE
ORDINARY ORDINARY PAID-IN- RETAINED TRANSLATION
SHARES DOLLARS SHARES DOLLARS CAPITAL EARNINGS ADJUSTMENT
<S> <C> <C> <C> <C> <C> <C> <C>
Initial capitalization of
Trident Automotive plc..... 50,000 $ 85 -- $ -- $ -- $ -- $ --
Issuance of U.S. Dollar
ordinary shares............ -- -- 16,704,000 16,704 23,556 -- --
Net income................... -- -- -- -- -- 123 --
Change in cumulative
translation adjustment..... -- -- -- -- -- -- (1,363)
----------- --- ----------- --------- ----------- ----- -----------
Balance at March 31, 1998.... 50,000 $ 85 16,704,000 $ 16,704 $ 23,556 $ 123 $ (1,363)
----------- --- ----------- --------- ----------- ----- -----------
----------- --- ----------- --------- ----------- ----- -----------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
<S> <C>
Initial capitalization of
Trident Automotive plc..... $ 85
Issuance of U.S. Dollar
ordinary shares............ 40,260
Net income................... 123
Change in cumulative
translation adjustment..... (1,363)
-------------
Balance at March 31, 1998.... $ 39,105
-------------
-------------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-34
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1997) TO MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................... $ 123
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization............................................... 3,547
Unrealized exchange loss.................................................... 922
Minority interests.......................................................... (24)
Decrease (increase) in assets:
Accounts receivable......................................................... 1,806
Inventories................................................................. 2,052
Other current assets........................................................ (2,658)
Other assets................................................................ (938)
(Decrease) increase in liabilities:
Accounts payable............................................................ 9,231
Accrued expenses............................................................ (10,915)
Other noncurrent liabilities................................................ 3,068
---------
Net cash provided by operating activities................................... 6,214
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Predecessor, net of cash acquired................................... (155,490)
Purchase of property and equipment.............................................. (7,810)
Proceeds from sale of property and equipment.................................... 24
---------
Net cash used in investing activities....................................... (163,276)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........................................ 125,000
Proceeds from borrowings on revolving credit facility........................... 7,763
Payments on revolving credit facility........................................... (4,963)
Receipt of capital from Investor Group.......................................... 42,585
Equity fees paid to affiliates of Investor Group................................ (1,500)
---------
Net cash provided by financing activities................................... 168,885
---------
Effect of exchange rate changes on cash..................................... (408)
---------
Net increase in cash and cash equivalents................................... 11,415
Cash and Cash Equivalents, beginning of period.................................... --
---------
Cash and Cash Equivalents, end of period.......................................... $ 11,415
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-35
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) THE COMPANY
On April 30, 1998, Trident Automotive plc (the "Company") was acquired by
Dura Automotive systems (UK), Ltd. ("Dura Ltd"), a wholly-owned subsidiary of
Dura Automotive Systems, Inc. ("Dura") (the "Dura Acquisiton"). See notes 6 and
11 for information related to this transaction.
The accompanying consolidated financial statements include the accounts of
the Company, a public limited company organized under the laws of England, and
its majority-owned subsidiaries. The Company and its subsidiaries were formed on
September 19, 1997 to acquire the net assets of the FKI Automotive Group (the
"FKI Acquisition") from FKI plc ("FKI"). On December 12, 1997, the Company
completed the FKI Acquisition at a cost of approximately $162.2 million plus
fees and expenses of approximately $13.8 million. The FKI Acquisition was
financed through the issuance of $75.0 million of 10% Senior Subordinated Notes
due 2005, $42.6 million in equity contributions from an investor group and
borrowings under the Company's new $105.0 million secured credit facility (the
"New Credit Facility"). Two affiliates of one of the investors received fees
totaling $0.6 million each for assistance in financing the transaction. In
addition, certain affiliates of the investor group received private equity fees
totalling $1.5 million and the Company paid an affiliate of one of the investors
$0.9 million for advisory services related to the acquisition.
The Company designs and manufactures cable assemblies for the global
automotive industry. Cable assemblies are sold primarily to original equipment
manufacturers ("OEMs"). The Company also designs and manufactures lighting
products and door handle assemblies which are sold to automotive OEM's and
automotive suppliers in the United States and Canada. The Company has eight
design and manufacturing facilities in the United States, Canada, the United
Kingdom, France, Germany and Brazil. Accounting records are maintained in local
currencies and converted to U.S. dollars in accordance with United States
Generally Accepted Accounting Principles. The Company is a holding company, with
a fiscal year end of March 31, that conducts all of its operations through its
subsidiaries. Accordingly, the Company is dependent on the cash flows of its
subsidiaries in order to meet debt service obligations.
The FKI Acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated based on the estimated
fair value of assets acquired and liabilities assumed. The fair value of the
assets acquired and liabilities assumed was approximately $159.8 million and
$87.2 million, respectively. The balance of the purchase price, approximately
$89.6 million, was recorded as goodwill. This allocation was based upon
available information and assumptions that management considers reasonable under
the circumstances and is subject to adjustment based on further analysis by
management and on formal appraisals not yet available. Management believes that
the final allocation of the purchase price will not materially differ from the
March 31, 1998 allocation. Assumed liabilites include approximately $3.2 million
for costs associated with the consolidation of certain facilities and
approximately $3.0 million for severance costs as of March 31, 1998. Through
March 31, 1998, approximately $0.2 million was charged to such reserves.
The following is unaudited pro forma financial information for the fiscal
year ended March 31, 1998 as if the FKI Acquisition had been completed at the
beginning of the year (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1998
<S> <C>
Net sales..................................................................... $ 283,538
Operating income.............................................................. 14,526
Net loss...................................................................... (442)
</TABLE>
F-36
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) THE COMPANY (CONTINUED)
The unaudited pro forma financial information does not purport to represent
what the Company's results of operations would actually have been if the FKI
Acquisition had occurred at such date or to project the Company's future results
of operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Trident Automotive plc and its majority-owned subsidiaries. All
significant intercompany transactions have been eliminated.
USE OF ESTIMATES--The preparation of 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION AND SALES COMMITMENTS--The Company recognizes revenue as
its products are shipped to its customers. The Company enters into agreements
with its customers at the beginning of a given vehicle's life to produce
products. Once such agreements are entered into by the Company, fulfillment of
the customers' purchasing requirements is generally the obligation of the
Company for the entire production life of the vehicle, generally with terms of
up to five years. In certain instances, the Company may be committed under
existing agreements to supply product to its customers at selling prices which
are not sufficient to cover the cost to produce such product. In such
situations, the Company records a liability for the estimated future amount of
such losses. Such losses are recognized at the time that the loss is probable
and reasonably estimable.
CASH EQUIVALENTS--Cash equivalents consist of highly liquid investments with
a maturity of three months or less when purchased.
INVENTORIES--Inventories are valued at the lower of cost or market on a
first-in, first-out (FIFO) basis. At March 31, 1998, inventories consisted of
the following:
<TABLE>
<S> <C>
Finished products.................................................. $ 4,158
Work-in-process.................................................... 6,755
Raw materials...................................................... 7,885
---------
$ 18,798
---------
---------
</TABLE>
OTHER CURRENT ASSETS--Other current assets consisted of the following at
March 31, 1998:
<TABLE>
<S> <C>
Deferred income taxes.............................................. $ 4,885
Prepaid expenses................................................... 2,491
Other.............................................................. 3,150
---------
$ 10,526
---------
---------
</TABLE>
F-37
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company designs and manufactures or purchases tooling for products sold
to its automotive customers. Excess costs over billings on uncompleted tooling
projects represent costs incurred by the Company in excess of costs billed to
the customer in the 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. 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 method over the life of the related tool.
Amounts capitalized and included in other current assets was $.7 million at
March 31, 1998. If the Company forecasts that the amount of capitalized tooling
and design costs exceeds the amount to be realized through the sale of the
product, a loss is recognized currently. Research and development and start-up
costs, which are not material, are expensed as incurred.
PROPERTY AND EQUIPMENT--Property and equipment is recorded at historical or
acquired cost and is depreciated over the estimated useful lives of the assets
utilizing the straight-line method, generally as follows: land improvements, 10
to 15 years; buildings, 30 years; machinery and equipment, 5 to 15 years.
Equipment, which is dedicated to a specific contract is depreciated over the
life of that contract. At March 31, 1998, property and equipment consisted of
the following:
<TABLE>
<S> <C>
Land and land improvements......................................... $ 3,378
Buildings.......................................................... 13,130
Machinery and equipment............................................ 45,613
Construction in progress........................................... 4,988
---------
67,109
Less--Accumulated depreciation..................................... (2,236)
---------
Property and equipment, net........................................ $ 64,873
---------
---------
</TABLE>
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements that extend the useful life of an item are
capitalized and depreciated. The cost and accumulated depreciation of property
and equipment retired or otherwise disposed of are removed from the related
accounts, and any residual values are charged or credited to income.
INCOME TAXES--The Company accounts for income taxes under the liability
method, which requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been included in the
financial statements and tax bases of assets and liabilities using currently
enacted tax rates. The Company does not provide for deferred taxes on its net
investment in foreign subsidiaries as it is essentially permanent in nature.
GOODWILL--Goodwill represents the excess of the purchase price over the fair
value of the net assets acquired and is amortized on a straight-line basis over
40 years. The Company periodically evaluates whether events and circumstances
have occurred which may affect the recoverability of the remaining balance of
its goodwill and other long-lived assets. If such events or circumstances were
to indicate that the carrying amount of these assets would not be recoverable,
the Company would estimate the future cash flows expected to result from the use
of the assets and their eventual disposition. If the sum of the expected
F-38
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
future cash flows (undiscounted and without interest charges) were less than the
carrying amount of the assets, the Company would recognize an impairment loss.
FOREIGN CURRENCY TRANSLATION--In accordance with Statement of Financial
Accounting Standards (SFAS) No. 52, substantially all assets and liabilities of
the Company's foreign subsidiaries are translated at the year-end exchange
rates; income and expenses are translated at the average exchange rates
prevailing during the period. Translation gains and losses are accumulated as a
separate component of shareholders' equity.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The fair value of the Company's Senior
Debt Credit Facility and Senior Subordinated Notes is estimated based on current
rates offered to the Company for debt of the same remaining maturities and on
quoted market rates, respectively. The estimated fair value of the Company's
Senior Debt Credit Facility approximates carrying value. Based on quoted market
prices, the estimated fair market value of the Senior Subordinated Notes is
approximately $78 million as of March 31, 1998.
ENVIRONMENTAL EXPENDITURES--Environmental expenditures that relate to
current or future revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past operations that
do not contribute to current or future revenues are expensed as incurred.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS--During June 1997, the Financial
Accounting Standards Board released SFAS No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997. SFAS No.
130 establishes standards for reporting and diplay in the financial statements
of total net income and the components of all other nonowner changes in equity,
referred to as comprehensive income. The Company will adopt SFAS No. 130 in
fiscal 1999 and anticipates this statement will not have a material effect on
the financial statements.
SUPPLEMENTAL CASH FLOW INFORMATION--The Company paid cash in the following
amounts relating to interest and taxes for the period from inception (September
19, 1997) to March 31, 1998:
<TABLE>
<S> <C>
Taxes............................................................... $ 510
Interest............................................................ 1,546
</TABLE>
(3) ACCRUED EXPENSES
Accrued expenses as of March 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Accrued compensation............................................... $ 9,737
Accrued income taxes............................................... 3,695
Accrued taxes other than income taxes.............................. 2,721
Accrued interest................................................... 2,271
Accrued professional fees.......................................... 3,332
Other.............................................................. 6,814
---------
$ 28,570
---------
---------
</TABLE>
F-39
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various lawsuits, including a dispute with a
minority shareholder in the Company's Brazilian subsidiary, and environmental
proceedings that have arisen in the normal course of business. Management
believes that the ultimate resolution of these matters will not have a material
adverse effect on the Company's financial position or results of operations.
The Company has noncancellable operating leases for its corporate
headquarters, certain manufacturing locations and various machinery and
equipment. The future minimum rental payments required under such leases are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING MARCH 31,
<S> <C>
1999............................................................................... $ 2,464
2000............................................................................... 2,053
2001............................................................................... 1,812
2002............................................................................... 1,724
2003............................................................................... 1,711
Thereafter......................................................................... 3,538
---------
$ 13,302
---------
---------
</TABLE>
Total rental expense for the period from inception (September 19, 1997) to
March 31, 1998 was approximately $.6 million.
As of March 31, 1998, the Company has unconditional agreements to purchase
approximately $4.4 million and $4.5 milion in raw materials and equipment,
respectively, expiring during the fiscal year ending March 31, 1999.
(5) TAXES ON INCOME
Income before provision for income taxes is comprised of the following:
<TABLE>
<S> <C>
U.S.................................................................. $ 295
Foreign.............................................................. 333
---------
Total.............................................................. $ 628
---------
---------
</TABLE>
The provision for income taxes in the accompanying consolidated statement of
operations consisted of the following:
<TABLE>
<S> <C>
Currently payable:
U.S. state and federal........................................... $ 2,580
Foreign.......................................................... 790
Deferred:
U.S state and federal............................................ (2,390)
Foreign.......................................................... (475)
---------
$ 505
---------
---------
</TABLE>
F-40
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) TAXES ON INCOME (CONTINUED)
The Company's effective tax rate differs from the U.S. statutory rate of 35%
as follows:
<TABLE>
<S> <C>
Federal income taxes at the U.S. statutory rate.................... $ 220
State income taxes, net of federal benefits........................ 15
Foreign losses not benefited....................................... 155
Book expenses not deductible for tax purposes, primarily goodwill
amortization..................................................... 115
---------
$ 505
---------
---------
</TABLE>
The components of the net deferred tax asset are as follows:
<TABLE>
<S> <C>
Current deferred tax asset:
Inventory........................................................ $ 1,503
Accruals......................................................... 2,894
Other............................................................ 488
---------
$ 4,885
---------
---------
Long-term deferred tax asset:
Accruals......................................................... $ 3,281
Other............................................................ (49)
---------
$ 3,232
---------
---------
</TABLE>
(6) LONG-TERM DEBT
Long-term debt as of March 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Senior Debt:
New Credit Facility term loan refinanced subsequent to yearend (see below)...... $ 50,000
New Credit Facility revolving loan refinanced subsequent to yearend (see
below)........................................................................ 2,800
Subordinated Debt:
Senior Subordinated Notes due December 15, 2005, interest payable semi-annually
on June 15 and December 15 at a 10% annual rate............................... 75,000
---------
127,800
Less--current maturities.......................................................... 1,500
---------
$ 126,300
---------
---------
</TABLE>
The effective rate of interest on the New Credit Facility term loan and
revolving loan was 7.9% and 9.5% as of March 31, 1998, respectively.
F-41
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) LONG-TERM DEBT (CONTINUED)
Principal maturities of long-term debt as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING MARCH 31,
<S> <C>
1999.............................................................................. $ 1,500
2000.............................................................................. 8,000
2001.............................................................................. 10,500
2002.............................................................................. 12,000
2003.............................................................................. 14,000
Thereafter........................................................................ 81,800
----------
$ 127,800
----------
----------
</TABLE>
The Company's payment obligations under the Notes are jointly and severally
guaranteed on a senior subordinated basis by certain of the Company's
subsidiaries (collectively, the "Guarantors"). The guarantees are subordinated
to the guarantees of Senior Indebtedness (as defined in the Indenture governing
the Notes (the "Indenture")) issued by the Guarantors.
Prior to December 15, 2001, the Notes will be redeemable at the Company's
option subject to certain call premiums, as defined in the Indenture.
Thereafter, the Notes will be subject to redemption from time to time, at the
option of the Company, in whole or in part, at certain specified redemption
prices, plus accrued and unpaid interest and Liquidated Damages (as defined in
the Indenture) thereon (if any) to the redemption date.
Concurrently with the FKI Acquisition, the Company and certain other
subsidiaries of the Company entered into the New Credit Facility, which was
repaid and replaced with a replacement credit facility (the "Replacement Credit
Facility") at the Dura Acquisition (see note 11).
Concurrently with the Dura Acquistion, the Company and certain of its
subsidiaries entered into the Replacement Credit Facility. Pursuant to the
Replacement Credit Facility, certain lenders provided a credit facility that
made available loans, letters of credit and commitments to Dura and its
subsidiaries, including the Company and its subsidiaries. In order to comply
with the terms of the Indenture, the lenders provided two different
sub-facilities under the Replacement Credit Facility; one sub-facility (the
"Trident Sub-Facility") was made available to the Company and certain of its
subsidiaries and the other sub-facility (the "Dura Sub-Facility") was made
available to Dura and its subsidiaries (other than the Company and its
subsidiaries). Pursuant to the terms of the Replacement Credit Facility, Dura
and certain of its subsidiaries (other than the Company and its subsidiaries)
will provide guarantees and collateral to support obligations owing under the
Trident Sub-Facility; but, so long as the Notes issued under the Indenture
remain outstanding, none of the Company or any of its subsidiaries will provide
any support for obligations owing under the Dura Sub-Facility. However, the two
sub-facilities do not generally have separate representations, warranties,
covenants or events of default. Therefore, any event of default relating to the
Dura Sub-Facility will cause an event of default under the Trident Sub-Facility.
Pursuant to the Trident Sub-Facility, the lenders provided (i) a Term Loan
to the Company in the aggregate principal amount of $50 million payable in
quarterly installments beginning March 1999 through April 2003, (ii) a Revolving
Credit and Letter of Credit Facility to the Company and certain of its
subsidiaries under which up to $25 million of loans and letters of credit in the
aggregate will from time to time be made available in various currencies for
working capital and general corporate purposes of the
F-42
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) LONG-TERM DEBT (CONTINUED)
Company and its subsidiaries maturing in April 2003 and (iii) an acquisition
loan facility to the Company under which up to $30 million in loans will from
time to time prior to April 28, 2000 be available in various currencies to
finance business acquisitions of the Company and its subsidiaries maturing in
April 2003 payable in quarterly installments beginning March 2000 and maturing
in April 2003.
Funds were drawn under the Trident Sub-Facility to refinance all amounts
owing under the New Credit Facility, which was terminated at the closing of the
Dura Acquisition. Loans under the Trident Sub-Facility can be made in various
currencies at the option of the Company. Each such loan will bear interest at an
applicable base rate, depending on the lending currency, plus an applicable
margin, as defined in the Replacment Credit Facility agreement.
The Replacement Credit Facility contains a number of covenants that, among
other things, restrict the ability of the Company and its subsidiaries to
dispose of assets, incur additional indebtedness, incur gaurantee obligations,
repay other indebtedness or amend other debt instruments, pay dividends, make
acquisitions, engage in mergers or consolidations, make capital expenditures,
engage in certain transactions with subsidiaries and affiliates and otherwise
restrict corporate activities. In addition, the Replacement Credit Facility also
requires Dura to maintain certain financial ratios, as defined in the
Replacement Credit Agreement. Failure of Dura or any of its subsidiaries to
comply with any of these covenants may cause an Event of Default under the
Trident Sub-Facility.
(7) RETIREMENT BENEFITS
DEFINED BENEFIT PLANS--Prior to the FKI Acquisition, employees participated
in FKI sponsored noncontributory defined benefit pension plans which covered
substantially all employees in the United States, the United Kingdom and Canada.
The plans provided benefits based on years of service and compensation or stated
amounts for years of service. In connection with the FKI Acquisition, the
Company established new defined benefit pension plans that provide benefits to
employees in the United States, the United Kingdom and Canada substantially the
same as those provided by the FKI plans. In connection therewith, FKI will
transfer funds from their pension trust funds in satisfaction of the actuarially
determined liability assumed by the Company. The Company's French subsidiary,
Trident Automotive S.A., provides certain retirement benefits to employees who
meet certain age and service requirements.
F-43
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) RETIREMENT BENEFITS (CONTINUED)
The funded status and amounts recognized in the Company's consolidated
balance sheet as of March 31, 1998 are as follows:
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL
------------------- ------------------------------------------
ACCUMULATED ASSETS EXCEED
BENEFITS EXCEED ACCUMULATED ACCUMULATED BENEFITS
ASSETS BENEFITS EXCEED ASSETS TOTAL
<S> <C> <C> <C> <C>
Actuarial present value of--
Vested benefits.................... $ (8,720) $ (11,158) $ (336) $ (20,214)
Nonvested benefits................. (393) -- (19) (412)
-------- -------- ----- ----------
Accumulated benefit obligation... (9,113) (11,158) (355) (20,626)
Effect of anticipated future
compensation levels................ (2,563) (614) (306) (3,483)
-------- -------- ----- ----------
Projected benefit obligation..... (11,676) (11,772) (661) (24,109)
Plan assets at fair value............ 8,810 12,496 -- 21,306
-------- -------- ----- ----------
Funded status........................ $ (2,866) $ 724 $ (661) $ (2,803)
-------- -------- ----- ----------
-------- -------- ----- ----------
</TABLE>
Net periodic pension cost for the period from inception (September 19, 1997)
to March 31, 1998 consisted of the following components:
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL TOTAL
<S> <C> <C> <C>
Service cost................................................ $ 317 $ 229 $ 546
Interest cost on projected benefit obligation............... 255 264 519
Actual return on plan assets................................ (253) (344) (597)
----- ----- ---------
Net periodic pension cost................................... $ 319 $ 149 $ 468
----- ----- ---------
----- ----- ---------
</TABLE>
The assumptions used to calculate the actuarial present value of the benefit
obligations as of March 31, 1998, were as follows:
<TABLE>
<CAPTION>
DOMESTIC INTERNATIONAL
<S> <C> <C>
Discount rate........................................................ 7.4% 6.0%-7.0%
Rate of increase in compensation level............................... 4.0% 4.5%-6.0%
Expected long-term rate of return on plan assets..................... 9.5% 9.0%
</TABLE>
DEFINED CONTRIBUTION PLAN--The Company's U.S. employees participate in a
defined contribution plan. Salaried and non-union hourly employees are eligible
to participate. The plan provides for employee contributions with certain
matching and discretionary employer contributions. Expense related to the plan
for the period from inception (September 19, 1997) to March 31, 1998 was $0.1
million.
POSTRETIREMENT HEALTH AND LIFE INSURANCE PLAN--FKI's employees participated
in an FKI sponsored postretirement health and life insurance plan which covered
substantially all U.S. salaried and hourly employees. Concurrently with the FKI
Acquisition, the Company established a new plan (the "Plan") with substantially
similiar provisions and assumed approximately $9.4 million of liabilities
related to postretirement health and life insurance benefits for employees of
FKI Automotive Group in the United States. To
F-44
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) RETIREMENT BENEFITS (CONTINUED)
be eligible for benefits, employees must be at least 60 years old with 10 years
of service. The monthly benefit provided by the Plan is generally $5.00 per year
of service, with participants paying any remaining premium cost. Certain
participants who retired prior to January 1993 or April 1994 pay a monthly rate
with the Company paying the remaining premium cost. The Plan is not funded.
The funded status of the Plan reconciles with the liability recorded as of
March 31, 1998 as follows:
<TABLE>
<S> <C>
Actuarial present value of--
Retirees.......................................................... $ 4,701
Fully eligible active participants................................ 1,035
Other active participants......................................... 3,638
---------
Accumulated and accrued postretirement benefit obligation........... $ 9,374
---------
---------
</TABLE>
Net periodic postretirement benefit cost for the period from inception
(September 19, 1997) to March 31, 1998 consisted of the following components:
<TABLE>
<S> <C>
Service cost......................................................... $ 69
Interest cost on accumulated postretirement benefit obligation....... 210
---------
Net postretirement benefit cost...................................... $ 279
---------
---------
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obiligation was 7.4% as of March 31, 1998. The assumed health care cost trend
rate used in determining the accumulated postretirement benefit obligation was
8% as of March 31, 1998. The rate was assumed to decrease by .5% per year to
5.0% in 2003.
Increasing the assumed health care cost trend rate by one percentage-point
in the period would increase the accumulated postretirement benefit obligation
by approximately $.1 million and would increase the aggregate of the service
cost and interest cost components of the net postretirement benefit cost by
approximately $.01 million.
(8) REDEEMABLE U.S. DOLLAR ORDINARY SHARES AND STOCK OPTIONS
Redeemable U.S. Dollar ordinary shares represent shares owned by employees
which the Company may be required to repurchase. With respect to 136,000 shares,
as defined in the Articles of Association, after the employee shareholder's
death or disability and expiration of 90 days without the Company executing a
call provision in the agreement, the employee, or legal representative, may sell
their shares to the Company at fair market value within 120 days after
employment cessation. As defined in an employment agreement and subject to the
Company meeting certain financial goals, the remaining 160,000 shares can be
sold to the Company within 120 days of employment termination at $2.50 per
share, except upon death or disability of the employee shareholder, at which
time the purchase price would be the greater of $2.50 per share or fair market
value. All share repurchases are subject to being permitted by applicable laws
and by the Company's financing agreements. The share repurchase requirements
lapse upon an initial public offering of the Company's common stock. On April
30, 1998, in connection with the Dura Aquisition discussed in Note 11, the
redeemable features of the stock discussed above were cancelled.
F-45
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) REDEEMABLE U.S. DOLLAR ORDINARY SHARES AND STOCK OPTIONS (CONTINUED)
Concurrently with the FKI Acquisition, the Company entered into various
incentive stock option agreements (the "Stock Option Agreements") whereby
non-qualifying stock options were granted to certain executives of the Company.
The Company may be required to repurchase any shares purchased pursuant to the
exercise of options under the Stock Option Agreements (the "Option Shares")
under terms similar to those discussed above for Redeemable U.S. Dollar ordinary
shares. The Company has authorized the granting of 3,000,000 options for
purchase of shares of common stock. All options granted pursuant to the Stock
Option Agreements generally expire ten years from the date of grant. The various
classes of options vest either (i) on a pro rata basis over periods ranging from
two to five years; (ii) based upon attainment of certain financial objectives;
(iii) based upon the successful acquisitons, as defined in the respective Stock
Option Agreements or (iv) immediately. Concurrently with the Dura Acquisition
(see Note 11), all options granted under the Stock Option Agreements were
cancelled or repurchased. Activity for these options is detailed below:
<TABLE>
<S> <C>
Options granted during the period from inception
(September 19, 1997) to March 31, 1998........................ 1,690,700
Options exercised during the period from inception
(September 19, 1997) to March 31, 1998........................ --
Options terminated during the period from inception
(September 19, 1997) to March 31, 1998........................ --
---------
1,690,700
---------
---------
Exercisable at March 31, 1998................................... 242,675
---------
---------
</TABLE>
The Company accounts for the Redeemable U.S. Dollar ordinary shares and options
granted under the Stock Option Agreements, both discussed above, in accordance
with APB Opinion 25, "Accounting for Stock Issued to Employess," which requires
the remeasurement of the value of the instruments to their estimated redemption
value during each reporting period. No compensation expense was recognized
during the period from inception (September 19, 1997) to March 31, 1998 related
to the management stock and stock options. This treatment is also in accordance
with SFAS No. 123, "Accounting for Stock Based Compensation".
(9) CUSTOMER INFORMATION
The Company sells its products primarily to OEMs in the automotive industry
on a worldwide basis. Sales are concentrated in North America and Europe with
the top three customers accounting for approximately 19%, 17% and 16% in the
period from inception (September 19, 1997) to March 31, 1998. The Company's
largest customer will discontinue purchases of certain products over the next
five years. Sales of these products were approximately 6% of net sales in the
period from inception (September 19, 1997) to March 31, 1998.
The accounts receivable balances of each of these top three customers was
approximately 22%, 10% and 13% of the gross accounts receivable balance as of
March 31, 1998, respectively.
F-46
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) SEGMENT INFORMATION
The Company operates in one business segment that manufactures automotive
parts for sale to OEMs. The Company operates in various geographical locations,
as indicated below. Transactions between subsidiaries of the Company are
consumated at market rates. The Company periodically benchmarks these
transactions against competitve sources. Segment financial information for the
period from inception (September 19, 1997) to March 31, 1998 is as follows:
<TABLE>
<CAPTION>
NORTH LATIN
AMERICA EUROPE AMERICA ELIMINATIONS TOTAL
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers......................... $ 59,308 $ 23,922 $ 3,112 $ -- $ 86,342
Transfers between geographic areas...................... 1,142 795 -- (1,937) --
--------- --------- --------- ------------ ---------
Net sales............................................... 60,450 24,717 3,112 (1,937) 86,342
Operating income........................................ 3,961 1,630 (178) -- 5,413
Identifiable assets..................................... 91,164 55,377 7,074 -- 153,615
</TABLE>
(11) SUBSEQUENT EVENTS
On April 30, 1998, Dura Ltd. acquired all of the outstanding shares of the
Company for an aggregate purchase price of approximately $87.5 million. The
stock purchase agreement with the principal shareholders of the Company contains
representations, warranties, covenants, conditions and indemnities covering
various aspects of the Dura Acquisition.
Dura Ltd. is a wholly-owned subsidiary of Dura, a Delaware corporation,
which is a leading designer and manufacturer of driver control systems,
engineered mechanical components and cable-related systems for the global
automotive industry.
In connection with the Dura Acquisition, the New Credit Facility was
replaced by the Replacement Credit Facility (see Note 6). The initial borrowing
under the Replacement Credit Facility occurred simultaneously with the
consummation of the Dura Acquisition. Deferred financing costs, related to the
New Credit Facility, will be written off in the first quarter of fiscal 1999,
resulting in an extraordinary charge of approximately $1.7 million, net of the
related tax benefit of $1.1 million.
The Dura Acquisition constituted a change of control under the Notes. Upon
the occurrence of a change of control, each holder of the Notes may require the
Company to repurchase all or any part of the Notes held by such holder at an
offer price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued interest and other specified costs to the date of repurchase.
Pursuant to the terms of the Indenture, Dura made a change of control Offer (as
defined in the Indenture) to the holders of the Notes on May 8, 1998. Since the
change of control offer has been made by Dura rather than the Company, the
purchase of the Notes pursuant thereto will have no effect on the Company's
financial position or results of operations.
F-47
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder and Board of Directors of
FKI Industries, Inc.:
We have audited the accompanying statement of net assets to be sold of the
FKI Automotive Group as of March 31, 1997, and the related statements of
operations to be sold and cash flows from operations to be sold for each of the
two years in the period ended March 31, 1997. 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.
As discussed in Note 1, these financial statements were prepared to present
the net assets to be sold of FKI Automotive Group and the related operations and
cash flows and are not intended to be a complete presentation of the Company's
assets, liabilities, operations and cash flows.
In our opinion, the special purpose financial statements referred to above
present fairly, in all material respects, the net assets to be sold of the FKI
Automotive Group as of March 31, 1997, and its related operations and cash flows
from operations to be sold for each of the two years in the period ended March
31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Stamford, Connecticut,
October 17, 1997
F-48
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trident Automotive plc:
We have audited the accompanying statement of operations to be sold and cash
flows from operations to be sold of the FKI Automotive Group (the Predecessor of
Trident Automotive plc) for the period from April 1, 1997 to December 12, 1997.
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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
As discussed in Note 1, these financial statements were prepared to present
the operations and cash flows from operations to be sold of FKI Automotive Group
and are not intended to be a complete presentation of the Company's operations
and cash flows.
In our opinion, the special purpose financial statements referred to above
present fairly, in all material respects, the operations and cash flows from
operations to be sold of the FKI Automotive Group for the period from April 1,
1997 to December 12, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
May 22, 1998
F-49
<PAGE>
FKI AUTOMOTIVE GROUP
STATEMENT OF NET ASSETS TO BE SOLD
AS OF MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents....................................................... $ --
Accounts receivable, less allowance for doubtful accounts of $922............... 51,835
Inventories..................................................................... 21,345
Reimbursable tooling............................................................ 2,865
Other current assets............................................................ 3,995
-----------
Total current assets.......................................................... 80,040
-----------
Property, plant and equipment, net................................................ 62,318
Other assets...................................................................... 3,231
-----------
Total assets.................................................................. 145,589
-----------
Current liabilities:
Accounts payable................................................................ 37,315
Accrued expenses................................................................ 14,575
-----------
Total current liabilities..................................................... 51,890
-----------
Accrued pension liability......................................................... 986
Other noncurrent liabilities...................................................... 2,860
Minority interests in subsidiary companies........................................ 1,168
Commitments and contingencies (Note 7)............................................
-----------
Net assets to be sold............................................................. $ 88,685
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-50
<PAGE>
FKI AUTOMOTIVE GROUP
STATEMENTS OF OPERATIONS TO BE SOLD
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
PERIOD
YEAR ENDED MARCH 31, FROM APRIL 1
---------------------- TO DEC. 12,
1996 1997 1997
<S> <C> <C> <C>
Net sales................................................................. $ 288,054 $ 297,884 $ 211,203
Cost of sales............................................................. 239,034 246,810 176,760
---------- ---------- -------------
Gross profit............................................................ 49,020 51,074 34,443
Selling and distribution expenses......................................... 10,575 11,318 7,635
General and administrative expenses....................................... 21,114 20,245 16,246
Legal judgments and expenses.............................................. 3,388 132 --
---------- ---------- -------------
Operating income........................................................ 13,943 19,379 10,562
Interest expense.......................................................... 390 448 651
Interest income........................................................... (1,183) (707) (599)
Exchange loss............................................................. 275 307 126
Other (income) expense.................................................... 160 (583) --
---------- ---------- -------------
Income before provision for income taxes................................ 14,301 19,914 10,384
Provision for income taxes................................................ 6,100 8,157 4,799
---------- ---------- -------------
Net income.............................................................. $ 8,201 $ 11,757 $ 5,585
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-51
<PAGE>
FKI AUTOMOTIVE GROUP
STATEMENTS OF CASH FLOWS FROM OPERATIONS TO BE SOLD
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED PERIOD
MARCH 31, FROM APRIL 1
---------------------- TO DEC. 12,
1996 1997 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................... $ 8,201 $ 11,757 $ 5,585
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 10,657 12,531 8,834
Provision for doubtful accounts...................................... 280 481 160
Loss (gain) on sale of property, plant and equipment................. (313) 125 18
Changes in operating items:
Accounts receivable.................................................. (658) (3,002) 2,717
Inventories.......................................................... 3,969 748 (586)
Reimbursable tooling................................................. (1,024) 6,367 617
Other current assets................................................. 346 (912) (991)
Other assets......................................................... 132 133 295
Accounts payable..................................................... (3,983) 418 (11,378)
Accrued expenses..................................................... 804 (4,403) 56
Other noncurrent liabilities......................................... (642) 29 (21)
Minority interests..................................................... (1,650) (263) 26
---------- ---------- -------------
Net cash provided by operating activities................................ 16,119 24,009 5,332
---------- ---------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................................ (15,355) (13,323) (9,853)
Proceeds from sale of property, plant and equipment...................... 427 468 217
Purchase of minority interest in ACCO La Teledynamique S.A............... (276) -- --
---------- ---------- -------------
Net cash used in investing activities.................................... (15,204) (12,855) (9,636)
---------- ---------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of note receivable............................................ 33 112 901
Principal payments on capital leases..................................... (122) (42) (29)
Net transfers from (to) FKI Industries................................... (755) (11,568) 1,909
---------- ---------- -------------
Net cash provided by (used in) financing activities...................... (844) (11,498) 2,781
---------- ---------- -------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................................... (71) 344 1,523
---------- ---------- -------------
Net increase in cash and cash equivalents................................ -- -- --
Cash and cash equivalents, beginning of period........................... -- -- --
---------- ---------- -------------
Cash and cash equivalents, end of period................................. $ -- $ -- $ --
---------- ---------- -------------
---------- ---------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................................... $ 224 $ 220 138
Income taxes........................................................... 4,019 2,859 1,930
</TABLE>
The accompanying notes are an integral part of these statements.
F-52
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD
1. BASIS OF PRESENTATION AND ORGANIZATION:
The accompanying special purpose financial statements of FKI Automotive
Group (the "FKI Automotive Group" or the "Company") relate to the automotive
business of FKI Industries Inc. ("FKI Industries") and its parent company, FKI
plc ("FKI"). The accompanying special purpose financial statements have been
derived from the historical financial statements of FKI Industries and FKI based
on assumptions management believes represent a reasonable basis for presenting
the historical financial position and results of operations of the FKI
Automotive Group. The financial statements of the FKI Automotive Group include
allocations of FKI Industries and FKI corporate expenses of approximately $1.5
million annually, as well as allocations of certain insurance, employee benefit
and other operating costs and expenses based on overall programs administered by
FKI Industries or FKI. These expenses have been allocated to the FKI Automotive
Group based on actuarial evaluations and management estimates. Management
believes this allocation methodology is reasonable and that the allocated costs
are comparable to those that the FKI Automotive Group would have incurred on a
stand-alone basis. The financial information included herein may not necessarily
reflect the financial position and results of operations of the FKI Automotive
Group in the future.
The accompanying special purpose financial statements have been prepared in
connection with the December 12, 1997 sale of the FKI Automotive Group by FKI
Industries and subsidiaries of FKI to Trident Automotive plc and its
consolidated subsidiaries ("Trident" or the "Purchaser") and the April 30, 1998
acquisition of all of the outstanding stock of Trident by Dura Automotive
Systems, Inc. ("Dura Automotive") (see note 13). The accompanying financial
statements reflect the combined financial position, results of operations and
cash flows of the following subsidiaries (direct or indirect) and divisions of
FKI Industries and FKI that were included in the acquisitions by Trident and
Dura Automotive:
ACCO Cable Controls Blytheville Division
ACCO Cable Controls Milan Division
Dominion Automotive Division
Keeler Automotive Division
Dominion Controls Division
ACCO La Teledynamique S.A.
ACCO Cable Controls Ltd.
ACCO-PLATEN GmbH
ACCO Industria e Commercio Ltda.
The accompanying financial statements have not been adjusted to reflect the
effects of the acquisitions by Trident or Dura Automotive.
The FKI Automotive Group financial statements do not include an allocation
of FKI Industries' or FKI's assets and liabilities not specifically identified
to the FKI Automotive Group, including cash and intercompany debt. In addition,
certain property, plant and equipment of the Keeler Automotive Division (a
division of FKI Industries) were not included in the acquisition by Trident. A
subsidiary of Trident leases such assets for approximately $1.5 million annually
for a period of 7.5 years. Accordingly, property, plant and equipment with a net
book value of approximately $15.6 million at March 31, 1997 have been excluded
from the accompanying statement of net assets to be sold. Depreciation expense
associated with these assets is included in the accompanying statements of
operations to be sold.
F-53
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD (CONTINUED)
1. BASIS OF PRESENTATION AND ORGANIZATION: (CONTINUED)
The Company is a manufacturer of cable assemblies, lighting products and
door handle assemblies primarily sold to original equipment manufacturers
("OEMs") predominantly in the automotive market. The Company's customers include
the major United States automotive OEMs as well as several foreign automotive
OEMs. The FKI Automotive Group has operations in the United States, Canada, the
United Kingdom, France, Germany and Brazil.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF PREPARATION:
The special purpose financial statements include the accounts of the
automotive subsidiaries and divisions of FKI Industries and FKI. All significant
intercompany transactions within the FKI Automotive Group have been eliminated.
USE OF ESTIMATES:
The preparation of 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION:
Revenues and earnings are recognized upon shipment of products.
INVENTORIES:
Inventories are valued at the lower of cost or market on a first-in,
first-out (FIFO) basis.
REIMBURSABLE TOOLING:
The Company capitalizes tooling costs and depreciates these costs over the
life of the related product. Additionally, the Company capitalizes as a
receivable the cost of tooling that is reimbursable by its customers.
PROPERTY, PLANT AND EQUIPMENT:
The cost of property, plant and equipment is depreciated over the estimated
useful lives of the assets using the straight-line method, generally as follows:
land improvements, ten to 15 years; buildings, 20 to 40 years; machinery and
equipment, five to 15 years. Certain property, plant and equipment was acquired
in 1987 in a transaction accounted for as a purchase. Such property, plant and
equipment was recorded based on an independent appraisal and is depreciated over
the estimated remaining useful lives set forth in the appraisal as follows: land
improvements and buildings, seven to 25 years; machinery and equipment, seven to
14 years.
Upon retirement or sale, the cost and related accumulated depreciation are
removed from the accounts and any resulting gains or losses are included in
operations.
F-54
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
EMPLOYEE BENEFITS:
FKI Automotive Group employees participate in FKI Industries and FKI
sponsored noncontributory defined benefit pension plans which cover
substantially all employees in the United States, the United Kingdom and Canada.
The plans provide benefits based on years of service and compensation or stated
amounts for years of service, and the plans are funded by FKI Industries and FKI
based on actuarial determinations. The expense for these plans, which was
allocated to the FKI Automotive Group by FKI Industries and FKI based on
actuarial evaluations, was approximately $1.7 million for the years ended March
31, 1996 and 1997 and $1.2 million for the period from April 1, 1997 to December
12, 1997.
The Company's French subsidiary, ACCO La Teledynamique S.A., provides
certain retirement benefits to employees who meet certain age and service
requirements. The obligation is unfunded, and accruals of approximately $1.0
million related to the plan are included in noncurrent liabilities in the
accompanying statement of net assets to be sold as of March 31, 1997. The
related expense was $0.1 million for the years ended March 31, 1996 and 1997 and
$0.1 million for the period from April 1, 1997 to December 12, 1997.
FKI Automotive Group's U.S. employees also participate in an FKI Industries
sponsored defined contribution plan. Salaried and non-union hourly employees are
eligible to participate. The plan provides for employee contributions with
certain matching and discretionary employer contributions. The Company's expense
for contributions under the plan was approximately $0.6 million and $0.6 million
for the years ended March 31, 1996 and 1997, respectively, and $0.5 million for
the period from April 1, 1997 to December 12, 1997.
FKI Automotive Group's employees participate in an FKI Industries sponsored
postretirement health and life insurance plan which covers substantially all
U.S. salaried and hourly employees. The expense for this plan, which was
allocated to the FKI Automotive Group by FKI Industries based on actuarial
evaluations, was approximately $1.0 million, and $0.9 million for the years
ended March 31, 1996 and 1997, respectively, and $0.7 million for the period
from April 1, 1997 to December 12, 1997.
The pension and postretirement benefit expense allocations were estimated
using actuarial estimates and management assumptions. The estimates are based on
historical information, along with certain assumptions about future events.
Changes in assumptions, as well as changes in actual experience, could cause the
estimated expenses and liabilities to change.
In connection with the purchase of the FKI Automotive Group, the Purchaser
will establish new defined benefit pension plans that will provide benefits to
employees in the United States, the United Kingdom and Canada identical to those
provided by the existing FKI Industries and FKI plans. In connection therewith,
FKI Industries and FKI will transfer funds from their pension trust funds in
satisfaction of the actuarially determined liability assumed by the Purchaser.
The Purchaser also will establish a new defined contribution plan for U.S.
employees and will assume approximately $8.7 million of liabilities related to
postretirement health and life insurance benefits for employees of FKI
Automotive Group in the United States.
F-55
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES:
The FKI Automotive Group operated as a division of FKI Industries in the
United States and Canada, and related income taxes were not allocated to the
Company. The provision for income taxes in the accompanying financial statements
reflects U.S. and Canadian tax rates of 40% and 37%, respectively, the estimated
combined rates for current and deferred state, federal and foreign income taxes.
The related current or deferred income taxes payable would have been transferred
to FKI Industries, if allocated, and are included in net assets. The provision
for income taxes related to the Company's other non-U.S. operations is based on
statutory tax rates. There are no significant temporary differences or related
deferred income tax assets, liabilities or provisions.
GOODWILL:
Goodwill is amortized using the straight-line method over periods ranging
from ten to 40 years. Subsequent to acquiring goodwill, the Company continually
evaluates whether events and circumstances, including anticipated future
operating results, indicate the remaining useful life of goodwill may warrant
revision. Based upon its most recent analysis, the Company believes that no
material impairment of goodwill exists at December 12, 1997. Accumulated
amortization of goodwill was approximately $0.4 million as of March 31, 1997.
FOREIGN CURRENCY TRANSLATION:
Substantially all assets and liabilities of the Company's foreign
subsidiaries are translated at the year-end exchange rates; income and expenses
are translated at the average exchange rates prevailing during the period.
Translation adjustments are accumulated in net assets. Translation adjustments
relating to the Company's operations in hyper-inflationary economies, which were
not material in any of the periods presented, are included in income.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair value of financial instruments approximates the carrying value.
Certain of the Company's divisions hedge foreign currency exposure for
inventory purchases that are not denominated in their local currency through the
use of forward exchange contracts. The forward contracts are intended to cover
anticipated operating needs rather than firm commitments. Therefore, the gains
and losses on these contracts are included in income based on the market values
at each reporting date. At March 31, 1997, the Company held $6.0 million of
foreign currency contracts maturing through March 1998. The fair value of the
contracts, based upon quotes obtained from brokers, was approximately $0.2
million at March 31, 1997.
RESEARCH AND DEVELOPMENT:
Expenditures for research and development and new product development are
expensed as incurred.
F-56
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ENVIRONMENTAL EXPENDITURES:
Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations that do not contribute to current or future
revenues are expensed as incurred.
3. INVENTORIES:
Inventories consisted of the following as of March 31, 1997 (in thousands):
<TABLE>
<S> <C>
Finished products.................................................. $ 2,957
Work-in-process.................................................... 11,175
Raw materials...................................................... 7,213
---------
$ 21,345
---------
---------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following as of March 31,
1997 (in thousands):
<TABLE>
<S> <C>
Land and land improvements........................................ $ 2,979
Buildings......................................................... 12,839
Machinery and equipment........................................... 125,328
Construction in progress.......................................... 4,041
-----------
145,187
Less: Accumulated depreciation.................................... (82,869)
-----------
Property, plant and equipment, net................................ $ 62,318
-----------
-----------
</TABLE>
5. OTHER ASSETS:
Other assets consisted of the following as of March 31, 1997 (in thousands):
<TABLE>
<S> <C>
Goodwill............................................................ $ 2,213
Note receivable-long-term........................................... 901
Other............................................................... 117
---------
$ 3,231
---------
---------
</TABLE>
F-57
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD (CONTINUED)
6. ACCRUED EXPENSES:
Accrued expenses consisted of the following as of March 31, 1997 (in
thousands):
<TABLE>
<S> <C>
Accrued compensation............................................... $ 5,681
Accrued insurance.................................................. 235
Accrued taxes other than income taxes.............................. 3,834
Other.............................................................. 4,825
---------
$ 14,575
---------
---------
</TABLE>
7. COMMITMENTS AND CONTINGENCIES:
During fiscal 1996, a judgment in the amount of $4.4 million plus $0.2
million of interest was entered against the Company in a product liability
lawsuit, which judgment was paid during 1997. The accompanying statements of
operations to be sold include expenses related to the judgment and related legal
fees and costs, net of insurance recoveries, of $3.4 million and $0.1 million
for the years ended March 31, 1996 and 1997, respectively. The Company is also a
defendant in various other lawsuits and environmental proceedings that have
arisen in the normal course of business. Management believes that the ultimate
resolution of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
The Company has noncancellable operating leases for its corporate
headquarters, certain manufacturing locations and various machinery and
equipment. The future minimum rental payments required under such leases are as
follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING MARCH 31,
<S> <C>
1998................................................................................. $ 1,413
1999................................................................................. 1,027
2000................................................................................. 685
2001................................................................................. 225
2002................................................................................. 124
Thereafter........................................................................... 112
---------
$ 3,586
---------
---------
</TABLE>
8. TAXES ON INCOME:
Income before provision for income taxes is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------- DEC. 12,
1996 1997 1997
<S> <C> <C> <C>
U.S.......................................................... $ 1,894 $ 7,571 $ (103)
Foreign...................................................... 12,407 12,343 10,487
--------- --------- ---------
Total...................................................... $ 14,301 $ 19,914 $ 10,384
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-58
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD (CONTINUED)
8. TAXES ON INCOME: (CONTINUED)
The provision for income taxes in the accompanying statements of operations
to be sold consists of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------- DEC. 12,
1996 1997 1997
<S> <C> <C> <C>
U.S. state and federal........................................... $ 658 $ 2,933 $ (41)
Foreign.......................................................... 5,442 5,224 4,840
--------- --------- -----------
$ 6,100 $ 8,157 $ 4,799
--------- --------- -----------
--------- --------- -----------
</TABLE>
The Company's effective tax rate differs from the U.S. statutory rate of 35%
as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------- DEC. 12,
1996 1997 1997
<S> <C> <C> <C>
Federal income taxes at the U.S. statutory rate.................. $ 5,005 $ 6,970 $ 3,634
State income taxes, net of federal benefits...................... 82 367 (3)
Foreign losses not benefited..................................... 841 756 301
Settlement of prior year taxes................................... -- -- 694
Other, net....................................................... 172 64 173
--------- --------- -----------
$ 6,100 $ 8,157 $ 4,799
--------- --------- -----------
--------- --------- -----------
</TABLE>
9. RELATED PARTY TRANSACTIONS:
The Company routinely enters into transactions with FKI and other companies
within the worldwide group of FKI. The amounts included in the accompanying
financial statements resulting from these related party transactions are as
follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------- DEC. 12,
1996 1997 1997
<S> <C> <C> <C>
Sales........................................................... $ 120 $ 92 $ 40
Purchases....................................................... 9,973 10,073 7,108
Interest income................................................. 66 65 4
</TABLE>
The Company maintains insurance coverage with a third party carrier that
reinsures a portion of the Company's coverage with a captive insurance company
of FKI. The Company's U.S. and Canadian entities are insured for workers'
compensation, general and product liability, and automobile liability through
this coverage. Premiums paid for all insurance coverages through the captive
insurance company were approximately $1.9 million, $2.0 million and $1.4 million
for the years ended March 31, 1996 and 1997 and the period from April 1, 1997 to
December 12, 1997, respectively.
F-59
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD (CONTINUED)
10. SUPPLEMENTARY PROFIT AND LOSS INFORMATION:
The statements of operations to be sold include the following expenses (in
thousands):
<TABLE>
<CAPTION>
MARCH 31,
-------------------- DEC. 12,
1996 1997 1997
<S> <C> <C> <C>
Depreciation and amortization................................. $ 10,657 $ 12,531 $ 8,834
Research and development...................................... 3,380 3,133 582
Rental........................................................ 1,680 908 965
</TABLE>
11. CUSTOMER INFORMATION:
The Company sells its products primarily to OEMs in the automotive industry
on a worldwide basis. Sales are concentrated in North America and Europe with
the top three customers accounting for approximately 29%, 12% and 12% in fiscal
1996; 25%, 15% and 14% in fiscal 1997 and; 21%, 17% and 15% for the period from
April 1, 1997 to December 12, 1997. The Company's largest customer will
discontinue purchases of certain products over the next five years. Sales of
these products were approximately 6.0% of total sales for the period from April
1, 1997 to December 12, 1997.
12. SEGMENT INFORMATION:
The Company operates in one business segment that manufactures automotive
parts for sale to OEMs. The Company operates in various geographical locations,
as indicated below. Segment financial information is as follows:
Segment Information Fiscal 1996:
<TABLE>
<CAPTION>
NORTH LATIN
AMERICA EUROPE AMERICA ELIMINATIONS TOTAL
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers...................... $ 195,492 $ 75,608 $ 16,954 $ -- $ 288,054
Transfers between geographic areas................... 4,495 1,382 -- (5,877) --
---------- --------- --------- ------------ ----------
Net sales............................................ $ 199,987 $ 76,990 $ 16,954 $ (5,877) $ 288,054
---------- --------- --------- ------------ ----------
---------- --------- --------- ------------ ----------
Operating income..................................... $ 9,115 $ 4,302 $ 526 $ -- $ 13,943
---------- --------- --------- ------------ ----------
---------- --------- --------- ------------ ----------
Identifiable assets.................................. $ 95,903 $ 46,320 $ 6,061 $ -- $ 148,284
---------- --------- --------- ------------ ----------
---------- --------- --------- ------------ ----------
</TABLE>
Segment Information Fiscal 1997:
<TABLE>
<CAPTION>
NORTH LATIN
AMERICA EUROPE AMERICA ELIMINATIONS TOTAL
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers...................... $ 203,369 $ 79,967 $ 14,548 $ -- $ 297,884
Transfers between geographic areas................... 2,684 2,290 -- (4,974) --
---------- --------- --------- ------------ ----------
Net sales............................................ $ 206,053 $ 82,257 $ 14,548 $ (4,974) $ 297,884
---------- --------- --------- ------------ ----------
---------- --------- --------- ------------ ----------
Operating income..................................... $ 12,998 $ 7,326 $ (945) $ -- $ 19,379
---------- --------- --------- ------------ ----------
---------- --------- --------- ------------ ----------
Identifiable assets.................................. $ 90,832 $ 49,396 $ 5,361 $ -- $ 145,589
---------- --------- --------- ------------ ----------
---------- --------- --------- ------------ ----------
</TABLE>
F-60
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO STATEMENTS OF NET ASSETS
AND OPERATIONS TO BE SOLD (CONTINUED)
12. SEGMENT INFORMATION: (CONTINUED)
Segment Information for the period April 1, 1997 to December 12, 1997:
<TABLE>
<CAPTION>
NORTH LATIN
AMERICA EUROPE AMERICA ELIMINATIONS TOTAL
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated Customers....................... $ 142,308 $ 59,181 $ 9,714 $ -- $ 211,203
Transfers between geographic areas.................... 2,502 1,955 -- (4,457) --
---------- --------- ----------- ------------ ----------
Net sales............................................. $ 144,810 $ 61,136 $ 9,714 $ (4,457) $ 211,203
---------- --------- ----------- ------------ ----------
---------- --------- ----------- ------------ ----------
Operating income...................................... $ 4,088 $ 6,249 $ 225 $ -- $ 10,562
---------- --------- ----------- ------------ ----------
---------- --------- ----------- ------------ ----------
</TABLE>
13. ACQUISITIONS:
On December 12, 1997, Trident completed the acquisition of the FKI
Automotive Group (the "Acquisition"). The Acquisition purchase price was
approximately $162.2 million. The Acquisition purchase price and related fees
and expenses of approximately $13.8 million were financed through the issuance
of $75.0 million 10% Senior Subordinated Notes due 2005 through a private
placement offering, borrowings under the Company's new $105.0 million secured
credit facility and $42.6 million in equity contributions.
On April 30, 1998, all of the outstanding stock of Trident was acquired by
an indirect, wholly-owned subsidiary of Dura Automotive for cash consideration
of approximately $87.5 million. Upon completion of the acquisition, Trident
became an indirect, wholly-owned subsidiary of Dura Automotive.
The above acquisitions were accounted for as purchases and, accordingly, the
assets and liabilities were adjusted to fair values as of the respective dates
of acquisition. The accompanying financial statements do not reflect the effects
of the acquisitions described above.
F-61
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 9
The Company.................................... 15
Use of Proceeds................................ 16
Market Price of Class A Common Stock........... 17
Dividend Policy................................ 17
Capitalization................................. 18
Unaudited Pro Forma Financial Data............. 20
Selected Consolidated Financial Data........... 28
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 30
Business....................................... 35
Management..................................... 51
Principal and Selling Stockholders............. 55
Description of Capital Stock................... 58
Underwriting................................... 61
Legal Matters.................................. 62
Experts........................................ 62
Available Information.......................... 63
Incorporation of Certain Documents by
Reference.................................... 63
Index to Financial Statements.................. F-1
</TABLE>
4,413,000 SHARES
[LOGO]
DURA AUTOMOTIVE
SYSTEMS, INC.
CLASS A COMMON STOCK
-----------------
PROSPECTUS
-----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ROBERT W. BAIRD & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PIPER JAFFRAY INC.
, 1998
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting discounts and commissions) payable by the
Company in connection with the issuance and distribution of the Class A Common
Stock pursuant to the Prospectus contained in this Registration Statement. The
Company will pay all of these expenses.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................ $ 57,077
NASD Filing Fee.................................................... 19,848
Nasdaq Listing Application Fee..................................... *
Accounting Fees and Expenses....................................... *
Legal Fees and Expenses............................................ *
Blue Sky Fees and Expenses......................................... *
Printing Expenses.................................................. *
Miscellaneous Expenses............................................. *
---------
Total.......................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be provided by amendment.
All expenses other than the Securities and Exchange Commission Registration
Fee and NASD Filing Fee are estimated.
ITEM 15. 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 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
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, suit or proceeding, 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 and, with respect to any criminal 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 indemnity may include expenses (including
attorney's 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 interest 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.
II-1
<PAGE>
The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws provide for the indemnification of directors and officers of
the Company to the fullest extent permitted by the General Corporation Law of
the State of Delaware.
In that regard, the Amended and Restated By-laws of the Company provide that
the Company shall indemnify any person who was or is a party or is threatened to
be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact that he,
or a person of whom he is the legal representative, 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, employee, fiduciary, or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
liabilities and losses (including attorneys' fees actually and reasonably
incurred in connection with such proceeding); provided that the Company shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the Board of Directors of the Company.
II-2
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S>
**1.1 Form of Underwriting Agreement between Dura Automotive Systems, Inc., Dura Operating Corp. and the
Underwriters named therein.
3.1 Form of Amended and Restated Certificate of Incorporation of the Company incorporated by reference to
Exhibit 3.1 of the Registrant's Form S-1, Registration No. 333-06601 filed under the Securities Act of
1933 (the "Form S-1").
3.2 Form of Amended and Restated By-laws of the Company, incorporated by reference to Exhibit 3.2 of the
Form S-1.
4.1 Stockholders Agreements, 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), incorporated by reference to Exhibit 4.1 of the Form S-1.
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),
incorporated by reference to Exhibit 4.2 of the Form S-1.
4.3 Registration Agreement, dated as of August 31, 1994, among the Company, Alkin and the MC Stockholders
(as defined therein), incorporated by reference to Exhibit 4.3 of the Form S-1.
4.4 Amendment to Registration Agreement, dated May 17, 1995, by and between the Company, the MC Stockholders
(as defined therein) and Alkin, incorporated by reference to Exhibit 4.4 of the Form S-1.
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, incorporated by reference to
Exhibit 4.5 of the Form S-1.
4.6 Form of certificate representing Class A Common Stock of the Company, incorporated by reference to
Exhibit 4.6 of the Form S-1.
4.7 Amendment No. 1 to Amended and Restated Stockholders Agreement, dated August 13, 1996, by and between
the Company, Onex DHC LLC, J2R, Alkin Co. and the HCI Stockholders and Management Stockholders listed
therein, incorporated by reference to Exhibits 4.1 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1997.
**5.1 Opinion of Kirkland & Ellis as to the validity of the issuance of the Class A Common Stock offered
hereby (including consent).
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of Arthur Andersen LLP.
**23.4 Consent of Kirkland & Ellis (included in Exhibit 5.1).
*24.1 Powers of Attorney (included on signature page).
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 (other than the
insurance policies referred to therein), or otherwise, the Registrant have 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 their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question 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.
The undersigned Registrant hereby undertake that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the 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 the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities Act, 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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF ROCHESTER HILLS, STATE OF MICHIGAN ON THE 27TH DAY OF
MAY, 1998.
<TABLE>
<S> <C> <C>
DURA AUTOMOTIVE SYSTEMS, INC.
By: /s/ DAVID R. BOVEE
-----------------------------------------
David R. Bovee
VICE PRESIDENT
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Scott D. Rued and S.A. Johnson and each of them,
as true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement (and any registration
statement filed pursuant to Rule 462(b) under the Securities Act), and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED ON MAY 27, 1998 BY
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ --------------------------
<C> <S>
President, Chief Executive
/s/ KARL F. STORRIE Officer and Director
- ------------------------------ (principal executive
Karl F. Storrie officer)
Vice President and Chief
/s/ STEPHEN E.K. GRAHAM Financial Officer
- ------------------------------ (principal financial and
Stephen E.K. Graham accounting officer)
/s/ S.A. JOHNSON
- ------------------------------ Chairman of the Board and
S.A. Johnson Director
/s/ J. RICHARD JONES
- ------------------------------ Vice Chairman and Director
J. Richard Jones
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ --------------------------
<C> <S>
/s/ WILLIAM H. CLEMENT
- ------------------------------ Director
William H. Clement
/s/ JACK K. EDWARDS
- ------------------------------ Director
Jack K. Edwards
/s/ ROBERT R. HIBBS
- ------------------------------ Vice President and
Robert R. Hibbs Director
/s/ JOHN C. JORGENSEN
- ------------------------------ Director
John C. Jorgensen
/s/ JAMES L. O'LOUGHLIN
- ------------------------------ Director
James L. O'Loughlin
/s/ ROBERT J. ORSCHELN
- ------------------------------ Director
Robert J. Orscheln
/s/ WILLIAM L. ORSCHELN
- ------------------------------ Director
William L. Orscheln
/s/ ERIC J. ROSEN
- ------------------------------ Director
Eric J. Rosen
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S>
**1.1 Form of Underwriting Agreement between Dura Automotive Systems, Inc., Dura Operating Corp. and the
Underwriters named therein.
3.1 Form of Amended and Restated Certificate of Incorporation of the Company incorporated by reference to
Exhibit 3.1 of the Registrant's Form S-1, Registration No. 333-06601 filed under the Securities Act of
1933 (the "Form S-1").
3.2 Form of Amended and Restated By-laws of the Company, incorporated by reference to Exhibit 3.2 of the
Form S-1.
4.1 Stockholders Agreements, 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), incorporated by reference to Exhibit 4.1 of the Form S-1.
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),
incorporated by reference to Exhibit 4.2 of the Form S-1.
4.3 Registration Agreement, dated as of August 31, 1994, among the Company, Alkin and the MC Stockholders
(as defined therein), incorporated by reference to Exhibit 4.3 of the Form S-1.
4.4 Amendment to Registration Agreement, dated May 17, 1995, by and between the Company, the MC Stockholders
(as defined therein) and Alkin, incorporated by reference to Exhibit 4.4 of the Form S-1.
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, incorporated by reference to
Exhibit 4.5 of the Form S-1.
4.6 Form of certificate representing Class A Common Stock of the Company, incorporated by reference to
Exhibit 4.6 of the Form S-1.
4.7 Amendment No. 1 to Amended and Restated Stockholders Agreement, dated August 13, 1996, by and between
the Company, Onex DHC LLC, J2R, Alkin Co. and the HCI Stockholders and Management Stockholders listed
therein, incorporated by reference to Exhibits 4.1 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 1997.
**5.1 Opinion of Kirkland & Ellis as to the validity of the issuance of the Class A Common Stock offered
hereby (including consent).
*23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of Arthur Andersen LLP.
**23.4 Consent of Kirkland & Ellis (included in Exhibit 5.1).
*24.1 Powers of Attorney (included on signature page).
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
May 22, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan
May 22, 1998
<PAGE>
EXHIBIT 23.3
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
Stamford, Connecticut
May 22, 1998
