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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended: Commission file number:
December 31, 1997 0-21139
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DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State of Incorporation) (I.R.S. Employer Identification No.)
4508 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (612) 342-2311
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of February 27, 1998, 4,165,251 shares of Class A Common Stock of the
Registrant were outstanding and the aggregate market value of the Class A
Common Stock of the Registrant (based upon the last reported sale price of
the Common Stock at that date by the Nasdaq National Market System), excluding
shares owned beneficially by affiliates, was approximately $128,569,000. In
addition, 4,654,380 shares of Class B Common Stock of the Registrant were
outstanding at February 27, 1998.
Information required by Items 10, 11, 12 and 13 of Part III of this Annual
Report on Form 10-K incorporates by reference information (to the extent
specific sections are referred to herein) from the Registrant's Proxy Statement
for its annual meeting to be held May 21, 1998 (the "1998 Proxy Statement").
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DURA AUTOMOTIVE SYSTEMS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
BACKGROUND OF COMPANY
Dura Automotive Systems, Inc. and its subsidiaries (collectively
referred to as the "Company") is a leading designer and manufacturer of
driver control systems, engineered mechanical components and cable-related
systems 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 26 manufacturing and product
development facilities located in the United States (Indiana, Michigan,
Missouri), Australia, Canada, France, Germany, Mexico, and Spain, and in
Brazil through a joint venture. The Company's revenues have increased from
$129.3 million in 1993 to $489.8 million in 1997 on a pro forma basis, a
compound annual growth rate of approximately 40%. Over this same period, the
Company's operating income margin has improved from 2.8% of revenues to 7.6%
of revenues.
The Company believes that it is a leading North American supplier of
parking brake mechanisms, transmission shifter mechanisms and automotive
cables, with estimated market shares in excess of 75%, 40% and 25%,
respectively. In addition, the Company is one of the few suppliers to offer
integrated parking brake, shifter and latch systems. 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 81% of the Company's 1997 revenues
are in North America with its major customers being Ford, GM, Chrysler and
Toyota. The Company manufactures products for many of the most popular car,
light truck and sport utility models, including eight 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 pickups, Dodge Ram pickups, and Toyota
Camry. As a result of recent acquisitions, approximately 17% of the
Company's 1997 pro forma revenues were generated from sales to European OEMS
including Mercedes, Volkswagen and BMW. The Company is generally the sole
supplier of the parts it sells to
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OEMs and will ordinarily continue to supply parts for a particular model for
the life of the model, which usually ranges from three to seven years.
The Company was formed by an investor group organized by Hidden Creek
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 cable and lever
business and light duty cable business (the "Brake and Cable Business") of
Alkin Co. ("Alkin") which significantly expanded the Company's size and
capabilities. The Company completed an initial public offering of 3,795,000
shares of its Class A common stock in August 1996.
Since August 1994, the Company has successfully completed the following
strategic acquisitions and joint ventures:
- In August 1996, the Company formed a joint venture with Excel Industries
Inc. ("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 $5.0 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 October 1996, the Company acquired the parking brake business of
Rockwell Light Vehicle Systems France S.A. 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.
- In December 1996, the Company acquired KPI Automotive Group ("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.
- In January 1997, the Company acquired the VOFA Group ("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.
- In May 1997, the Company acquired the automotive 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.
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- 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. 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. In addition, the acquisition
added Nissan as a customer.
- In December 1997, the Company purchased approximately 19% of the
outstanding common stock of Thixotech Inc. ("Thixotech") for approximately
$0.5 million. The Company also loaned Thixotech an additional $2.8 million
pursuant to notes which are convertible into additional common stock of
Thixotech at the Company's option. If exercised, the Company could own a
majority of Thixotech. Thixotech is currently pursuing the development of an
alternative manufacturing technology for component parts.
- In December 1997, the Company acquired REOM Industries ("REOM"), an
Australian designer and manufacturer of jacks and parking brakes, for
approximately $3.7 million. The acquisition added market penetration in
parking brakes, a new product (jacks) and established a presence in the
Pacific Rim.
- The Company is currently in the process of acquiring Universal Tool &
Stamping, Inc. ("Universal"), a manufacturer of jacks for the North American
automotive industry. Universal had 1997 revenues of approximately $37.0
million. Universal's customers include General Motors, Ford and Honda. The
acquisition provides the Company with a market presence for jacks in North
America and adds Honda as a significant new customer.
In order to focus on its higher margin products, the Company sold its
window regulator business to Rockwell International Corporation ("Rockwell")
in April 1995 for approximately $18.0 million in cash, resulting in a pretax
gain of $4.2 million.
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 been reducing 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 and financial resources to meet
such demands. For full-service suppliers such as the Company, the new
environment provides an opportunity to grow by obtaining business previously
provided by other non full-service suppliers and by acquiring suppliers that
further enhance product, manufacturing and service capabilities. OEMs
rigorously evaluate suppliers on the basis of product quality, cost control,
reliability of delivery, product design capability, financial strength, new
technology implementation, quality and condition of facilities and overall
management. Suppliers that obtain superior ratings are considered for
sourcing new business; those that do not generally continue their existing
contracts, but normally do not receive additional business. Although these
new supplier policies have already
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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.
The Company has seven manufacturing facilities located in France,
Germany, Spain, Australia and through its joint venture in Brazil. In
addition, 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 two 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.
BUSINESS 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,
engineered mechanical components and cable-related systems 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.
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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
ownership-related incentives to managers and salaried and hourly employees
through grants under the 1996 Key Employee Stock Option Plan and
participation in the Dura Automotive Systems, Inc. Employee Stock Discount
Purchase Plan.
GROWTH STRATEGY
STRATEGIC ACQUISITIONS. Since August 1994, the Company has successfully
completed seven strategic acquisitions and two joint ventures. 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. 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 AND MODULES. OEMs continue to seek
suppliers capable of manufacturing complete modules and systems for a vehicle
rather than suppliers that produce only the component parts which comprise a
module or 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 modules and 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
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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 minivan 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 joint ventures. Consistent with this
strategy, the Company believes that the VOFA (Germany and Spain), Rockwell
Light Vehicle Systems France S.A. (France) and REOM (Australia) 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, tilt lever and turn signal assemblies).
The Company believes that it is the leading North American supplier of
parking brake mechanisms, transmission shifter mechanisms and automotive
cables, with estimated market shares in excess of 75%, 40% and 25%,
respectively. The Company offers individual components as well as integrated
parking brake, shifter and latch systems, which consist of mechanisms and
cables.
The following table sets forth the approximate composition by product
category of the Company's revenues on a pro forma basis for the last three
fiscal years:
Year Ended December 31,
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Product Category 1997 1996 1995
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Parking brake mechanisms 23% 39% 57%
Automotive cables 38 39 29
Latches 4 12 9
Transmission shifter mechanisms 24 4 3
Other body hardware 11 6 2
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Total 100% 100% 100%
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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 and Toyota. As a result of recent
acquisitions, the Company added Mercedes, Volkswagen and BMW 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 past three fiscal years:
Year Ended December 31,
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Customer 1997 1996 1995
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Ford 42% 49% 52%
GM 25 36 35
Chrysler 7 8 6
Toyota 4 5 5
Mercedes 4 - -
Volkswagen 4 - -
BMW 3 - -
Other 11 2 2
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Total 100% 100% 100%
---- ---- ----
---- ---- ----
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 model, which is generally up 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, 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:
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Customer Car Models Truck Models
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Ford Escort/Tracer, Fiesta *, Bronco, Econoline,
Mustang, Ka* Contour/Mystique/ Expedition/Navigator,
Mondeo*, Continental/Town Car, Navajo/Explorer/
Mark/Mark VIII, Taurus/Sable, Mountaineer, F-Series,
Cougar, Crown Victoria/ Ranger, Villager,
Grand Marquis Windstar Autoeuropa
MPV*, Escort Van*
GM Achieva/Grand Am, Century, Safari/Astro, Blazer/
Corvette, Deville/Seville/ Bravada/Jimmy, C/K Pickup/
Eldorado, Firebird/Camaro, Tahoe/Sierra/Yukon,
Lumina/Monte Carlo/Regal/ Silhouette/TransSport/
Intrigue, Aurora/Riviera/Park Venture, S-10 Pick-up/
Avenue, Olds 88/Bonneville/ Sonoma, Suburban
LeSabre, Saturn/Innovate,
Sunfire/Cavalier, Malibu/
Cutlass/Grand Prix, Astra*,
Corsa*, Vectra*
Chrysler Intrepid/Concorde/LHS/300M, Caravan/Voyager, Dakota/
Neon, Prowler, Viper, Durango, Grand Cherokee/
Cirrus, Stratus, Breeze Cherokee, Ram Van and
Pickup, Wrangler
Toyota Avalon, Camry, Corolla, Lexus*, Sienna, Toyota Pickup
Prizm, Solara
Mercedes* A, C, E, M and S Class, Cabrio -
Volkswagen/Audi* Polo, Golf, Passat, A4, A8 Transporter, Bus
BMW* 3, 5, 7 and 8 Series -
* Indicates models manufactured outside North America
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):
Model Year Model
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1999 GM Corsa* park brake and door cables and
Innovate shifter system
Chrysler Grand Cherokee parking brake system
and shifter and hood release cables
Peugeot* TI parking brake
Cami Sidekick shifter
2000 GM Lumina/Monte Carlo shifter and C/K
Pickup hood latch
2001 Ford Explorer shifter
* Indicates model manufactured outside of North America
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 four technical centers, two in Michigan, one in
Germany and one 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
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developed in conjunction with the Company's customers. The Company utilizes
Computer Aided Designs ("CAD") in the design process, which enables the
Company to share data files with its customers 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 200 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.
MANUFACTURING
In manufacturing its products, the Company utilizes two different
manufacturing processes, one for mechanisms and one for cables that will
ultimately attach to such mechanisms, creating a system. The Company
utilizes flexible manufacturing cells in both the mechanism and cable
assembly processes. Manufacturing cells are clusters of individual
manufacturing operations and work stations grouped in a cylindrical
configuration, with the operators placed centrally within the configuration.
This provides flexibility by allowing efficient changes to the number of
operations each operator performs. When compared to the more traditional,
less flexible assembly line process, cell manufacturing allows the Company to
maintain its production output consistent with its customers' requirements
and reduce the level of inventory.
Mechanical assemblies consist of between five and 50 individual
components, which are attached to form an integrated mechanism. The
Company's assembly operations are performed on either dedicated, high-volume,
automated assembly machines or on low capital-intensive, flexible,
cell-oriented assembly units capable of low or high volume production runs.
The assembly operations construct the final product through 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.
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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 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 suppliers' 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 French operation, which is scheduled for certification
in 1998.
The Company's plants have been recognized by its customers with various
awards, such as the Chrysler Pentastar Award, GM Target for Excellence, Nummi
Delivery Performance Award, Isuzu Quality Achievement Award and Calsonic
Supplier of the Year Award. The Company has received Ford Q-1
certification at all facilities shipping current model Ford product.
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.
("Edscha"), Teleflex Incorporated, Ficosa International, S.A., Ventra Group,
Inc. ("Seeburn Division"), and Aries Industries. The Company's primary
competitors in cables are Teleflex Incorporated, Ficosa International, S.A.,
Trident Automotive plc and Nippon Cable System Inc.
SUPPLIERS AND RAW MATERIALS
The principal raw materials purchased by the Company are steel, wire and
resin. The types of steel the Company purchases include hot and cold rolled,
galvanized, organically coated and aluminized steel. In general, the wire
used by the Company is produced from steel with many of the same
characteristics with the exception that it has a higher carbon content. The
Company utilizes plastic resin to produce the protective coating for its
cables and production of shifter components. The Company employs
just-in-time manufacturing and sourcing systems
-12-
<PAGE>
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.
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 December 31, 1997, the Company had approximately 5,200 employees,
approximately 825 of whom are salaried and the balance of whom are paid on an
hourly basis. Approximately 2,170 employees located at the Company's facilities
in Matamoros, Mexico, Windsor and Brantford, Ontario, Dusseldorf, Gehren and
Daun, Germany, Barcelona, Spain, Melbourne, Australia and East Jordan and
Mancelona, Michigan are currently covered by collective bargaining agreements.
<TABLE>
<CAPTION>
Collective Bargaining
Location Agreement Expiration
- ---------------- ------------------------------------------- ----------------
<S> <C> <C>
Mexico Confederacion de Trabajodores de Mexico Annually
Canada CAW December 1998
June 1999
September 1999
Germany IG-Metall December 1998
Spain Comisiones Oberera December 1999
Australia Australian Metals Workers No term
United States UAW December 2000
</TABLE>
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 could have a material
adverse effect on the operations of the Company.
(b) SAFE HARBOR PROVISIONS
Forward-looking statements included in this Form 10-K are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. There are certain important factors that could cause future results
to differ materially from those that might be anticipated based on some of
the statements made in this report. Investors are cautioned that all
forward-looking statements involve risks and uncertainty. Among the factors
that could cause actual results to differ materially are the following:
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<PAGE>
- RELIANCE ON MAJOR CUSTOMERS. The Company's two largest customers, Ford and
GM, represented approximately 42% and 25%, respectively, of the Company's 1997
revenues. The loss of Ford, GM or any of the Company's other significant
customers could have a material adverse effect on the Company.
- 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.
- FAILURE TO OBTAIN BUSINESS RELATED TO NEW AND REDESIGNED MODEL
INTRODUCTIONS. 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 result in personal injury or death, and there can be no assurance that
the Company will not experience material product liability losses in the future.
ITEM 2. PROPERTIES
FACILITIES
The following table provides information regarding the Company's
principal facilities. The Company believes that the productive capacity and
utilization of its facilities are sufficient to allow the Company to conduct
its operations in accordance with its business strategy. All of the owned
facilities are subject to liens under the Company's credit agreement.
-14-
<PAGE>
<TABLE>
<CAPTION>
Square Type of Description
Location Footage Interest of Use
- ------------------------------ --------- ---------- -----------------------
<S> <C> <C> <C>
Barcelona, Spain 179,000 Owned Manufacturing
Mancelona, Michigan 167,000 Owned Manufacturing
Moberly, Missouri 165,000 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
Dusseldorf, Germany 113,000 Leased Manufacturing/Product
Development
Spring Lake, Michigan* 95,000 Owned Manufacturing
White Cloud, Michigan* 94,000 Leased Manufacturing
Hannibal, Missouri (South) 90,000 Owned Manufacturing
Windsor, Ontario (2 locations) 84,000 Owned Manufacturing
Livonia, Michigan 84,000 Owned Manufacturing
Melbourne, Australia 77,500 Leased Manufacturing
Hartford City, Indiana 70,000 Owned Manufacturing
Brownstown, Indiana 68,000 Owned Manufacturing
Brantford, Ontario 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
Grand Haven, Michigan* 48,000 Leased Product Development
Metamoros, Mexico 42,000 Owned Manufacturing
Warren, Michigan 40,000 Leased Manufacturing
Cluses, France 10,000 Leased Manufacturing
Minneapolis, Minnesota 5,700 Leased Corporate Headquarters
</TABLE>
* Manufacturing at these facilities will be consolidated into the
Fremont, Michigan facility in 1998.
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.
ITEM 3. LEGAL PROCEEDINGS
The Company faces an inherent business risk of exposure to product
liability claims in the event that the failure of its products results in
personal injury or death, and there can be no assurance that the Company will
not experience any material product liability losses in the future. In
addition, if any Company-designed products prove to be defective, the Company
may be required to participate in a recall involving such products.
In late 1994, Ford issued a recall of a series of manual transmission
Ford F-Series pick-ups to repair the self-adjust parking brakes originally
manufactured by the Brake and Cable Business. 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 $.4 million as of December 31, 1997.
-15-
<PAGE>
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 minivan 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.
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.
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
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<PAGE>
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.
ENVIRONMENTAL MATTERS
The Company is subject to the requirements of Federal, state, and local
environmental and occupational health and safety laws and regulations. There
can be no assurance that the Company is at all times in complete compliance
with all such requirements. Although the Company has made and will continue
to make capital and other expenditures to comply with environmental
requirements, the Company does not expect to incur material capital
expenditures for environmental controls in 1998. If a release of hazardous
substances occurs on or from the Company's properties or any associated
offsite disposal location, or if contamination is discovered at any of the
Company's current or former properties, the Company may be held liable for
remediation costs and expenses, and the amount of such liability could be
material.
In 1995, the Michigan Department of Environmental Quality ("MDEQ")
requested that Wickes and the Company investigate environmental conditions at
the Company's Mancelona facility and at certain adjacent property retained by
Wickes. Wickes and the Company jointly completed the requested investigation
in January of 1996. In 1997, Wickes and the Company agreed to undertake
additional investigatory work requested by MDEQ. The investigation found
varying levels of trichlorethylene at levels well 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 and
monitor the characteristics of the contamination. Additional work plans and
test results have been reported to the MDEQ. Depending upon the results of
this work, the Company could incur additional costs to further investigate or
conduct cleanup at the facility.
In 1993, the Company received requests for information pursuant to CERCLA
from the U.S. EPA with respect to two landfill sites located in Toledo, Ohio.
In 1994, the Company received a notice of potential liability under CERCLA from
the EPA with respect to one of the sites. The Company responded to the requests
and notice by explaining to the EPA that it had no involvement with these sites,
which 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
-17-
<PAGE>
March 3, 1998, 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 is awaiting a response. If the claims go forward, the Company would
be one of approximately 25 defendants. The total recovery sought by the
City, and the amount allegedly attributable to the Company, are unknown to
the Company.
In connection with the Company's acquisition of certain assets from
Wickes in 1990, and subject to certain limitations, Wickes agreed to
indemnify the Company for environmental liabilities arising from the
operation of the acquired facilities prior to the acquisition. The Company
and Wickes subsequently agreed that the Company had provided Wickes with
timely and adequate notice with respect to certain matters (including the
matters described in the immediately preceding paragraph) and that, subject
to the limitations set forth in the agreement, those matters are covered by
the Wickes indemnification. There can be no assurance, however, that all
costs associated with such matters will ultimately be reimbursed by Wickes.
The Company does not currently believe that any liability associated with the
foregoing matters will be material to the Company.
In December 1996, the Company acquired the stock of KPI from
Sparton Corporation ("Sparton"). In connection with the acquisition, such
subsidiaries 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.
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, Ontario facility. The
Company believes that the cost of any environmental remediation with respect
to this matter will not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of Stockholders during the
fourth quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Class A Common Stock has traded on the Nasdaq National Market under
the symbol DRRA since August 14, 1996. The following table sets forth, for
the periods indicated, the low
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<PAGE>
and high closing sale prices for the Class A Common Stock as reported on the
Nasdaq National Market:
Low High
1996 ------ ------
Third Quarter 17 19 3/4
Fourth Quarter 18 3/4 27 3/4
1997
First Quarter 23 1/8 27
Second Quarter 22 1/2 28 3/4
Third Quarter 27 33 3/8
Fourth Quarter 23 7/8 35
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the Company presented below
for, and as of the end of each of the years in the five-year period ended
December 31, 1997, is derived from Dura Automotive Systems, Inc.'s
Consolidated Financial Statements which have been audited by Arthur Andersen
LLP, independent accountants. The consolidated financial statements at
December 31, 1996 and 1997 and for each of the three years in the period
ended December 31, 1997 and the auditor's report thereon are included
elsewhere in this report. The consolidated financial statements at and for
the years ended December 31, 1993, 1994 and 1995 are not included herein.
This selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the Company's Consolidated Financial Statements and Notes to
Consolidated Financial Statements, included elsewhere in this report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 129,328 $ 189,675 $ 253,726 $ 245,329 $ 449,111
Cost of sales 116,611 170,625 219,559 207,810 375,086
S, G & A expense 8,643 10,485 15,513 17,157 32,815
Amortization expense 487 690 1,094 1,036 3,600
Operating income 3,587 7,875 17,560 19,326 37,610
Interest expense 1,533 3,473 4,822 2,589 9,298
Gain on sale of window
regulator business - - (4,240) - -
Provision for income taxes 936 1,822 6,852 6,609 11,670
Net income 1,118 2,580 10,126 10,128 16,642
--------- --------- --------- --------- ---------
Basic earnings per share $ 0.41 $ 0.75 $ 2.04 $ 1.57 $ 1.89
Diluted earnings per share $ 0.41 $ 0.75 $ 2.03 $ 1.57 $ 1.88
</TABLE>
Dec. 31, Dec. 31,
1996 1997
--------- ---------
BALANCE SHEET DATA:
Working capital $ 27,528 $ 50,304
Total assets 246,129 419,264
Long-term debt 77,376 178,081
Stockholders' investment 87,367 101,708
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes to Consolidated Financial
Statements included elsewhere in this report.
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 product, (ii) costs related to the production
of the tools and dies used to manufacture the new product and (iii) start-up
costs associated with the initial production of such product. In general,
design and engineering costs are expensed in the period incurred unless they
are reimbursed by the customer, in which case they are capitalized and
amortized over the life of such product 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.
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 Automotive Group ("KPI") in
December 1996, the VOFA Group ("VOFA") in January 1997 and GT Automotive
Systems, Inc. ("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.
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<PAGE>
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 International Corporation 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.
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 underutilized 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. The increased
expenses were primarily a result of costs incurred as a result of providing a
greater level of design and engineering services to the Company's customers. As
a percentage of revenues, selling, general and administrative expenses increased
to 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.
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<PAGE>
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 initial public offering of 3,795,000
shares of Class A common stock.
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.
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 $19.0 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 Bank Credit Agreement consists of a revolving credit facility
providing for borrowings of up to $200.0 million. Borrowings under the Bank
Credit Agreement are secured by substantially all of the Company's assets and
guaranteed by the Parent. 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 $50.0 million. As of December 31, 1997, the Company
had outstanding borrowings under the Bank Credit Agreement of approximately
$165.2 million (of which approximately $2.8 million were denominated in
Canadian dollars and approximately $3.6 million were denominated in Deutsche
Marks). The Bank Credit Agreement requires the Company to pay a facility fee
on the commitment amount of 0.25% and contains various restrictive covenants,
which, among other things, require the Company to maintain certain financial
ratios, including minimum liquidity and interest coverage.
The Company estimates that it will fund approximately $19.0 million in
capital expenditures in 1998. 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.
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<PAGE>
The Company believes that funds available under its bank credit
agreement, together with funds generated by the Company's operations, will
provide the Company with sufficient liquidity and capital resources for
working capital, capital expenditures and other needs. However, any
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
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 1997 were derived
from manufacturing operations in Europe, Latin America and Canada. The
results of operations and 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 December 31, 1997 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
may, from time to time, engage in hedging programs intended to reduce the
Company 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 effects its operations. During 1998
and 1999, the Company expects to incur costs of approximately $1.0 million and
$1.5 million, respectively, to make these replacements and upgrades. Failure
of the Company to make required modifications on a timely basis or the
-23-
<PAGE>
inability of other companies with which the Company does business to complete
their year 2000 modifications on a timely basis, could adversely effect the
Company's operations.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company are hereby
incorporated by reference to Exhibit 99.1, which is being filed with this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. DIRECTORS OF THE REGISTRANT
The information required by Item 10 with respect to the directors is
incorporated herein by reference to the section labeled "Election of Directors"
which appears in the Company's 1998 Proxy Statement.
B. EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Company's executive officers as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
S.A. Johnson 57 Chairman and Director
Karl F. Storrie 60 President, Chief Executive Officer and
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
</TABLE>
S.A. 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 Corporation (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
-24-
<PAGE>
Holding, Inc., a supplier of interior trim components to the automotive
industry, from May 1990 until its sale to Lear Corporation in August 1995.
Mr. Johnson is also Chairman and a director of Tower Automotive, Inc., a
manufacturer of engineered metal stampings and assemblies for the automotive
industry.
KARL F. STORRIE has served as President, Chief Executive Officer and a
Director of the Company since March 1991. Prior to joining the Company and
from 1986, Mr. Storrie was Group President of a number of aerospace
manufacturing companies owned by Coltec Industries, a multi-divisional public
corporation. Prior to becoming a Group President, Mr. Storrie was a Division
President of two aerospace design and manufacturing companies for Coltec
Industries from 1981 to 1986. During his thirty-five year career, Mr.
Storrie has held a variety of positions in technical and operations
management. Mr. Storrie is also a director of Argo-Tech Corporation, a
manufacturer of aircraft fuel, boost and transfer pumps.
DAVID R. BOVEE has served as Vice President 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 operation 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 a 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. 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 and added responsibility for Sales/Engineering in June 1997.
From April 1991
-25-
<PAGE>
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 it 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 until its sale to Lear Corporation
in August 1995. Mr. Rued is also a director of The Rottlund Company, Inc., a
corporation engaged in the development and sale of residential real estate.
C. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The information required by Item 10 with respect to compliance with
reporting requirements is incorporated herein by reference to the section
labeled "Section 16(a) Beneficial Ownership Reporting Compliance" which
appears in the Company's 1998 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to
the sections labeled "Compensation of Directors" and "Executive Compensation"
which appear in the Company's 1998 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference to
the section labeled "Security Ownership" which appears in the Company's 1998
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference to
the section labeled "Certain Relationships and Related Transactions" which
appears in the Company's 1998 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
The following documents are filed as a part of this Form 10-K:
(1) FINANCIAL STATEMENTS:
- Report of Independent Public Accountants
- Consolidated Balance Sheets as of December 31, 1996 and
1997
-26-
<PAGE>
- Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1996 and 1997
- Consolidated Statements of Stockholders' Investment for the
Years Ended December 31, 1995, 1996 and 1997
- Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1996 and 1997
- Notes to Consolidated Financial Statements
(2) EXHIBITS: See "Exhibit Index" beginning on page 29.
(b) REPORTS ON FORM 8-K
None.
-27-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: February 26, 1998 By /s/ S. A. JOHNSON
---------------------------
S. A. Johnson, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/S/ S. A. JOHNSON Chairman and Director February 26, 1998
- ----------------------------
S. A. Johnson
/S/ KARL F. STORRIE President, Chief Executive February 26, 1998
- ---------------------------- Officer (Principal Executive
Karl F. Storrie Officer) and Director
/S/ ROBERT R. HIBBS Vice President and February 26, 1998
- ---------------------------- Director
Robert R. Hibbs
/S/ NEIL C. ANDERSON Director February 26, 1998
- ----------------------------
Neil C. Anderson
/S/ ROBERT E. BROOKER, JR. Director February 26, 1998
- ----------------------------
Robert E. Brooker, Jr.
/S/ W.H. CLEMENT Director February 26, 1998
- ----------------------------
W.H. Clement
/S/ JACK K. EDWARDS Director February 26, 1998
- ----------------------------
Jack K. Edwards
/S/ JAMES O'LOUGHLIN Director February 26, 1998
- ----------------------------
James O'Loughlin
/S/ WILLIAM L. ORSCHELN Director February 26, 1998
- ----------------------------
William L. Orscheln
/S/ ERIC J. ROSEN Director February 26, 1998
- ----------------------------
Eric J. Rosen
/S/ BARBARA A. WESTHUES Director February 26, 1998
- ----------------------------
Barbara A. Westhues
/S/ STEPHEN E.K. GRAHAM Vice President and Chief February 26, 1998
- ---------------------------- Financial Officer (Principal
Stephen E.K. Graham Accounting Officer)
</TABLE>
-28-
<PAGE>
EXHIBIT 11
DURA AUTOMOTIVE SYSTEMS, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
(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>
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF THE REGISTRANT
Dura Operating Corp.
Dura de Mexico S.A. de C.V.
MC Holding Corp.
Reom Industries (AUST) Pty Ltd.
Kimanus Vermogensverwaltungs GmbH
Dura Automotive Systems, Inc. Shifter Operations
Dura Automotive Systems Export, Inc.
Dura Shifter Holding Corp.
Thixotech Inc.
Dura/Excel do Brasil LTDA
Pollone S.A. Industria E Comerica
Talia Vermogensverwaltungs GmbH
Vofa S.A., Barcelona
Dura Automotive Systems France
Dura Automotive Systems, Inc. Column
Shifter Operations
Dura Shift Systems, Inc.
Dura Automotive Systems (Canada) Ltd.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statement File No. 333-17821.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
March 2, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS THE SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND IN THE COMPANY'S
1996 ANNUAL REPORTS AAND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,148
<SECURITIES> 0
<RECEIVABLES> 79,032
<ALLOWANCES> 0
<INVENTORY> 30,301
<CURRENT-ASSETS> 138,281
<PP&E> 125,061
<DEPRECIATION> 23,523
<TOTAL-ASSETS> 419,264
<CURRENT-LIABILITIES> 87,977
<BONDS> 0
0
0
<COMMON> 88
<OTHER-SE> 101,620
<TOTAL-LIABILITY-AND-EQUITY> 419,264
<SALES> 449,111
<TOTAL-REVENUES> 449,111
<CGS> 375,086
<TOTAL-COSTS> 375,086
<OTHER-EXPENSES> 36,415
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,298
<INCOME-PRETAX> 28,312
<INCOME-TAX> 11,670
<INCOME-CONTINUING> 16,642
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,642
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.88
</TABLE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
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
</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 amortization
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 designs and
manufactures driver control mechanisms, cable related systems and
engineered mechanical components 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 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>
F-7
<PAGE>
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>
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. Forecasted 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:
Buildings 30 years
Machinery and equipment 3 to 20 years
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
F-8
<PAGE>
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.
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>
F-9
<PAGE>
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.
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.
F-10
<PAGE>
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 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
F-11
<PAGE>
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-12
<PAGE>
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
F-13
<PAGE>
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.
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.
F-14
<PAGE>
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.
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.
F-15
<PAGE>
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. 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):
F-16
<PAGE>
<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.
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>
<CAPTION>
<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
F-17
<PAGE>
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.
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):
F-18
<PAGE>
<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 costs 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.
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.
F-19
<PAGE>
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
related to the minimum pension liability, which are classified as other
assets in the accompanying consolidated balance sheets.
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
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
F-20
<PAGE>
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.
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 (loss) 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
F-21
<PAGE>
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.
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-22
<PAGE>
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.
F-23
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PAGE NUMBER IN
SEQUENTIAL
NUMBERING
OF ALL FORM 10-K
EXHIBIT AND EXHIBIT PAGES
------- -----------------
<S> <C> <C>
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 "S-1").
3.2 Form of Amended and Restated By-laws of the Company, incorporated by *
reference to Exhibit 3.2 of the S-1.
4.1 Stockholders Agreement, dated as of August 31, 1994, by and among the *
Company, Onex U.S. Investments, Inc., J2R, Alkin, the HCI Stockholders (as
defined therein) and the Management Stockholders (as defined therein),
incorporated by reference to Exhibit 4.1 of the 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 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 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 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 S-1.
4.6 Form of certificate representing Class A Common Stock of the Company, *
incorporated by reference to Exhibit 4.6 of the S-1.
4.7 Amended and Restated Multicurrency Credit Agreement, dated December 5,
1996, among Dura Operating Corp., Kimanus Vermogensverwaltung GmbH, the
various financial institutions parties thereto, Bank of America NT&SA, as
agent, and BA Securities, Inc., as the arranger incorporated by reference to
Exhibit 4.1 of the Registrant's Form 8-K dated December 20, 1996.
4.8 Consolidated Amendment No. 1 to Amended and Restated Multicurrency Credit
Agreement, dated August 29, 1997, by and among Dura Operating Corp., Kimanus
Vermogensverwaltung GmbH, the various commercial lending institutions parties
thereto, as lenders, and Bank of America NT&SA, as agent, incorporated by
reference to Exhibit 4.2 of the Registrant's Form 8-K dated September 12, 1997.
10.1 Joint Venture Agreement, dated as of August 31, 1994, by and among the *
Company, Alkin, MCHC, Onex and J2R, incorporated by reference to Exhibit 10.1 of
the S-1.
10.2** Management Contribution Agreement, dated as of August 31, 1994, by and *
among the Company, Kim B. Clark and the Management Stockholders (as defined
therein), incorporated by reference to Exhibit 10.2 of the S-1.
10.3** Management Agreement, dated as of August 31, 1994, by and between *
Hidden Creek and Dura Operating Corp. (formerly known as Dura Automotive
Systems, Inc.) ("Dura Operating"), incorporated by reference to Exhibit 10.3 of
the S-1.
10.4** Stock Option Agreement, dated as of August 31, 1994, between the Company *
and Alkin, incorporated by reference to Exhibit 10.4 of the S-1.
10.5** Stock Option Agreement, dated as of August 31, 1994, between the Company *
and Kim B. Clark, incorporated by reference to Exhibit 10.5 of the S-1.
10.6 Subordinated Promissory Note, dated August 31, 1994, of the Company in the *
amount of $2,000,000 in favor of Alkin, incorporated by reference to Exhibit
10.6 of the S-1.
10.7 Subordinated Promissory Note, dated August 31, 1994, of MCHC in the amount *
of $1,800,000 in favor of Onex Ohio Holdings, Inc., incorporated by reference to
Exhibit 10.7 of the S-1.
<PAGE>
10.8 Subordinated Promissory Note, dated August 31, 1994, of MCHC in the amount *
of $200,000 in favor of J2R, incorporated by reference to Exhibit 10.8 of the
S-1.
10.9 Credit Agreement, dated as of August 31, 1994, among Dura Operating, certain *
commercial lending institutions, The Bank of Nova Scotia, Comerica Bank, The
Chase Manhattan Bank and Continental Bank, incorporated by reference to Exhibit
10.9 of the S-1.
10.10 Security Agreement, dated as of August 31, 1994, between Dura Operating and *
Continental Bank, as agent, incorporated by reference to Exhibit 10.10 of the
S-1.
10.11 Pledge Agreement, dated as of August 31, 1994, entered into by Dura Operating *
in favor of Continental Bank, as agent, incorporated by reference to Exhibit
10.11 of the S-1.
10.12 Guaranty, dated August 31, 1994, by Dura de Mexico S.A. de C.V. ("Dura *
Mexico") in favor of the Agents, the Co-Agents and the Lenders (each as defined
therein), incorporated by reference to Exhibit 10.12 of the S-1.
10.13 Accounts Receivable Pledge Agreement, dated as of August 31, 1994, by *
and between Continental Bank, as agent, and Dura Mexico, incorporated by
reference to Exhibit 10.13 of the S-1.
10.14 Corporate Guaranty, dated August 31, 1994, by MCHC in favor of the Agent, *
Co-Agents and Lenders (each as defined therein), incorporated by reference to
Exhibit 10.14 of the S-1.
10.15 Pledge Agreement, dated as of August 31, 1994, by MCHC in favor of *
Continental Bank, as agent, incorporated by reference to Exhibit 10.15 of the
S-1.
10.16 Letter Agreement, dated August 25, 1994, between the Company and Ford, *
incorporated by reference to Exhibit 10.16 of the S-1.
10.17 Promissory Note, dated December 31, 1991, of Karl F. Storrie in favor of *
Continental Bank, as agent, incorporated by reference to Exhibit 10.17 of the
S-1.
10.18 Asset Purchase Agreement, dated March 23, 1995, by and among Dura *
Operating, the Company and Rockwell International Corporation, incorporated by
reference to Exhibit 10.18 of the S-1.
10.19 Subscription Agreement, dated as of June 26, 1995, by and between the *
Company and the persons listed on the signature pages thereto, incorporated by
reference to Exhibit 10.19 of the S-1.
10.20 Subscription Agreement, dated as of June 26, 1995, by and between the *
Company, David P. Klosterman and Craig L. Lamiman, incorporated by reference to
Exhibit 10.20 of the S-1.
10.21** Letter Agreement, dated November 9, 1995, between the Company and John J. *
Knappenberger, incorporated by reference to Exhibit 10.21 of the S-1.
10.22** Letter Agreement, dated August 16, 1994, between the Company and Craig L. *
Lamiman, incorporated by reference to Exhibit 10.21.1 of the S-1.
10.23** Letter Agreement, dated September 1, 1994, between the Company and David *
P. Klosterman, incorporated by reference to Exhibit 10.21.2 of the S-1.
10.24 Lease, entered into as of January 5, 1988, between the City of Moberly, *
Missouri and Alkin, incorporated by reference to Exhibit 10.22 of the S-1.
10.25 Net Lease, made as of March 16, 1995, by and between First Industrial *
Financing Partnership, L.P. ("First Industrial") and Dura Operating,
incorporated by reference to Exhibit 10.23 of the S-1.
10.26 First Addendum to New Lease, dated April 24, 1995, between First Industrial *
and Dura Operating, incorporated by reference to Exhibit 10.24 of the S-1.
10.27 Lease of Office Space, dated June 14, 1991, between 80 South Eight Street *
Limited Partnership ("Eighth Street") and Hidden Creek, incorporated by
reference to Exhibit 10.25 of the S-1.
<PAGE>
10.28 Amendment and Renewal of Lease, made as of April 30, 1993, by and *
between Eighth Street and Hidden Creek, incorporated by reference to Exhibit
10.26 of the S-1.
10.29** Form of 1996 Key Employee Stock Option Plan, incorporated by reference to *
Exhibit 10.27 of the S-1.
10.30** Form of Independent Director Stock Option Plan, incorporated by reference to *
Exhibit 10.28 of the S-1.
10.31** Form of Employee Stock Discount Purchase Plan, incorporated by reference to *
Exhibit 10.29 of the S-1.
10.32 Form of Amended and Restated Stockholders Agreement, incorporated by *
reference to Exhibit 10.30 of the S-1.
10.33 Form of Amended and Restated Investor Stockholders Agreement, incorporated *
by reference to Exhibit 10.31 of the S-1.
10.34 Stock and Asset Purchase Agreement, dated October 3, 1996, among Sparton
Corporation, Sparton Engineered Products, Inc., Lake Odessa Sparton Group
and Dura Automotive Systems, Inc. incorporated by reference to Exhibit
2.1 of the Registrant's Form 8-K dated December 20, 1996.
10.35 Stock Purchase Agreement, dated August 1, 1997, by and among Dura Shifter
Holding Corp. and the various selling shareholders, incorporated by
reference to Exhibit 2.1 of the Registrant's Form 8-K dated September 12, 1997.
11 Statement of Computation of Earnings Per Share for the Year Ended --
December 31, 1997 filed herewith.
21.1 Subsidiaries of the Company filed herewith. --
23.1 Consent of Arthur Andersen LLP filed herewith. --
27.1 Financial Data Schedule filed herewith. --
99.1 Consolidated Financial Statements of the Company for the Year Ended December --
31, 1997 together with Report of Indepedent Public Accoutants filed herewith
</TABLE>
- -----------------
* Incorporated by reference.
** Indicates compensatory arrangement.
