<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1999
REGISTRATION NO. 333-82703
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
--------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3714 38-3185711
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
------------------------
4508 IDS CENTER, MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 342-2311
(Address, including zip code, and telephone number, including area code, of
Registrants' principal offices)
STEPHEN E.K. GRAHAM
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
DURA AUTOMOTIVE SYSTEMS, INC.
2791 RESEARCH DRIVE, ROCHESTER HILLS, MI 48309
TELEPHONE: (248) 299-7500
(Address, including zip code, and telephone number, including area code, of
Agent for Service)
Copy to:
DENNIS M. MYERS, ESQ.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE, CHICAGO, IL 60601
TELEPHONE: (312) 861-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT BECOMES EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 6, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
152,401 SHARES
DURA AUTOMOTIVE SYSTEMS, INC.
CLASS A COMMON STOCK
------------------
The shares of Class A common stock covered by this prospectus may be sold
from time to time by the selling stockholders identified in this prospectus
under the heading "Selling Stockholders." Dura will not receive any part of the
proceeds from the sale of the shares. See "Use of Proceeds."
Our Class A common stock is traded on the Nasdaq Stock Market (the "Nasdaq")
under the symbol "DRRA." On August 5, 1999, the last reported closing price for
the Class A common stock was $29 3/8 per share.
------------------------
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
Dura has agreed to pay the cost of the registration of the shares and the
preparation of this prospectus and registration statement under which it is
filed. The expenses so payable by Dura are estimated to be approximately
$85,000.
------------------------
The date of this prospectus is August 9, 1999.
<PAGE>
You should rely on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus. In this prospectus, unless otherwise noted, Dura Automotive
Systems, Inc., is referred to as "DASI," exclusive of its subsidiaries.
References to "we," "our," "ours," "us" and "Dura" refer to DASI and its
consolidated subsidiaries, including the Dura Operating Corp.
We acquired Excel Industries, Inc. ("Excel") on March 23, 1999 and Adwest
Automotive Plc ("Adwest") on March 15, 1999. Such acquisitions are referred to
herein as the "Excel Acquisition" and the "Adwest Acquisition," respectively,
and collectively as the "Acquisitions." Unless otherwise indicated, financial
and operating data presented herein for 1998 on a pro forma basis give effect to
the Excel Acquisition, the Adwest Acquisition and each of the other acquisitions
made by Dura and Excel in 1998 as if each occurred on January 1, 1998. See
"Unaudited Pro Forma Financial Statements."
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 7
Forward-Looking Statements May Prove
Inaccurate................................... 14
Use of Proceeds................................ 14
Market Price for Class A Common Stock.......... 15
Dividend Policy................................ 15
Capitalization................................. 16
Unaudited Pro Forma Financial Statements....... 17
Selected Consolidated Financial Data........... 23
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 29
<CAPTION>
PAGE
---------
<S> <C>
Business....................................... 44
Management..................................... 67
Security Ownership of Certain Beneficial Owners
and Management............................... 76
Selling Stockholders........................... 78
Certain Relationships and Related Party
Transactions................................. 80
Description of Capital Stock................... 80
Description of Certain Indebtedness............ 82
Plan of Distribution........................... 86
Legal Matters.................................. 88
Experts........................................ 88
Where You Can Find More Information............ 88
Index to Financial Statements.................. F-1
</TABLE>
------------------------
i
<PAGE>
CURRENCIES AND EXCHANGE RATES
References in this prospectus to "Dollars," "$" or " CENTS" are to the
currency of the United States and references to "United States" and "U.S." means
the United States of America, its states, territories, possessions and all areas
subject to its jurisdiction. References herein to "Euro" and "[EURO]" are to the
currency that was introduced at the start of the third stage of economic and
monetary union pursuant to the treaty establishing the European Economic
Community, as amended by the Treaty on European Union, signed at Maastricht, the
Netherlands on February 7, 1992. Except as otherwise stated herein, conversions
of non-Dollar currencies to Dollars in the financial statements and the other
information included herein have been calculated, for income statement purposes,
on the basis of average exchange rates over the related periods and, for balance
sheet purposes, on the date thereof. These translations should not be construed
as representations that the non-Dollar currency amounts actually represent such
Dollar amounts or could be converted into Dollars at the rates indicated or at
any other rates.
References to "Pounds Sterling," "Pounds," "L," "Pence" or "p" are to the
currency of the United Kingdom (the "U.K."). There are 100 Pence to each Pound.
References in this prospectus to "DM" are to the currency of Germany.
Solely for your convenience, this prospectus contains translations of
certain financial data of Adwest from Pounds to Dollars. The following table
reflects the exchange rates used as well as other information for your benefit.
Dura does not represent that the Pound amounts shown in this prospectus would
have been converted into Dollars at the quoted exchange rates.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
------------------------ ------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating results...................................................... 1.6094 1.6464 1.6433 1.6627
Balance sheet.......................................................... 1.6448 1.6509 1.6607 1.6710
</TABLE>
As of August 4, 1999, the closing rate with respect to the Pound was L1.00 =
$1.6163.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY CONTAINS THE BASIC INFORMATION ABOUT DURA. IT DOES NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU IN DECIDING WHETHER TO
PURCHASE THE CLASS A COMMON STOCK OFFERED HEREBY. WE ENCOURAGE YOU TO READ THE
PROSPECTUS IN ITS ENTIRETY.
DURA AUTOMOTIVE SYSTEMS, INC.
We are the world's largest independent designer and manufacturer of driver
control systems for the global automotive industry. We are also a leading global
supplier of window systems, door systems and engineered mechanical components.
Our products include:
- driver control products--automotive cables, parking brake mechanisms and
transmission shifter mechanisms;
- window system products--encapsulated windows and push out and sliding
windows;
- door system products--window regulators, door latches, frames and hinges;
and
- other products--seating systems, engine control products and engineered
mechanical components, such as underbody tire carriers, jacks, brake,
clutch and accelerator pedals, turn signal and tilt lever assemblies,
injection molded plastic parts, hood hinges, automotive lighting products
and latches.
We sell our products to every major North American, European and Japanese
automotive original equipment manufacturer ("OEM"), including Ford, General
Motors, DaimlerChrysler, Volkswagen, BMW, Toyota, Honda, PSA (Peugeot and
Citroen), Renault and Nissan. We manufacture products for many of the most
popular car, light truck and sport utility models, including all of the top ten
selling vehicles in North America and nine of the top ten selling vehicles in
Europe for 1998. We have over 80 manufacturing and product development
facilities located in the United States, Australia, Brazil, Canada, the Czech
Republic, France, Germany, India, Mexico, Portugal, Spain and the U.K. On a pro
forma basis, we had revenues of $2.5 billion for the year ended December 31,
1998.
In March 1999, we completed both the Excel Acquisition and the Adwest
Acquisition. Excel is a leading supplier of window systems, door systems,
seating systems and injection molded plastic parts for the global automotive
market and appliances, hardware products, window systems, door systems and
seating systems for the recreational vehicle, mass transit and heavy truck
("RV/MT/HT") industries in North America. On a pro forma basis giving effect to
a 1998 acquisition, Excel had net sales of $1.2 billion for the year ended
January 2, 1999. Adwest is a leading European supplier of driver control
products, including transmission shifter mechanisms, parking brake mechanisms,
steering columns and gears, cables and engine control products, such as engine
thermostats, radiator caps and fuel caps, primarily for European automotive
OEMs. Adwest had revenues of $399.7 million for the twelve month period ended
December 31, 1998.
The Acquisitions have significantly increased our product offerings, global
reach and scale. Strategic benefits of the Acquisitions include:
- Diversification of our revenue base and expansion of our product offerings
through the addition of Excel's broad array of products, including such
major product categories as window systems and door systems;
- Global leadership in driver control systems, including parking brake
systems and transmission shifter systems, resulting from the combination
of our operations with Adwest;
- Significant expansion of both our European manufacturing operations and
customer base; and
- Substantial opportunities for operational synergies driven by the
similarity of the manufacturing processes and technical capabilities of
Dura, Excel and Adwest and the sharing of best practices among all of our
businesses. Consolidation of design, engineering and administrative
functions,
1
<PAGE>
plant restructuring and realignment, coordination of raw material
purchases and other operating improvements are expected to produce annual
cost savings of approximately $35.0 million by 2001.
We believe, based upon our experience in the automotive supply industry,
that we hold the #1 or #2 market position for our principal products in the
following markets. The table below sets forth our estimated pro forma combined
market position in North America and Europe in 1998:
<TABLE>
<CAPTION>
MARKET
PRODUCT CATEGORY REGION POSITION
- ----------------------------------------- ----------------------------------------- ---------
<S> <C> <C>
Automotive cables........................ North America............................ #1
Europe................................... #1
Parking brake mechanisms................. North America............................ #1
Europe................................... #1
Transmission shifter mechanisms.......... North America............................ #1
Europe................................... #2
Window systems........................... North America............................ #1
Europe................................... #2
Window regulators........................ North America............................ #1
</TABLE>
COMPETITIVE STRENGTHS
We believe that we possess a number of competitive strengths that have been
further enhanced by the Acquisitions, including:
- - WELL POSITIONED TO TAKE ADVANTAGE OF MARKET TRENDS: We believe that we are
well positioned to meet the demands of OEMs for fewer, full-service and
globally positioned suppliers. We believe our advanced design capabilities,
broad product lines and ability to supply complete systems, combined with our
global production capabilities, will enable us to take advantage of these
market trends.
- - STRONG OEM PARTNERSHIPS: We have formed strong partnerships with our major
OEM customers due to our high level of product quality, customer service,
product design and engineering capabilities. Our application of innovative
operating techniques, combined with investments in sophisticated capital
equipment, has led to a high level of product quality, industry-low defect
rates and the receipt of numerous supplier awards.
- - WELL POSITIONED ON POPULAR PRODUCT PLATFORMS: We manufacture products for
many of the most popular car, light truck and sport utility vehicle models.
In North America, these include all of the top ten selling vehicles for 1998:
the Ford Taurus, Explorer, Ranger and F-Series pickups, the GM full-size
pickup, the Dodge Caravan and Ram pickup, the Honda Accord and Civic, and the
Toyota Camry. In Europe, these include nine of the top ten selling vehicles
for 1998: the Volkswagen Golf, Passat and Polo, the GM/Opel Astra, Corsa and
Vectra, the Renault Megane and the Ford Escort/Focus and Fiesta. The
Acquisitions increased our 1998 North American content per vehicle from
$36.55 to $97.77 on a pro forma basis.
- - SIGNIFICANT ACQUISITION EXPERIENCE: Our leadership team, the members of which
have an average of 20 years of experience in the automotive supply industry,
has successfully completed eleven acquisitions and two joint ventures over
the last three years. We have been successfully integrating the acquired
operations and generating significant operational efficiencies and cost
savings. In addition, we have generally retained key personnel from acquired
companies, which has enabled us to strengthen our global management team as
we have grown.
2
<PAGE>
BUSINESS STRATEGY
Our primary business objective is to capitalize on the consolidation, system
sourcing and globalization trends in the automotive supply industry in order to
continue to be the leading provider of the component parts and systems that we
supply to OEMs worldwide. The key elements of our operating and growth
strategies are as follows:
OPERATING STRATEGY
- CONTINUOUS OPERATIONAL IMPROVEMENTS: We continuously 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 the reduction of scrap.
- CAPITALIZE ON OPPORTUNITIES FOR OPERATING SYNERGIES: The Acquisitions are
expected to provide us with a number of opportunities to reduce costs and
improve operational efficiency. The similarity of the manufacturing
processes and technical capabilities of Dura, Excel and Adwest is expected
to result in significant cost savings and operating synergies.
- FOSTER A DECENTRALIZED, PARTICIPATORY CULTURE: Our decentralized approach
to managing our manufacturing facilities encourages decision making and
employee participation in areas such as manufacturing processes and
customer service. This "team" approach fosters a unified culture and
enhances communication of strategic direction and goals, while
facilitating a greater success rate in reaching and exceeding our
objectives.
GROWTH STRATEGY
- FOCUS ON SYSTEMS: OEMs are increasingly seeking suppliers capable of
providing complete systems rather than suppliers who only provide separate
component parts. A key element of our growth strategy has been to add to
our ability to provide complete systems to our OEM customers.
- INCREASE PLATFORM AND CUSTOMER PENETRATION: A key element of our strategy
is to increase volume by adding new customers and to strengthen our
existing customer relationships by broadening our range of products
through internal development efforts and acquisitions. During 1998,
through the acquisition of Trident, we increased our penetration of
certain foreign OEMs such as Volkswagen, Toyota, Honda, PSA (Peugeot and
Citroen), Renault and Nissan. The Acquisitions have further expanded our
relationships with most of the North American and European OEMs.
- EXTEND GLOBAL MANUFACTURING REACH: In 1998, over 70% of total worldwide
passenger vehicle production occurred outside North America. To meet OEMs'
increasing preference for suppliers with global capabilities, we have
expanded our manufacturing operations into new geographic markets through
strategic acquisitions and two joint ventures.
- PURSUE STRATEGIC ACQUISITIONS: We compete in what we believe to be a $12
to $14 billion, highly fragmented, worldwide automotive market that
provides numerous potential acquisition and joint venture opportunities.
Since 1996, we have successfully completed eleven strategic acquisitions
and formed two joint ventures.
THE ACQUISITIONS
THE EXCEL ACQUISITION
On March 23, 1999, we acquired Excel through a merger of Excel with and into
Dura Operating Corp. In the merger, DASI issued an aggregate of approximately
5.1 million shares of its Class A common stock and paid $155.5 million in cash
to Excel's former shareholders. The Excel Acquisition
3
<PAGE>
had a transaction value of approximately $471.3 million, plus fees and expenses.
The cash consideration and related fees and expenses paid in the Excel
Acquisition (including acquired indebtedness) were financed through borrowings
under our amended and restated $1,150 million senior secured credit facility,
which we refer to in this prospectus as our "new credit facility."
THE ADWEST ACQUISITION
On March 15, 1999, Dura acquired through a cash tender offer approximately
95% of the outstanding ordinary shares of Adwest. The aggregate consideration
(including acquired indebtedness) and related fees and expenses paid in the
Adwest Acquisition were financed through borrowings under our new credit
facility. We intend to acquire all of the remaining ordinary shares within the
next six months. We estimate that the aggregate cost of the Adwest Acquisition,
including the amount necessary to acquire the remaining outstanding shares, will
be approximately $295 million, plus fees and expenses.
The following table summarizes our sources and uses of funds for the
Acquisitions (in millions):
<TABLE>
<CAPTION>
SOURCES OF FUNDS: AMOUNT USES OF FUNDS: AMOUNT
- -------------------------------------------- --------- -------------------------------------------- ---------
<S> <C> <C> <C>
New credit facility......................... $ 828.1 Purchase of Excel's equity.................. $ 334.6
Issuance of Class A common stock(1)......... 170.7 Purchase of Adwest's equity................. 207.2
Cash on hand................................ 49.8 Refinance Excel's existing debt............. 100.0
Refinance Adwest's existing debt............ 106.1
Refinance Dura's existing debt.............. 250.7
Prepayment penalties, net................... 9.5
Fees and expenses........................... 40.5
--------- ---------
Total....................................... $ 1,048.6 Total....................................... $ 1,048.6
--------- ---------
--------- ---------
</TABLE>
- ------------------------------
(1) Based on a per share price of $33 9/16, which was the closing price of the
Class A common stock on January 15, 1999, the date on which the Excel
Acquisition purchase agreement was signed.
RECENT DEVELOPMENTS
On July 21, 1999, Dura announced record revenues, operating income and net
income for the second quarter ended June 30, 1999.
For the second quarter of 1999, revenues were $685.2 million, a significant
increase compared with $187.4 million in the 1998 period. Operating income rose
to $55.8 million from $18.0 million reported last year. Income before
extraordinary item, related to the early extinguishment of debt, was $18.4
million, or $1.00 per diluted share outstanding, versus $6.5 million, or 67
cents per diluted share, in the comparable 1998 period.
The quarter ended June 30, 1999 represents the first full quarter since Dura
completed its merger with Excel and its acquisition of Adwest. Both were
completed in March 1999.
For the six months ended June 30, 1999, revenues were $949.9 million,
operating income was $81.7 million and net income before extraordinary item and
accounting change was $27.7 million. These results represent significant
increases compared to the same period in 1998 which had revenues of $313.2
milion, operating income of $28.8 million and net income before extraordinary
item of $11.1 million. An extraordinary loss of $2.7 million, net of income tax
benefit, was recorded in the second quarter of 1999 related to the early
extinguishment of the Trident notes. Trident is a wholly-owned subsidiary of
Dura.
COMPANY BACKGROUND
DASI is a holding company whose predecessor was formed in 1990 by Hidden
Creek Industries, Onex Corporation, J2R Corporation and certain others for the
purpose of acquiring certain operating divisions from the Wickes Manufacturing
Company.
Our principal executive offices are located at 4508 IDS Center, Minneapolis,
Minnesota 55402, and our telephone number is (612) 342-2311.
4
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
We derived the following historical financial information from the audited
consolidated financial statements of Dura for 1996, 1997 and 1998 and the
unaudited consolidated financial statements of Dura for the three month periods
ended March 31, 1998 and 1999. The summary pro forma financial data of Dura for
the year ended December 31, 1998 and the three months ended March 31, 1999 have
been derived from the pro forma financial statements and related notes contained
elsewhere in this prospectus. The pro forma financial statements do not purport
to represent what our results of operations actually would have been if the
events assumed therein had occurred as of the dates indicated or what our
results will be for any future period.
You should read the following summary together with the "Management's
Discussion and Analysis of Results of Operations and Financial Condition" for
each of Dura, Excel and Adwest and the audited and unaudited financial
statements and the related notes and the unaudited pro forma financial
statements and related notes contained elsewhere in this prospectus.
DURA AUTOMOTIVE SYSTEMS, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------------- -----------------------------------
PRO FORMA PRO FORMA
1996(1) 1997(2) 1998(3) 1998(4)(5) 1998 1999 1999(4)
--------- --------- --------- ----------- --------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................... $ 245,329 $ 449,111 $ 739,467 $ 2,525,448 $ 125,746 $ 264,701 $ 653,752
Gross profit................. 37,519 74,025 130,949 354,976 21,275 46,482 97,783
Operating income............. 19,326 37,610 71,256 163,575 10,864 25,900 49,783
Net income................... 10,128 16,642 26,667 35,866 4,576 3,492 8,139
Basic earnings per share
(6)........................ $ 1.57 $ 1.89 $ 2.43 $ 2.06 $ 0.52 $ 0.27 $ 0.47
Diluted earnings per share
(6)........................ $ 1.57 $ 1.88 $ 2.37 $ 2.05 $ 0.52 $ 0.29 $ 0.46
OTHER FINANCIAL DATA:
Depreciation and
amortization............... $ 6,079 $ 12,303 $ 27,571 $ 85,845 $ 3,067 $ 10,507 $ 19,117
Capital expenditures, net.... 6,260 16,242 31,822 106,120 3,733 5,994 21,994
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents.... $ 1,667 $ 4,148 $ 20,544 $ 57,159 $ 46,938 $ 39,267 $ 55,247
Working capital.............. 27,528 50,304 63,766 195,437 103,066 265,890 281,870
Total assets................. 246,129 419,264 929,383 2,170,277 500,606 2,260,567 2,287,547
Total debt................... 77,456 180,322 331,906 1,025,035 194,438 1,072,091 1,099,071
Total stockholders'
investment................. 87,367 101,708 238,037 405,823 105,769 393,462 393,462
</TABLE>
- --------------------------
(1) Includes the results of operations of (i) the parking brake business from
Rockwell International Corporation ("Rockwell") from October 1, 1996 and
(ii) KPI Automotive Group ("KPI") from December 5, 1996, their respective
dates of acquisition. DASI issued an aggregate of 3,795,000 shares of its
Class A common stock in August 1996 in connection with its initial public
offering.
(2) Includes the results of operations of (i) VOFA Group ("VOFA") from January
1, 1997, (ii) the parking brake business of Excel from May 5, 1997, (iii) GT
Automotive Systems, Inc. ("GT Automotive") from August 29, 1997, and (iv)
REOM Industries (Aust) Pty Ltd. ("REOM Industries") from December 12, 1997,
which represent their respective dates of acquisition.
(3) Includes the results of operations of (i) Universal Tool & Stamping Co.,
Inc. ("Universal") from March 8, 1998, (ii) Trident Automotive plc
("Trident") from April 30, 1998, and (iii) the hinge business of Tower
Automotive, Inc. (the "Hinge Business") from September 8, 1998, which
represent their respective dates of acquisition. In March 1998, Dura
Automotive Systems Capital Trust (the "Dura Trust") issued 7 1/2%
convertible trust preferred securities (the "Trust Preferred Securities")
with an aggregate liquidation
5
<PAGE>
preference of $55.3 million. In June 1998, DASI issued 3,500,000 shares of
its Class A common stock, giving effect to the exercise of the underwriters'
over-allotment option (the "June 1998 Offering").
(4) The pro forma statement of operations data for the year ended December 31,
1998 give effect to: (i) the acquisitions of Universal, Trident, the Hinge
Business, Excel and Adwest by Dura, (ii) Excel's acquisition, effective July
1, 1998, of 70% of Schade, (iii) the March 1998 offering of the Trust
Preferred Securities, (iv) the June 1998 Offering, (v) the completion of the
notes offering of the 9% senior subordinated notes and the application of
the net proceeds therefrom and (vi) the retirement of the 10% senior
subordinated notes of Trident, as if each had been consummated on January 1,
1998. The pro forma statement of operations data for the three months ended
March 31, 1999 give effect to: (i) the acquisitions of Excel and Adwest,
(ii) the 9% senior subordinated notes offering and the application of the
net proceeds therefrom and (iii) the retirement of the Trident notes, as if
each had been consummated on January 1, 1998. The related pro forma balance
sheet data as of March 31, 1999 give effect to the completion of the notes
offering and the application of the net proceeds therefrom, as if that
transaction had been consummated on March 31, 1999.
(5) Amounts for Adwest have been translated from Pounds into Dollars using the
exchange rates set forth herein for convenience purposes only. In addition,
certain amounts of Adwest have been adjusted to conform to U.S. GAAP. See
Note 31 to the Consolidated Financial Statements of Adwest, Note 5 to the
Unaudited Interim Consolidated Financial Statements of Adwest and
"Currencies and Exchange Rates" included elsewhere herein.
(6) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A common stock and Class B common
stock outstanding during the year. Diluted earnings per share include the
dilutive effects of outstanding stock options using the treasury stock
method and the Trust Preferred Securities.
6
<PAGE>
RISK FACTORS
YOU SHOULD READ AND CONSIDER CAREFULLY EACH OF THE FOLLOWING FACTORS, AS
WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE MAKING A
DECISION TO PURCHASE CLASS A COMMON STOCK OFFERED HEREBY.
OUR BUSINESS MAY BE ADVERSELY IMPACTED AS A RESULT OF OUR SUBSTANTIAL LEVERAGE
We have a significant amount of indebtedness. As of March 31, 1999, on a pro
forma basis giving effect to the notes offering, we would have had approximately
$1,180 million of outstanding debt, $55.3 million of outstanding Trust Preferred
Securities and approximately $393.5 million of stockholders' investment, and our
pro forma ratio of earnings to fixed charges for the quarterly period ended
March 31, 1999 would have been 1.9 to 1. In addition, we are able to incur
substantial additional indebtedness in the future. The terms of the indentures
relating to the notes do not fully prohibit them from doing so. Our new credit
facility provides for revolving credit borrowings of up to $400 million, subject
to certain financial covenants set forth therein.
Our indebtedness could have several important consequences to you, including
but not limited to the following:
- our ability to obtain additional financing in the future for working
capital, capital expenditures, potential acquisition opportunities,
general corporate purposes or other purposes may be impaired;
- a substantial portion of our cash flow from operations must be dedicated
to the payment of principal and interest on our indebtedness;
- we may be more vulnerable to economic downturns, may be limited in our
ability to withstand competitive pressures and may have reduced
flexibility in responding to changing business, regulatory and economic
conditions; and
- fluctuations in market interest rates will affect the cost of our
borrowings to the extent not covered by interest rate hedge agreements
because a portion of our indebtedness is payable at variable rates.
Our ability to service our indebtedness will depend on our future
performance, which will be affected by prevailing economic conditions and
financial, business, regulatory and other factors. Certain of these factors are
beyond our control. We believe that, based upon current levels of operations, we
will be able to meet our debt service obligations when due. Significant
assumptions underlie this belief, including, among other things, that we will
continue to be successful in implementing our business strategy and that there
will be no material adverse developments in our business, liquidity or capital
requirements. If we cannot generate sufficient cash flow from operations to
service our indebtedness and to meet our other obligations and commitments, we
might be required to pursue one or more alternative strategies such as selling
assets, restructuring or refinancing our indebtedness or seeking additional
equity capital (which may substantially dilute the ownership interest of holders
of our common stock). We cannot assure you that any of these strategies could be
effected on satisfactory terms, if at all.
WE ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS AND COVENANTS UNDER THE INDENTURES
AND NEW CREDIT FACILITY
The indentures under which the 9% senior subordinated notes were issued and
the new credit facility contain numerous restrictive covenants, including, but
not limited to, covenants that restrict Dura's ability to incur indebtedness,
pay dividends, create liens, sell assets and engage in certain mergers and
acquisitions. In addition, the new credit facility also requires Dura to
maintain certain financial ratios. Our ability to comply with the covenants and
other terms of the new credit facility and the indentures and to satisfy our
other respective debt obligations (including, without limitation,
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borrowings and other obligations under the new credit facility) and our ability
to make cash payments with respect to the notes will depend on our future
operating performance. In the event that we fail to comply with the various
covenants contained in the new credit facility or the indentures, as applicable,
we would be in default thereunder, and in any such case, the maturity of
substantially all of our long-term indebtedness could be accelerated.
A default under the indentures would also constitute an event of default
under the new credit facility. In addition, the lenders under the new credit
facility could elect to declare all amounts borrowed thereunder, together with
accrued interest, to be due and payable. If we were unable to repay such
borrowings, such lenders could proceed against our assets, which secure our
borrowings under the new credit facility.
WE ARE DEPENDENT ON FORD, GM AND DAIMLERCHRYSLER AS OUR LARGEST CUSTOMERS
Our revenues from Ford, GM and DaimlerChrysler represented approximately
32%, 12% and 10%, respectively, of our revenues in 1998 on a pro forma basis and
approximately 36%, 23% and 15%, respectively, of our actual revenues in 1998.
The loss of Ford, GM, DaimlerChrysler or any other significant customer could
have a material adverse effect on us. The contracts we have entered into with
many of our customers provide for supplying the customers' requirements for a
particular model, rather than for manufacturing a specific quantity of products.
Such contracts range from one year to the life of the model, usually three to
seven years, and do not require the purchase by the customer of any minimum
number of parts. Therefore, the loss of any one of such customers or a
significant decrease in demand for certain key models or group of related models
sold by any of our major customers could have a material adverse effect on us.
We are involved in claims relating to our products with certain of our
significant customers. As a result of these claims, it is possible that our
relationship with these customers could be adversely affected. See
"Business--Legal Proceedings."
WE MAY EXPERIENCE DIFFICULTIES IN INTEGRATING EXCEL AND ADWEST
We believe that the Acquisitions will provide us with significant
opportunities to achieve operating synergies and cost savings. There can be no
assurance, however, that such benefits will be realized, that the combination of
Dura, Excel and Adwest will be successful, or that we will not experience
difficulties in integrating the operations of Excel and Adwest with our
operations. For example, the integration of Excel and Adwest will require the
experience and expertise of certain former key managers of Excel and Adwest,
respectively, who have been retained by Dura. There can be no assurance,
however, that these managers will remain with Dura for the time period necessary
to successfully integrate Excel's and Adwest's operations with our operations.
In addition, the Acquisitions may present significant challenges for our
management due to the increased time and resources required to properly
integrate management, employees, information systems, accounting controls,
personnel and administrative functions of Excel and Adwest with those of Dura
and to manage the combined company on a going forward basis. We cannot assure
you that we will be able to successfully integrate and streamline overlapping
functions or, if successfully accomplished, that such integration will not be
more costly to accomplish than presently contemplated or that we will not
encounter difficulties in managing the combined company due to its increased
size and scope.
In addition, we cannot assure you that we will achieve the operating
synergies and annual cost savings that we expect to result from the
Acquisitions, which we discuss under "Prospectus Summary," and "Unaudited Pro
Forma Financial Statements," and elsewhere in this prospectus. These estimates
constitute forward-looking information and involve known and unknown risks,
uncertainties and other factors that may cause the actual cost savings or cash
generated to be materially different from our estimates or result in these
savings not being realized in the time frame expected. In addition to the
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general factors discussed above, such estimates are based on a variety of other
factors and were derived utilizing numerous important assumptions, including:
- achieving estimated reductions in personnel at currently projected
severance cost levels, while maintaining historical sales levels;
- achieving a sufficient level of sales necessary to yield planned
production efficiencies and absorption of fixed costs;
- eliminating certain components of fixed overhead without affecting our
ability to manage our restructured operations;
- not disrupting planned production schedules; and
- achieving operating improvements at certain of Excel's and Adwest's
facilities.
WE MAY BE UNABLE TO COMPLETE ADDITIONAL STRATEGIC ACQUISITIONS
The automotive component supply industry has undergone, and is likely to
continue to experience, consolidation as OEMs seek to reduce costs and reduce
their supplier base. We intend to actively pursue acquisition targets that will
allow us to continue to expand into new geographic markets, add new customers,
provide new product, manufacturing and service capabilities or increase model
penetration with existing customers. There can be no assurance that we will find
attractive acquisition candidates or successfully integrate acquired businesses
into our existing business. If the expected synergies from such acquisitions do
not materialize or we fail to successfully integrate new businesses into our
existing businesses, our results of operations could be adversely affected. To
the extent that we may be considered as an acquisition candidate by a third
party, certain provisions in our restated certificate of incorporation and our
amended and restated by-laws may inhibit a change in control.
WE ARE SUBJECT TO CERTAIN RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS
We have significant international operations, specifically in Europe, Canada
and Latin America and the Acquisitions have further increased our international
operations. Excel has significant operations in Europe and substantially all of
Adwest's operations are located in Europe. Certain risks are inherent in
international operations, including:
- the difficulty of enforcing agreements and collecting receivables through
certain foreign legal systems;
- foreign customers may have longer payment cycles than customers in the
United States;
- tax rates in certain foreign countries may exceed those in the United
States and foreign earnings may be subject to withholding requirements or
the imposition of tariffs, exchange controls or other restrictions;
- general economic and political conditions in countries where Dura, Excel
and Adwest operate may have an adverse effect on their operations in those
countries;
- the difficulties associated with managing a large organization spread
throughout various countries; and
- required compliance with a variety of foreign laws and regulations.
As we continue to expand our business globally, our success will be
dependent, in part, on our ability to anticipate and effectively manage these
and other risks. We cannot assure you that these and other factors will not have
a material adverse effect on our international operations or our business as a
whole. In addition, we generate a significant portion of our revenues and incur
a significant portion of our expenses in currencies other than Dollars. To the
extent that we are unable to match revenues
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<PAGE>
received in foreign currencies with costs paid in the same currency, exchange
rate fluctuations in any such currency could have an adverse effect on our
financial results.
WE MAY BE ADVERSELY IMPACTED BY WORK STOPPAGES AND OTHER LABOR MATTERS
Approximately 8,300 of our employees are unionized, which represents
approximately 39% of our employees at March 31, 1999. We cannot assure you that
we will not encounter strikes, further unionization efforts or other types of
conflicts with labor unions or our employees. Any of these factors may have an
adverse effect on us or may limit our flexibility in dealing with our workforce.
In addition, many OEMs and their suppliers have unionized work forces. Work
stoppages or slow-downs experienced by OEMs or their suppliers could result in
slow-downs or closures of assembly plants where our products are included in
assembled vehicles. For example, strikes by the United Auto Workers led to the
shut down of most of GM's North American assembly plants in June and July 1998.
We estimate that this work stoppage at GM's facilities had an unfavorable impact
of approximately $16.7 million on our 1998 revenues. In the event that one or
more of our customers experiences a material work stoppage, such work stoppage
could have a material adverse effect on our business.
WE MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL AND SAFETY REGULATIONS TO WHICH WE
ARE SUBJECT
We are subject to the requirements of federal, state, local and foreign
environmental and occupational health and safety laws and regulations. We cannot
assure you that we operate at all times in complete compliance with all such
requirements. We could be subject to potentially significant fines and penalties
for any noncompliance that may occur. We have made and will continue to make
capital and other expenditures to comply with environmental requirements. We are
also subject to laws requiring the cleanup of contamination. Some of our
operations generate hazardous substances. If a release of hazardous substances
occurs at or from any of our current or former properties or at a landfill or
another location where we have disposed of wastes, we may be held liable for the
contamination, and the amount of such liability could be material. We are
currently addressing environmental contamination matters at certain facilities,
including facilities in Mancelona, Michigan, Butler, Indiana, and Rotenberg,
Einbeck and Dusseldorf, Germany, which could result in material expenditures.
See "Business--Environmental Matters."
CERTAIN STOCKHOLDERS CURRENTLY CONTROL ALL MATTERS SUBMITTED TO A STOCKHOLDER
VOTE
Onex Corporation, Alkin Co. and certain other stockholders associated with
Dura or Hidden Creek Industries beneficially own all of our outstanding shares
of Class B common stock, representing approximately 70% of the combined voting
power of our outstanding common stock as of March 31, 1999. Each share of Class
B common stock has ten votes, as compared to one vote for each share of Class A
common stock. As a result of such stock ownership, these stockholders are able
to control the vote on all matters submitted to a vote of the holders of our
common stock, including the election of directors, amendments to our restated
certificate of incorporation and by-laws and approval of significant corporate
mergers. Such consolidation of voting power could also have the effect of
delaying, deterring or preventing a change in control of Dura that might be
otherwise beneficial to Dura. See "Description of Capital Stock."
CYCLICALITY AND SEASONALITY COULD ADVERSELY AFFECT US
The automotive and recreational vehicle markets are highly cyclical and both
markets are dependent on consumer spending. Economic factors adversely affecting
automotive production and consumer spending could adversely impact us. In
addition, our business is somewhat seasonal. We typically experience decreased
revenues and operating income during the third calendar quarter of each
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year due to the impact of scheduled OEM plant shutdowns in July and August for
vacations and new model changeovers.
WE MAY BE ADVERSELY AFFECTED BY PRODUCT LIABILITY EXPOSURE CLAIMS
We face an inherent business risk of exposure to product liability claims in
the event that the failure of our products results in personal injury or death,
and there can be no assurance that we will not experience any material product
liability losses in the future. In addition, if any of our products prove to be
defective, we may be required to participate in a recall involving such
products. In late 1994, Ford issued a recall of a series of manual-transmission
Ford F-Series pickups to repair the self-adjust parking brakes originally
manufactured by the brake and cable business of Alkin Co. (the "Brake and Cable
Business"). Our share of such costs, which was fully reserved at the time of the
acquisition of the Brake and Cable Business has reached the full $6.0 million
limit agreed to between us and Ford. We are also involved in a product recall
relating to the same issue with respect to the Mondeo in Europe. We have agreed
to pay 50% of the costs of that recall not to exceed $1.0 million, which
payments totaled $0.4 million at December 31, 1998. The types of alleged
failures that prompted the F-Series recall have also led to a number of claims
and lawsuits filed against Ford, one of which culminated in a July 1998 award of
punitive damages against Ford of more than $151 million (which has subsequently
been reduced to $69 million) and Ford is appealing the decision. To date, two
cases have been instituted directly against Dura or Alkin Co. relating to
personal injury claims, and, at last report, Ford has indicated that it has
received over 400 claims (generally for property damage) relating to alleged
defects in the self-adjust parking brakes. Ford has maintained that Dura or
Alkin Co. is responsible for all damages or liabilities incurred by Ford as a
result of these claims, and as of December 31, 1998, Ford had tendered its
defense of approximately 30 such claims to Dura and Alkin Co. Dura and Alkin Co.
have submitted these claims to their insurance carriers. We maintain insurance
against product liability claims, but there can be no assurance that such
coverage will be adequate for liabilities ultimately incurred or that it will
continue to be available on terms acceptable to us. In November 1996, one of our
insurance carriers brought a declaratory judgment that its policy did not
provide coverage for an allegedly defective parking brake manufactured prior to
August 31, 1994.
A successful claim brought against us in excess of available insurance
coverage or a requirement to participate in any product recall may have a
material adverse effect on our results of operations or financial condition. See
"Business--Legal Proceedings."
WE OPERATE IN THE HIGHLY COMPETITIVE AUTOMOTIVE SUPPLY INDUSTRY
The automotive component supply industry is highly competitive. Some of our
competitors are companies, or divisions or subsidiaries of companies, that are
larger and have greater financial and other resources than we do. In addition,
with respect to certain of our products, some of our competitors are divisions
of our OEM customers. There can be no assurance that our products will be able
to compete successfully with the products of these other companies.
We principally compete for new business both at the beginning of the
development of new models and upon the redesign of existing models by our major
customers. New model development generally begins two to five years prior to the
marketing of such models to the public. The failure to obtain new business on
new models or to retain or increase business on redesigned existing models could
adversely affect our business.
In addition, there is substantial and continuing pressure from the major
OEMs to reduce costs, including the cost of products purchased from outside
suppliers such as Dura. If we are unable to generate sufficient production cost
savings in the future to offset price reductions, our gross margin could be
adversely affected.
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TECHNOLOGICAL AND REGULATORY CHANGES MAY ADVERSELY AFFECT US
Changes in legislative, regulatory or industry requirements or competitive
technologies may render certain of our products obsolete. Our ability to
anticipate changes in technology and regulatory standards and to develop and
introduce new and enhanced products successfully on a timely basis will be a
significant factor in our ability to grow and to remain competitive. There can
be no assurance that we will be able to achieve the technological advances that
may be necessary for us to remain competitive or that certain of our products
will not become obsolete. We are also subject to the risks generally associated
with new product introductions and applications, including lack of market
acceptance, delays in product development and failure of products to operate
properly.
WE MAY BE ADVERSELY IMPACTED BY THE YEAR 2000 ISSUE
We are currently working to resolve the potential impact of the year 2000 on
the processing of time-sensitive information by our computerized information
systems. Any of our programs that have time-sensitive software may recognize
"00" as the year 1900 rather than the year 2000. This could result in
miscalculations, classification errors or system failures.
While our various operations are at different stages of Year 2000 readiness,
we have nearly completed our global compliance review. Based on the information
available to date, we do not anticipate any significant readiness problems with
respect to our systems.
The most reasonably likely worst case scenario that we currently anticipate
with respect to Year 2000 is the failure of some of our suppliers, including
utilities suppliers, to be ready. This could cause a temporary interruption of
materials or services that we need to make our products, which could result in
delayed shipments to customers and lost sales and profits for us. We have
completed an assessment of our critical suppliers and have developed contingency
plans to address the risks which were identified. These plans include resourcing
materials or building inventory banks.
The outcome of our Year 2000 program is subject to a number of risks and
uncertainties, some of which (such as the availability of qualified computer
personnel and the Year 2000 responses of third parties) are beyond our control.
Therefore, there can be no assurances that we will not incur material
remediation costs beyond the above anticipated future costs, or that our
business, financial condition, or results of operations will not be
significantly impacted if Year 2000 problems with our systems, or with the
products or systems of other parties with whom we do business, are not resolved
in a timely manner.
SUBSTANTIAL SALES OF OUR CLASS A COMMON STOCK COULD ADVERSELY AFFECT ITS MARKET
PRICE
No prediction can be made as to the effect, if any, that future sales of
shares of our Class A common stock or the availability of such shares for future
sale will have on the market price of our Class A common stock prevailing from
time to time. Sales of substantial amounts of our Class A common stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for our Class A common stock. Currently, an aggregate of 3,325,303 shares
of Class B common stock convertible into shares of Class A common stock are
eligible for sale under Rule 144 under the Securities Act and are subject to
certain rights to register such shares under the Securities Act at Dura's
expense. In addition, an aggregate of 1,289,000 shares of Class A common stock
have been reserved for issuance upon conversion of the Trust Preferred
Securities.
DURA DOES NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE
We currently intend to retain earnings to support our growth strategy and do
not anticipate paying dividends on our Class A common stock in the foreseeable
future. As a holding company, the ability of DASI to pay dividends in the future
is dependent upon the receipt of dividends or other payments
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from its principal operating subsidiary, Dura Operating Corp. The payment of
dividends by such subsidiary to DASI for the purpose of paying dividends to
holders of Class A common stock is limited by the terms of Dura's new credit
facility and the indentures under which the 9% senior subordinated notes were
issued.
CERTAIN PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS COULD DELAY OR PREVENT A
CHANGE OF CONTROL
Certain provisions of our restated certificate of incorporation and by-laws
may inhibit changes in control of Dura that are not approved by Dura's board of
directors. These provisions include
- disparate voting rights per share between the Class A common stock and the
Class B common stock,
- a prohibition on stockholder action through written consents,
- a requirement that special meetings of stockholders be called only by the
board,
- advance notice requirements for stockholder proposals and nominations,
- limitations on the ability of stockholders to amend, alter or repeal our
by-laws and
- the authority of the board to issue without stockholder approval preferred
stock with such terms as the board may determine.
Dura is also subject to the protections of Section 203 of the Delaware
General Corporation Law, which could have similar effects. See "Description of
Capital Stock."
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FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This prospectus contains forward-looking statements that are subject to
risks and uncertainties. You should not place undue reliance on those statements
because they only speak as of the date of this prospectus. Forward-looking
statements include information concerning the possible or assumed future results
of operations of Dura, including forecasts, projections and descriptions of
expected cost savings or other anticipated synergies related to the acquisitions
of Excel and Adwest. These statements often include words such as "believe,"
"expect," "anticipate," "intend," "plan," "estimate," or similar expressions.
These statements are based on certain assumptions that we have made in light of
our experience in the industry as well as our perceptions of historical trends,
current conditions, expected future developments and other factors we believe
are appropriate in these circumstances. As you read and consider this
prospectus, you should understand that these statements are not guarantees of
performance or results. They involve risks, uncertainties and assumptions.
Although we believe that these forward-looking statements are based on
reasonable assumptions, you should be aware that many factors could affect our
actual financial results or results of operations and could cause actual results
to differ materially from those in the forward-looking statements. These factors
include:
- general economic or business conditions affecting the automotive industry
(which is dependent on consumer spending), either nationally or
regionally, being less favorable than expected;
- expected synergies, economies of scale and cost savings from the
acquisitions of Excel and Adwest not being fully realized or realized
within the expected time frames;
- costs or operational difficulties related to integrating the operations of
Excel and Adwest with our operations being greater than expected;
- our failure to develop or successfully introduce new products;
- increased competition in the automotive components supply market;
- unforseen problems associated with international sales, including gains
and losses from foreign currency exchange;
- implementation of or changes in the laws, regulations or policies
governing the automotive industry that could negatively affect the
automotive components supply industry;
- changes in general economic conditions in the United States and Europe;
and
- various other factors beyond our control.
All future written and oral forward-looking statements by us or persons
acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to above. Except for our ongoing obligations to
disclose material information as required by the federal securities laws, we do
not have any obligation or intention to release publicly any revisions to any
forward-looking statements to reflect events or circumstances in the future or
to reflect the occurrence of unanticipated events. YOU SHOULD ALSO READ
CAREFULLY THE FACTORS DESCRIBED IN THE "RISK FACTORS" SECTION OF THIS
PROSPECTUS.
USE OF PROCEEDS
Dura is registering the shares on behalf of the Selling Stockholders
pursuant to its obligations under a registration rights agreement. Dura will not
receive any cash proceeds from the sale of the shares by the Selling
Stockholders. All of the shares of Class A common stock covered by this
prospectus may be acquired by the Selling Stockholder upon the exercise of
outstanding warrants. The exercise price per share for the warrants is $16.56.
Any proceeds received by Dura upon the exercise of the warrants will be used for
general corporate purposes. See "Selling Stockholders."
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MARKET PRICE OF CLASS A COMMON STOCK
Dura's Class A common stock is traded on Nasdaq under the symbol "DRRA." The
following table sets forth, for the periods indicated, the high and low closing
prices for the Class A common stock as regularly quoted on Nasdaq. The Class A
common stock commenced trading on August 14, 1996. Prior thereto, there was no
public market for the Class A common stock.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1997:
First Quarter........................................ $27 $23 1/8
Second Quarter....................................... 28 3/4 22 1/2
Third Quarter........................................ 33 3/8 27
Fourth Quarter....................................... 35 3/8 23 7/8
FISCAL YEAR 1998:
First Quarter........................................ $32 1/2 $24 3/8
Second Quarter....................................... 40 1/4 30 3/8
Third Quarter........................................ 34 5/16 20
Fourth Quarter....................................... 34 1/8 20 5/8
FISCAL YEAR 1999:
First Quarter........................................ $35 $23 1/8
Second Quarter....................................... 33 3/4 23 3/8
Third Quarter (through August 5, 1999)............... 33 1/2 29 3/8
</TABLE>
On August 5, 1999, the last reported sale price of the Class A common stock
on Nasdaq was $29.38. On August 5, 1999, there were approximately 680 holders of
record of the Class A common stock and twelve holders of record of the Class B
common stock. We believe that there are significantly more beneficial owners of
our Class A common stock.
DIVIDEND POLICY
Dura has not declared or paid any dividends on its Class A common stock in
the past and currently intends to retain its earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future. As
a holding company, DASI's ability to pay dividends in the future is dependent
upon the receipt of dividends or other payments from its principal operating
subsidiary, Dura Operating Corp. Any future payment of dividends is within the
discretion of the board and will depend upon, among other factors, the capital
requirements, operating results and financial condition of Dura from time to
time. In addition, Dura's ability to pay cash dividends on its Class A common
stock is limited by the terms of its new credit facility and the indentures
under which the 9% senior subordinated notes were issued.
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CAPITALIZATION
The following table sets forth as of March 31, 1999: (1) the actual
consolidated capitalization of Dura, and (2) the as adjusted capitalization of
Dura giving effect to our recent sale of 9% senior subordinated notes and the
application of the net proceeds therefrom and our repurchase of the Trident
notes. This table should be read in conjunction with the audited and unaudited
consolidated financial statements and related notes and the unaudited pro forma
financial statements and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------------
ACTUAL AS ADJUSTED(1)
------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................................................... $ 39,267 $ 55,247
------------ --------------
------------ --------------
Long-term debt, including current maturities:
New credit facility:
Revolving credit facility..................................................... $ 100,086 $ --
Tranche A term loan........................................................... 250,740 250,740
Tranche B term loan........................................................... 275,000 275,000
Interim term loan............................................................. 200,000 --
Other senior indebtedness......................................................... 165,331 165,331
------------ --------------
Total senior debt............................................................... 991,157 691,071
------------ --------------
Trident notes(2).................................................................. 80,934 --
9% senior subordinated notes...................................................... -- 408,000
------------ --------------
Total subordinated debt......................................................... 80,934 408,000
------------ --------------
Total debt.................................................................... 1,072,091 1,099,071
------------ --------------
Trust Preferred Securities(3)....................................................... 55,250 55,250
Stockholders' investment:
Preferred Stock, $1.00 par value per share; 5,000,000 shares authorized; none
issued or outstanding........................................................... -- --
Class A Common Stock, $0.01 par value per share; 60,000,000 shares authorized;
13,943,622 shares issued and outstanding on an actual basis..................... 140 140
Class B Common Stock, $0.01 par value per share; 10,000,000 shares authorized;
3,325,303 shares issued and outstanding on an actual basis...................... 33 33
Additional paid-in capital........................................................ 335,884 335,884
Retained earnings................................................................. 70,544 70,544
Accumulated other comprehensive loss.............................................. (13,139) (13,139)
------------ --------------
Total stockholders' investment.................................................. 393,462 393,462
------------ --------------
Total capitalization.......................................................... $ 1,520,803 $ 1,547,783
------------ --------------
------------ --------------
</TABLE>
- ------------------------
(1) As adjusted to give effect to our sale of 9% senior subordinated notes,
which was completed on April 22, 1999 and the retirement of the Trident
notes, which was completed on June 24, 1999. Proceeds are net of discounts
and commissions and the expenses of the notes offering.
(2) Represents the Trident notes, which were issued in December 1997 and
subsequently repurchased in June 1999.
(3) Represents the Trust Preferred Securities issued by the Dura Trust in March
1998. The sole assets of the Dura Trust are approximately $57.0 million
principal amount of DASI's 7 1/2% convertible subordinated debentures due
March 31, 2028, such amount being the sum of the stated liquidation
preference of the Trust Preferred Securities and the capital contributed by
DASI in exchange for the common securities of the Dura Trust. DASI has
guaranteed, on a subordinated basis, certain obligations of the Dura Trust
under the Trust Preferred Securities.
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UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The Unaudited Pro Forma Statement of Operations for the year ended December
31, 1998 gives effect to: (1) the acquisitions of Universal, Trident, the Hinge
Business, Excel and Adwest by Dura, (2) Excel's July 1 acquisition of 70% of
Schade, (3) the March 1998 issuance of the Trust Preferred Securities, (4) the
June 1998 Offering, (5) the borrowings under the new credit facility, (6) the
sale of the 9% senior subordinated notes and the application of the net proceeds
therefrom and (7) the retirement of the Trident notes, as if such transactions
had occurred on January 1, 1998. The results of operations of Adwest represent
Adwest's results of operations for the twelve month period ended December 31,
1998.
The Unaudited Pro Forma Statement of Operations for the three months ended
March 31, 1999 gives effect to: (1) the acquisitions of Excel and Adwest, (2)
the borrowings under the new credit facility, (3) the sale of the 9% senior
subordinated notes and the application of the net proceeds therefrom and (4) the
retirement of the Trident notes, as if such transactions had occurred on January
1, 1999.
The unaudited pro forma financial data presented in this prospectus are
based on the assumptions and adjustments described in the accompanying notes.
The Unaudited Pro Forma Statements of Operations do not purport to represent
what our results of operations actually would have been if the events described
above had occurred as of the dates indicated or what our results will be for any
future periods. The Unaudited Pro Forma Financial Statements are based upon
assumptions and adjustments that we believe are reasonable. You should read the
Unaudited Pro Forma Financial Statements and the accompanying notes in
conjunction with the historical financial statements, including the related
notes, included elsewhere in this prospectus.
The acquisitions of Trident, the Hinge Business, Excel, Schade and Adwest
have been accounted for using the purchase method of accounting and,
accordingly, the assets acquired and liabilities assumed have been recorded at
their fair values as of the dates of their respective acquisitions. These
amounts have been recorded based upon preliminary estimates as of such dates.
Further adjustments to the acquired assets and assumed liabilities will be
reflected as a change in goodwill.
17
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
DURA(1) EXCEL(5) ADWEST(7) ADJUSTMENTS PRO FORMA
-------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues.......................................... $264,701 $308,705 $80,346 $ -- $653,752
Cost of sales..................................... 218,219 272,716 69,840 (4,806)(8) 555,969
-------- -------- --------- ----------- ---------
Gross profit.................................... 46,482 35,989 10,506 4,806 97,783
Selling, general & administrative expenses........ 16,897 17,991 7,027 -- 41,915
Amortization expense.............................. 3,685 358 655 1,387(10) 6,085
-------- -------- --------- ----------- ---------
Operating income................................ 25,900 17,640 2,824 3,419 49,783
Interest expense, net............................. 6,895 2,704 2,035 12,262(11) 23,896
Other income...................................... -- (582) -- -- (582)
-------- -------- --------- ----------- ---------
Income before provision for income taxes and
minority interest............................. 19,005 15,518 789 (8,843) 26,469
Provision for income taxes........................ 7,711 7,991 433 (5,415)(12) 10,720
Minority interest-trust preferred securities...... 611 -- -- -- 611
Minority interest in subsidiaries................. 1,342 (177) (15) -- 1,150
-------- -------- --------- ----------- ---------
Income before extraordinary item and accounting
change........................................ 9,341 7,704 371 (3,428) 13,988
Extraordinary item--loss on early extinguishment
of debt, net.................................... (2,702) -- -- -- (2,702)
Cumulative effect of change in accounting, net.... (3,147) -- -- -- (3,147)
-------- -------- --------- ----------- ---------
Net income (loss)............................... $ 3,492 $ 7,704 $ 371 $ (3,428) $ 8,139
-------- -------- --------- ----------- ---------
-------- -------- --------- ----------- ---------
Diluted shares outstanding(15).................... 14,253 4,599 18,852
-------- ----------- ---------
-------- ----------- ---------
Diluted earnings per share(15).................... $ 0.27 $ 0.46
-------- ---------
-------- ---------
Basic shares outstanding(15)...................... 12,877 4,599 17,476
-------- ----------- ---------
-------- ----------- ---------
Basic earnings per share.......................... $ 0.29 $ 0.47
-------- ---------
-------- ---------
</TABLE>
18
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HINGE
DURA(1) UNIVERSAL(2) TRIDENT(3) BUSINESS(4)
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Revenues................................ $739,467 $7,836 $ 104,555 $34,991
Cost of sales........................... 608,518 6,593 86,858 31,632
-------- ------ ---------- -----------
Gross profit.......................... 130,949 1,243 17,697 3,359
Selling, general and administrative
expenses.............................. 49,825 318 15,278 1,400
Amortization expense.................... 9,868 -- 1,303 --
-------- ------ ---------- -----------
Operating income...................... 71,256 925 1,116 1,959
Interest expense, net................... 20,267 -- 4,402 --
Other (income) expense.................. -- -- 369 --
-------- ------ ---------- -----------
Income before provision for income
taxes and minority interest......... 50,989 925 (3,655) 1,959
Provision for income taxes.............. 20,933 370 (1,033) 784
Minority interest-trust preferred
securities............................ 1,908 -- -- --
Minority interest in subsidiaries....... 1,481 -- -- --
-------- ------ ---------- -----------
Income before extraordinary item...... 26,667 555 (2,622) 1,175
Extraordinary item--loss on early
extinguishment of debt, net........... 643 -- -- --
-------- ------ ---------- -----------
Net income (loss)..................... $ 26,024 $ 555 $ (2,622) $ 1,175
-------- ------ ---------- -----------
-------- ------ ---------- -----------
Diluted shares outstanding(15).......... 11,795
--------
--------
Diluted earnings per share(15).......... $ 2.37
--------
--------
Basic shares outstanding(15)............ 10,708
--------
--------
Basic earnings per share................ $ 2.43
--------
--------
<CAPTION>
PRO FORMA
EXCEL(5) SCHADE(6) ADWEST(7) ADJUSTMENTS PRO FORMA
---------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues................................ $1,106,103 $ 132,779 $ 399,717 $ -- $2,525,448
Cost of sales........................... 995,982 117,593 346,972 (23,676)(8) 2,170,472
---------- --------- --------- ----------- ----------
Gross profit.......................... 110,121 15,186 52,745 23,676 354,976
Selling, general and administrative
expenses.............................. 76,507 7,494 23,974 (6,000)(9) 168,796
Amortization expense.................... 2,108 -- 2,927 6,399(10) 22,605
---------- --------- --------- ----------- ----------
Operating income...................... 31,506 7,692 25,844 23,277 163,575
Interest expense, net................... 9,623 2,669 9,823 43,282(11) 90,066
Other (income) expense.................. (69) -- -- -- 300
---------- --------- --------- ----------- ----------
Income before provision for income
taxes and minority interest......... 21,952 5,023 16,021 (20,005) 73,209
Provision for income taxes.............. 3,632 1,419 6,094 (2,549)(12) 29,650
Minority interest-trust preferred
securities............................ -- -- -- 580(13) 2,488
Minority interest in subsidiaries....... 1,367 -- 633 1,081(14) 4,562
---------- --------- --------- ----------- ----------
Income before extraordinary item...... 16,953 3,604 9,294 (19,117) 36,509
Extraordinary item--loss on early
extinguishment of debt, net........... -- -- -- -- 643
---------- --------- --------- ----------- ----------
Net income (loss)..................... $ 16,953 $ 3,604 $ 9,294 $(19,117) $ 35,866
---------- --------- --------- ----------- ----------
---------- --------- --------- ----------- ----------
Diluted shares outstanding(15).......... 5,723 17,518
----------- ----------
----------- ----------
Diluted earnings per share(15).......... $ 2.05
----------
----------
Basic shares outstanding(15)............ 6,729 17,437
----------- ----------
----------- ----------
Basic earnings per share................ $ 2.06
----------
----------
</TABLE>
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(1) Represents the results of operations of Dura for the year ended December 31,
1998, including the results of operations of Universal, Trident and the
Hinge Business from their respective dates of acquisition and for the three
months ended March 31, 1999, including the results of operations of Excel
and Adwest from their respective dates of acquisition.
(2) Represents the results of operations of Universal from January 1, 1998
through the date of acquisition, March 8, 1998.
(3) Represents the results of operations of Trident from January 1, 1998 through
the date of acquisition, April 30, 1998.
(4) Represents the results of operations for the Hinge Business from January 1,
1998 through the date of acquisition, August 31, 1998.
(5) Represents the results of operations for Excel for the year ended December
31, 1998 and from January 1, 1999 through the date of acquisition, March 23,
1999. The results of operations for the year ended December 31, 1998 include
the results of operations of Schade from July 1, 1998, the date of its
acquisition, through December 31, 1998.
(6) Represents the results of operations of Schade from January 1, 1998 through
the date of its acquisition by Excel, July 1, 1998.
(7) Represents the results of operations for Adwest for the twelve months ended
December 31, 1998 and from January 1, 1999 through the date of acquisition,
March 15, 1999.
(8) Reflects the change in depreciation expense resulting from adjustments to
the depreciable lives of property, plant and equipment of Universal,
Trident, the Hinge Business, Excel, Schade and Adwest to their estimated
useful lives at the time of their acquisition and from adjustments to value
such property, plant and equipment at fair value as of the date of
acquisition as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ -------------
<S> <C> <C>
Universal....................................................... $ 33 $ --
Trident......................................................... 1,543 --
Hinge Business.................................................. 474 --
Excel........................................................... 12,886 2,962
Schade.......................................................... 5,740 1,282
Adwest.......................................................... 3,000 562
------------ -------------
Total......................................................... $ 23,676 $ 4,806
------------ -------------
------------ -------------
</TABLE>
(9) Reflects the elimination of certain corporate payroll and related costs and
duplicate public company expenses arising from the acquisitions of Excel and
Adwest for the year ended December 31, 1998 as set forth below:
<TABLE>
<S> <C>
Executive management payroll costs.................................. $ 3,500
Public company costs................................................ 1,700
Other............................................................... 800
---------
Total............................................................. $ 6,000
---------
---------
</TABLE>
20
<PAGE>
(10) Represents the additional amortization of goodwill and other intangible
assets arising from the acquisitions of Universal, Trident, the Hinge
Business, Excel, Adwest, net of amortization of goodwill and other
intangible assets previously recorded by Trident, Excel and Adwest:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ -------------
<S> <C> <C>
Amortization of goodwill and other intangible assets:
Universal..................................................... $ 87 $ --
Trident....................................................... 2,019 --
Hinge Business................................................ 345 --
Excel/Schade.................................................. 4,966 1,159
Adwest........................................................ 5,320 1,241
------------ -------------
12,737 2,400
Amortization previously recorded by:
Trident....................................................... (1,303) --
Excel......................................................... (2,108) (358)
Adwest........................................................ (2,927) (655)
------------ -------------
(6,338) (1,013)
------------ -------------
Net increase................................................ $ 6,399 $ 1,387
------------ -------------
------------ -------------
</TABLE>
Goodwill is amortized on a straight-line basis over a forty-year period.
Other intangible assets are amortized over the useful life of the related
asset.
(11) Represents the change in interest expense arising from:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ -------------
<S> <C> <C>
Interest expense on Term Loan A................................. $ 21,313 $ 5,328
Interest expense on Term Loan B................................. 22,000 5,500
Interest expense on Subordinated Notes.......................... 36,720 9,180
Interest expense on other senior indebtedness................... 6,033 2,888
Amortization of capitalized financing fees...................... 4,000 1,000
------------ -------------
Total adjustments....................................... 90,066 23,896
------------ -------------
Interest expense, net previously recorded by:
Dura............................................................ (20,267) (6,895)
Trident......................................................... (4,402) --
Excel........................................................... (9,623) (2,704)
Schade.......................................................... (2,669) --
Adwest.......................................................... (9,823) (2,035)
------------ -------------
(46,784) (11,634)
------------ -------------
Net increase............................................ $ 43,282 $ 12,262
------------ -------------
------------ -------------
</TABLE>
(12) Adjusts the provision for income taxes on a pro forma basis to reflect
Dura's incremental tax rate of 40.5%.
(13) Represents dividends, net of income taxes, on the Trust Preferred
Securities for the period prior to their issuance in March 1998.
21
<PAGE>
(14) Represents the minority interest in the earnings of Schade for the period
prior to July 1, 1998, the date of its acquisition by Excel.
(15) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A common stock and Class B common
stock outstanding during the year. Diluted earnings per share for the three
months ended March 31, 1999 include the dilutive effects of outstanding
stock options using the treasury stock method and assumes the conversion of
the Trust Preferred Securities into shares of Class A common stock. Diluted
earnings per share for the year ended December 31, 1998 excludes the
conversion of the Trust Preferred Securities (into approximately 1,289,000
shares of Class A common stock), as their effect is anti-dilutive. Pro forma
weighted average shares outstanding include the effects of the shares that
were issued in connection with the acquisition of Excel.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
DURA
The following table sets forth selected consolidated financial data with
respect to Dura for each of the periods indicated. The selected historical
financial data for Dura for the years ended December 31, 1994 through 1998 have
been derived from Dura's consolidated financial statements which have been
audited by Arthur Andersen LLP, independent public accountants. The selected
historical consolidated financial data of Dura for the three months ended March
31, 1998 and 1999 have been derived from unaudited financial statements of Dura
and reflect all adjustments which, in the opinion of management, are necessary
for a fair presentation of the consolidated financial statements for an interim
period. All such adjustments are of a normal, recurring nature. Results of
operations for an interim period are not necessarily indicative of results for
the full year. The selected historical consolidated financial data should be
read in conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the consolidated financial statements
and notes thereto all included elsewhere herein.
DURA AUTOMOTIVE SYSTEMS, INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1994(1) 1995(2) 1996(3) 1997(4) 1998(5) 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................... $ 189,675 $ 253,726 $ 245,329 $ 449,111 $ 739,467 $ 125,746 $ 264,701
Cost of sales.......................... 170,625 219,559 207,810 375,086 608,518 104,471 218,219
--------- --------- --------- --------- --------- --------- ---------
Gross profit......................... 19,050 34,167 37,519 74,025 130,949 21,275 46,482
Selling, general and administrative
expenses............................. 10,485 15,513 17,157 32,815 49,825 9,160 16,897
Amortization expense................... 690 1,094 1,036 3,600 9,868 1,251 3,685
--------- --------- --------- --------- --------- --------- ---------
Operating income..................... 7,875 17,560 19,326 37,610 71,256 10,864 25,900
Interest expense, net.................. 3,473 4,822 2,589 9,298 20,267 2,938 6,895
Other income(2)........................ -- (4,240) -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes........... 4,402 16,978 16,737 28,312 50,989 7,926 19,005
Provision for income taxes............. 1,822 6,852 6,609 11,670 20,933 3,274 7,711
Equity in losses of affiliate, net..... -- -- -- -- 1,481 -- 1,342
Minority interest(6)................... -- -- -- -- 1,908 76 611
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item and
accounting change.................. 2,580 10,126 10,128 16,642 26,667 4,576 9,341
Extraordinary item, net................ -- -- -- -- 643 -- (2,702)
Cumulative effect of change in
accounting, net...................... -- -- -- -- -- -- (3,147)
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 2,580 $ 10,126 $ 10,128 $ 16,642 $ 26,024 $ 4,576 $ 3,492
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Basic earnings per share(7)............ $ 0.75 $ 2.04 $ 1.57 $ 1.89 $ 2.43 $ 0.52 $ 0.27
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings per share(7).......... $ 0.75 $ 2.03 $ 1.57 $ 1.88 $ 2.37 $ 0.52 $ 0.29
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
OTHER FINANCIAL DATA:
Depreciation and amortization.......... $ 3,725 $ 5,578 $ 6,079 $ 12,303 $ 27,571 $ 3,067 $ 10,507
Capital expenditures, net.............. 5,406 6,116 6,260 16,242 31,822 3,733 5,994
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1994(1) 1995(2) 1996(3) 1997(4) 1998(5) 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents.............. $ 17 $ 1,732 $ 1,667 $ 4,148 $ 20,544 $ 46,938 $ 39,267
Working capital........................ 18,631 13,701 27,528 50,304 63,766 103,066 265,890
Total assets........................... 166,133 140,531 246,129 419,264 929,383 500,606 2,260,567
Total debt............................. 74,766 51,776 77,456 180,322 331,906 194,438 1,072,091
Total stockholders' investment......... 17,418 27,683 87,367 101,708 238,037 105,769 393,462
</TABLE>
- ------------------------------
(1) In August 1994, Dura acquired the Brake and Cable Business of Alkin Co. The
results of operations of this acquired business have been included in the
consolidated financial statements of Dura from August 31, 1994, the date of
acquisition.
(2) In April 1995, Dura sold the net assets of its window regulator business to
Rockwell, realizing a pretax gain of approximately $4.2 million. The results
of operations of the window regulator business have been included in the
consolidated financial statements of Dura through April 2, 1995, the date of
divestiture.
(3) Includes the results of operations of (i) the parking brake business from
Rockwell from October 1, 1996 and (ii) KPI from December 5, 1996, their
respective dates of acquisition. Dura issued an aggregate of 3,795,000
shares of its Class A common stock in August 1996 in connection with its
initial public offering.
(4) Includes the results of operations of (i) VOFA from January 1, 1997, (ii)
the parking brake business of Excel from May 5, 1997, (iii) GT Automotive
from August 29, 1997 and (iv) REOM Industries from December 12, 1997, which
represent their respective dates of acquisition.
(5) Includes the results of operations of (i) Universal from March 8, 1998, (ii)
Trident from April 30, 1998, and (iii) the Hinge Business from September 8,
1998, which represent their respective dates of acquisition. In March 1998,
the Dura Trust issued the Trust Preferred Securities. In June 1998, DASI
issued 3,500,000 shares of its Class A common stock, giving effect to the
exercise of the underwriters' over-allotment option.
(6) Represents dividends, net of income taxes, on the Trust Preferred
Securities.
(7) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A common stock and Class B common
stock outstanding during the year. Diluted earnings per share include the
dilutive effects of outstanding stock options using the treasury stock
method and the Trust Preferred Securities.
24
<PAGE>
EXCEL
The following table sets forth selected consolidated financial data with
respect to Excel for each of the periods indicated. The selected historical
financial data for Excel for the fiscal years ended December 28, 1996, December
27, 1997 and January 2, 1999 have been derived from Excel's consolidated
financial statements, which have been audited by Arthur Andersen LLP,
independent accountants. The selected historical consolidated financial data
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the consolidated financial
statements and notes thereto all included elsewhere herein.
EXCEL INDUSTRIES, INC.
<TABLE>
<CAPTION>
YEAR ENDED,
----------------------------------------------------------
JANUARY 2,
DECEMBER 28, 1996(1) DECEMBER 27, 1997 1999(2)
-------------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 887,741 $ 962,333 $ 1,106,103
Cost of goods sold................................... 783,375 846,990 995,982
-------- -------- -----------------
Gross profit................................... 104,366 115,343 110,121
Selling, administrative and engineering expenses..... 65,652 79,267 78,615
-------- -------- -----------------
Operating income............................... 38,714 36,076 31,506
Interest expense..................................... 9,784 10,984 11,628
Other income, net.................................... (1,736) (1,930) (2,074)
-------- -------- -----------------
Income before income taxes and minority
interest..................................... 30,666 27,022 21,952
Provision for income taxes........................... 11,550 9,458 3,632
Minority interest.................................... -- -- 1,367
-------- -------- -----------------
Net income..................................... $ 19,116 $ 17,564 $ 16,953
-------- -------- -----------------
-------- -------- -----------------
OTHER FINANCIAL DATA:
Depreciation and amortization........................ $ 26,246 $ 33,382 $ 39,679
Capital expenditures, net............................ 29,209 39,287 45,958
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and short-term investments...................... $ 6,580 $ 2,317 $ 16,290
Working capital...................................... 114,140 116,550 118,796
Total assets......................................... 443,234 457,797 594,384
Total debt........................................... 133,006 108,615 167,035
Shareholders' equity................................. 150,725 185,315 194,258
</TABLE>
- ------------------------------
(1) On April 3, 1996, Excel acquired Anderson Industries, Inc. ("Anderson"),
whose primary asset was Atwood Industries, Inc. ("Atwood"). The results of
operations of Atwood have been included in the consolidated financial
statements of Excel from April 3, 1996.
(2) The results of operations of Schade have been included in the consolidated
financial statements of Excel since July 1, 1998.
25
<PAGE>
ADWEST
The following table sets forth selected consolidated financial data with
respect to Adwest for each of the periods indicated. The selected historical
financial data for Adwest for the fiscal years ended June 30, 1997 and 1998, set
forth in U.K. GAAP in Pounds, have been derived from Adwest's consolidated
financial statements, which have been audited by KPMG Audit Plc, independent
public accountants. The data as of and for the six months ended December 31,
1997 and 1998, set forth in U.K. GAAP in Pounds, have been derived from Adwest's
unaudited consolidated financial statements which, in the opinion of Adwest's
management, contain all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial condition and results of
operations for these periods. The results of operations for the six months ended
December 31, 1998 are not necessarily indicative of the results that may be
expected for the entire fiscal year. The consolidated financial statements of
Adwest for the periods presented have been prepared in accordance with U.K.
GAAP, which differs in certain significant respects from U.S. GAAP. See Note 31
to the Consolidated Financial Statements of Adwest and Note 5 to the Unaudited
Interim Consolidated Financial Statements of Adwest included elsewhere herein.
The selected financial data for the fiscal years ended June 30, 1997 and 1998,
and the six months ended December 31, 1998, set forth in U.S. GAAP in Dollars,
has been derived from the audited and unaudited consolidated financial
statements of Adwest and adjusted for differences between U.K. GAAP and U.S.
GAAP. The selected historical consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and the consolidated financial statements and notes
thereto all included elsewhere herein.
ADWEST AUTOMOTIVE PLC
<TABLE>
<CAPTION>
U.K. GAAP IN POUNDS
------------------------------------------------
FISCAL YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
---------------------- ------------------------
1997(1) 1998(1)(2) 1997(1)(2) 1998(2)
--------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(POUNDS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF PROFIT AND LOSS DATA:
TURNOVER........................................................ L191,412 L249,853 L112,190 L118,155
Net operating costs............................................. 173,399 228,495 102,736 109,829
--------- ----------- ----------- -----------
OPERATING PROFIT................................................ 18,013 21,358 9,454 8,326
Associated undertakings......................................... 21 21 -- --
Net interest.................................................... (2,892) (5,199) (2,196) (2,924)
Loss on disposal of businesses.................................. (791) (13,501) -- --
--------- ----------- ----------- -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX........................ 14,351 2,679 7,258 5,402
Taxation on ordinary activities................................. 4,527 4,529 2,249 1,536
--------- ----------- ----------- -----------
(LOSS)/PROFIT FOR THE FINANCIAL YEAR AFTER TAX.................. 9,824 (1,850) 5,009 3,866
Minority interests.............................................. 400 505 246 133
--------- ----------- ----------- -----------
(LOSS)/PROFIT FOR THE FINANCIAL YEAR............................ 9,424 (2,355) 4,763 3,733
Dividends....................................................... 6,428 6,442 1,897 --
--------- ----------- ----------- -----------
RETAINED (LOSS)/PROFIT FOR THE FINANCIAL YEAR................... L2,996 L(8,797) L2,866 L3,733
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital................................................. L 34,876 L 11,758 L 13,482 L (2,289)
Total assets.................................................... 121,640 160,647 157,041 158,110
Borrowings due after more than one year......................... 38,767 61,093 66,680 53,724
Shareholders' funds--equity..................................... 29,451 8,246 4,371 11,577
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
U.S. GAAP IN DOLLARS(3)(4)
--------------------------------------------------
FISCAL YEAR ENDED JUNE SIX MONTHS ENDED
30, DECEMBER 31,
------------------------ ------------------------
1997(1) 1998(1)(2) 1997(1)(2) 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................................... $ 242,765 $ 365,814 $ 163,020 $ 196,456
Cost of sales............................................... 202,876 313,450 137,681 170,792
----------- ----------- ----------- -----------
Gross profit.............................................. 39,889 52,364 25,339 25,664
Selling, general and administrative expenses................ 14,543 23,084 13,168 14,058
Amortization expense........................................ 1,704 2,267 853 1,510
----------- ----------- ----------- -----------
Operating income.......................................... 23,642 27,013 11,318 10,096
Interest expense............................................ 4,654 8,560 3,609 4,860
----------- ----------- ----------- -----------
Income from continuing operations before provision for
income taxes and minority interest...................... 18,988 18,453 7,709 5,236
Provision for income taxes.................................. 6,370 6,182 2,829 2,779
Minority interest........................................... 651 831 408 208
----------- ----------- ----------- -----------
Net income from continuing operations..................... $ 11,967 $ 11,440 $ 4,472 $ 2,249
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
OTHER FINANCIAL DATA:
Depreciation and amortization............................... $ 13,939 $ 16,515 $ 7,671 $ 9,625
Capital expenditures, net................................... 9,521 27,556 12,479 13,263
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................................. $ 47,079 $ 11,976 $ 12,545 $ (22,446)
Total assets................................................ 291,014 374,066 398,869 376,476
Long-term debt (less current portion)....................... 63,764 100,858 110,735 89,773
Shareholders' equity........................................ 137,288 122,316 139,192 121,721
</TABLE>
- ------------------------------
(1) In May 1998 Adwest disposed of its U.S. electronics division for $38.0
million. Adwest realized a pre-tax loss of approximately $9.7 million
related to the sale. The results of operations of the electronics division
have been included in the consolidated financial statements of Adwest
through the date of divestiture.
During the year ended June 30, 1997, Adwest finalized the disposal of the
U.K. power systems division and property portfolio. The loss from the
disposal of these entities was $1.3 million for the year ended June 30,
1997. The results of operations of these entities have been included in the
consolidated financial statements of Adwest through the dates of
divestiture.
(2) On September 11, 1997, Adwest acquired Heidemann Verwaltungs GmbH
("Heidemann") and its subsidiary undertakings for DM132.0 million. The
results of operations of Heidemann have been included in the consolidated
financial statements of Adwest from September 11, 1997.
27
<PAGE>
(3) The Adwest historical financial statements were prepared in accordance with
U.K. GAAP, which differs in certain significant respects from U.S. GAAP. The
following table reconciles the Adwest profit/loss as reported under U.K.
GAAP to net income as stated under U.S. GAAP:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
-------------------- --------------------
1997 1998 1997 1998
--------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
(Loss)/profit attributable to shareholders as reported
under U.K. GAAP....................................... L 9,424 L(2,355) L4,763 L3,733
Converted to U.S. Dollars............................... $ 15,167 $ (3,877) $ 7,827 $ 6,207
U.S. GAAP adjustments (in U.S. Dollars):
Goodwill amortization................................. (2,361) (2,267) (853) (1,510)
Impact of goodwill previously amortized on sale of
subsidiary.......................................... -- 4,783 -- --
Cumulative exchange loss on sale of foreign
subsidiaries........................................ -- (1,946) -- --
Pension costs......................................... 533 26 15 (414)
Deferred taxation--full provision..................... (270) (235) (150) (219)
Tax effect of U.S. GAAP reconciling items............. (428) (49) (10) 90
Fixed asset revaluations.............................. 818 165 82 83
Deferred profit on sale of property................... 488 499 250 253
Pre-production costs.................................. -- (1,976) (629) (2,097)
Other................................................. (26) 34 (13) (60)
Minority interests.................................... (8) -- (3) 12
Reverse prior year adjustment......................... -- -- -- (978)
--------- --------- --------- ---------
Net (loss)/income under U.S. GAAP....................... $ 13,913 $ (4,843) $ 6,516 $ 1,367
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
(4) Operating results and balance sheet data of Adwest have been translated from
Pounds to Dollars using the following ratios:
<TABLE>
<CAPTION>
FISCAL YEAR SIX MONTHS
ENDED JUNE 30, ENDED DECEMBER 31,
-------------------- --------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating results.................................. 1.6094 1.6464 1.6433 1.6627
Balance sheet...................................... 1.6448 1.6509 1.6607 1.6710
</TABLE>
(5) "EBITDA" is operating income plus depreciation and amortization. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles, and our calculation thereof may not be comparable to that
reported by other companies. We believe that it is widely accepted that
EBITDA provides useful information regarding a company's ability to service
and/or incur indebtedness. EBITDA does not take into account Adwest's
working capital requirements, debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary use.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
We ordinarily begin 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, we incur (1) costs related to the design and engineering of such
products, (2) costs related to the production of the tools and dies used to
manufacture the new product and (3) start-up costs associated with the initial
production of such product. In general, design and engineering costs are
expensed in the period incurred unless they are reimbursed by the customer, in
which case they are capitalized and amortized over the life of such product as
they are recovered from the customer. Costs incurred in the production of the
tools and dies are generally capitalized and reimbursed by the customer prior to
production. Start-up costs, which are generally incurred 30 to 60 days
immediately prior to and immediately after initial production, are expensed as
incurred.
RESULTS OF OPERATIONS
DURA
The following table sets forth the percentage relationship of certain items
to revenues for Dura for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues......................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................................... 84.7 83.5 82.3 83.1 82.4
--------- --------- --------- --------- ---------
Gross profit................................................. 15.3 16.5 17.7 16.9 17.6
Selling, general and administrative expenses..................... 7.0 7.3 6.7 7.3 6.4
Amortization expense............................................. 0.4 0.8 1.3 1.0 1.4
--------- --------- --------- --------- ---------
Operating income............................................. 7.9 8.4 9.7 8.6 9.8
Interest expense, net............................................ 1.1 2.1 2.7 2.3 2.6
--------- --------- --------- --------- ---------
Income before provision for income taxes, equity in losses of
affiliates and minority interest........................... 6.8 6.3 7.0 6.3 7.2
Provision for income taxes....................................... 2.7 2.6 2.9 2.6 2.9
Equity in losses of affiliates, net.............................. -- -- 0.2 -- 0.5
Minority interest-dividends on Trust Preferred Securities, net... -- -- 0.3 0.1 0.3
--------- --------- --------- --------- ---------
Income before extraordinary item and accounting change....... 4.1% 3.7% 3.6% 3.6% 3.5%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 TO THE THREE MONTHS
ENDED MARCH 31, 1998
REVENUES. Revenues of $264.7 million for the three months ended March 31,
1999 increased substantially over $125.7 million for the three months ended
March 31, 1998. The increase in revenues is primarily the result of the
acquisitions of Universal in March 1998, Trident in April 1998, the Hinge
Business in September 1998, Excel in March 1999 and Adwest in March 1999.
COST OF SALES. Cost of sales for the three months ended March 31, 1999
increased by $113.7 million to $218.2 million from $104.5 million for the three
months ended March 31, 1998. Cost of sales as a percentage of revenues for the
three months ended March 31, 1999 was 82.4% compared
29
<PAGE>
to 83.1% for the three months ended March 31, 1998. The corresponding
improvement in gross margins is primarily the result of lower costs of purchased
materials and higher margins from efficiency improvements and plant
rationalizations in acquired operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $16.9 million for the three months ended March 31,
1999 compared to $9.2 million for the three months ended March 31, 1998. The
increase was due primarily to incremental costs from the acquisitions discussed
above. As a percentage of revenues, selling, general and administrative expenses
were 6.4% for the three months ended March 31, 1999 compared to 7.3% for the
three months ended March 31, 1998.
INTEREST EXPENSE. Interest expense for the three months ended March 31,
1999 was $6.9 million compared to $2.9 million for the three months ended March
31, 1998. The increase was due principally to borrowings incurred related to the
acquisitions discussed above.
INCOME TAXES. The effective income tax rate was 40.6% for the three months
ended March 31, 1999 and 41.3% for the three months ended March 31, 1998. The
effective rates differed from the statutory rates as a result of higher foreign
tax rates and the effects of state taxes and non-deductible goodwill
amortization.
COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997
REVENUES. Revenues for the year ended December 31, 1998 increased by $290.4
million, or 64.7%, to $739.5 million from $449.1 million for 1997. The increase
in revenues relates primarily to the acquisitions of GT Automotive in August
1997, REOM Industries in December 1997, Universal in March 1998, Trident in
April 1998 and the Hinge Business in September 1998. These increases were
partially offset by the effects of a strike at GM. We estimate the strike at GM
decreased our revenues by approximately $16.7 million for the year ended
December 31, 1998.
COST OF SALES. Cost of sales for the year ended December 31, 1998 increased
by $233.4 million, or 62.2%, to $608.5 million from $375.1 million for 1997.
Cost of sales as a percentage of revenues for the year ended December 31, 1998
was 82.3% compared to 83.5% for 1997. The corresponding improvement in gross
margin is primarily the result of lower costs of purchased materials and higher
margins from efficiency improvements and plant rationalizations in acquired
operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $17.0 million, or 51.8%, to $49.8 million
for the year ended December 31, 1998 from $32.8 million for 1997. The increase
is due primarily to incremental costs from the acquisitions discussed above. As
a percentage of revenues, selling, general and administrative expenses were 6.7%
for 1998 compared to 7.3% for 1997.
AMORTIZATION EXPENSE. Amortization expense increased from $3.6 million for
the year ended December 31, 1997 to $9.9 million for 1998. The increase is the
result of goodwill amortization arising from the acquisitions discussed above.
INTEREST EXPENSE. Interest expense for the year ended December 31, 1998 was
$20.3 million compared to $9.3 million for 1997. The increase was due
principally to borrowings incurred related to the acquisitions discussed above.
INCOME TAXES. The effective income tax rate was 41.1% for 1998 compared to
41.2% for 1997. The effective rates differed from the statutory rates primarily
as a result of higher foreign tax rates, state taxes and non-deductible goodwill
amortization.
EQUITY IN LOSSES OF AFFILIATE. In January 1998, Dura and Excel, then its
joint venture partner, exercised an option to increase their joint venture's
ownership interest in Pollone to 51%, and as of
30
<PAGE>
such date, began consolidating the results of Pollone into the results of their
joint venture. Equity in losses of affiliate for the year ended December 31,
1998 represents Dura's share of the loss of the joint venture's operations in
1998.
MINORITY INTEREST. Minority interest for the year ended December 31, 1998
represents dividends, net of income tax benefits, on the Trust Preferred
Securities which were issued by the Dura Trust on March 20, 1998.
EXTRAORDINARY ITEM. The extraordinary loss for the year ended December 31,
1998 represents the write-off, net of income taxes, of deferred financing costs
related to former credit facilities.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
REVENUES. Revenues for 1997 increased by $203.8 million, or 83.1%, to
$449.1 million from $245.3 million for 1996. Approximately $179.0 million of the
increase relates to the acquisitions of KPI in December 1996, VOFA in January
1997 and GT Automotive in August 1997. The remaining increase is due to
increased production on models served by Dura 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 gross margin is a result of continued cost reduction efforts,
including manufacturing process improvements such as cellular manufacturing,
mistake proofing, improved capacity utilization through rationalization and
consolidation of facilities and the effects of material cost reductions achieved
through the centralization of purchasing efforts and the resulting greater
purchasing power.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $15.7 million, or 91.3%, to $32.8 million
for 1997 from $17.2 million for 1996. This increase is due to incremental costs
from the acquisitions of KPI, VOFA and GT Automotive, engineering costs related
to new business and costs associated with the greater involvement in the design,
engineering and prototyping of systems for customers. As a percentage of
revenues, selling, general and administrative expenses were 7.3% for 1997
compared to 7.0% for 1996.
INTEREST EXPENSE. Interest expense for 1997 increased by $6.7 million to
$9.3 million from $2.6 million for 1996. The increase was due principally to
borrowings incurred related to the acquisitions of KPI, VOFA and GT Automotive.
INCOME TAXES. The effective income tax rate for 1997 was 41.2% for 1997
compared to 39.5% for 1996. The effective rates differed from the statutory
rates primarily as a result of an increased proportion of Dura's earnings being
derived in higher tax rate jurisdictions, such as Germany and Canada, state
taxes and an increase in non-deductible goodwill amortization.
EXCEL
Excel was founded in 1928 and became a public company in April 1984.
Effective July 1, 1998, Excel acquired 70% of Schade. Schade has sales and
manufacturing operations in the Czech Republic, Germany, Portugal, Spain and the
U.K. Schade and its affiliated companies are engaged in the manufacture and
distribution of modular windows, decorative trims, body components and injection
molded plastic components for the automotive industry. In April 1996, Excel
acquired all of the outstanding common shares of Anderson, located in Rockford,
Illinois. Anderson is a holding company whose main asset is Atwood. Atwood
manufactures seating systems, including seat and height adjusters, recliner
mechanisms, transmission selectors and hood and deck hinges, all for the
automotive industry. In addition, Atwood produces appliances such as water
heaters, furnaces, stoves and ranges, hardware, such as jacks, couplers and
surge brake actuators, seating frames, seat adjusters and recliner
31
<PAGE>
mechanisms for the recreational vehicle industry, and window systems and door
systems for the mass transit and heavy truck industries. The comparability of
Excel's results on a period-to-period basis is significantly affected by these
acquisitions.
Historically, Excel's operating units were aggregated into two segments for
financial reporting purposes: (1) light vehicle products, which included plastic
and metal framed window and door assemblies, manual and power window regulator
systems, manual seating systems, decorative trims and injection molded plastic
parts and (2) RV/MT/HT products, which included appliances (water heaters,
furnaces, stoves and ranges), jacks, couplers, seating frames and seat
adjusters, preassembled doors and windows for motor homes and window assemblies
for mass transit systems and heavy trucks.
The following table sets forth the percentage relationship of certain items
to revenues for Excel for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED,
---------------------------------------------
DECEMBER 28, DECEMBER 27, JANUARY 2,
1996 1997 1999
--------------- --------------- -----------
<S> <C> <C> <C>
Net sales................................................................ 100.0% 100.0% 100.0%
Cost of good sold........................................................ 88.2 88.0 90.0
----- ----- -----
Gross profit....................................................... 11.8 12.0 10.0
Selling, administrative and engineering expenses......................... 7.4 8.2 7.1
----- ----- -----
Operating income................................................... 4.4 3.8 2.9
Interest expense......................................................... 1.1 1.1 1.1
Other income, net........................................................ (0.2) (0.2) (0.2)
----- ----- -----
Income before income taxes and minority interest................... 3.5 2.8 2.0
Provision for income taxes............................................... 1.3 1.0 0.3
Minority interest........................................................ -- -- 0.1
----- ----- -----
Net income......................................................... 2.2% 1.8% 1.5%
----- ----- -----
----- ----- -----
</TABLE>
COMPARISON OF YEAR ENDED JANUARY 2, 1999 TO YEAR ENDED DECEMBER 27, 1997
Sales for the year ended January 2, 1999 totaled $1,106 million, an increase
of $144.0 million or 15% from 1997. The light vehicle products segment accounted
for $126.0 million of the increase, with RV/MT/HT making up the difference.
Sales in the light vehicle products segment totaled $885.0 million as compared
to $759.6 million in 1997. The acquisition of Schade added $165.0 million in
sales in the second half of 1998, while sales in North America declined $39.0
million. The decline in North America light vehicle product sales results from
programs that were discontinued or canceled amounting to approximately $76.6
million offset by sales of new programs of $59.2 million, with the remainder of
the sales decline due to a decline in passenger car production.
Sales of the RV/MT/HT products segment increased $18.0 million, as the
recreational vehicle industry production volumes were up approximately 15% and
mass transit production was also strong.
Gross profit totaled $110.1 million or 10% of sales, which compares with
$115.3 million or 12% of sales in 1997. This decrease in gross profit of $5
million and in profit percentage results from losses incurred in the seating
systems area amounting to approximately $18.0 million arising from excessive
launch costs, tooling costs, pricing and other issues. In addition, a reserve to
cover estimated losses on long-term production contracts was established in the
fourth quarter in the amount of $4.5 million. Gross profit of 19% in 1998 in the
RV/MT/HT products segment was identical with that in 1997.
Selling, administrative and engineering expenses totaled $78.6 million or
7.1% of sales for 1998, down from $79.3 million or 8.2% of sales in 1997.
Excluding Schade's expenses of approximately
32
<PAGE>
$8.8 million in 1998, total expenses would have been lower by $9.5 million.
Approximately $5.5 million of the decrease was due to a reduction in product
development expenses, $2.3 million was due to the administrative costs of the
North American facilities closed in late 1997, $1.2 million was due to costs
associated with the closure of the Italian operation recorded in 1997, and
$500,000 results from a reduction in compensation.
Other income, net, consists primarily of interest income of $2.0 million and
royalty income of $.7 million, less losses on a Brazilian joint venture of $1.5
million in 1998, which compares to interest income of $2.0 million in 1997.
Interest costs of $11.6 million for 1998 increased slightly from $11.0
million in 1997, as the interest on Schade's bank loans were partially offset by
the elimination of interest on convertible subordinated notes that were
converted into common shares of Excel in 1997.
Provision for taxes on income in 1998 includes the benefit of tax credits
related to prior years. In 1998, Excel completed a review of qualified research
and development expenditures for the years 1994 to 1997 and recorded tax credits
totaling $4.0 million. The effective rate for U.S. taxes was lowered to 16.5%
for 1998, down from 35.0% in 1997 due to the current year's effect of these
credits.
COMPARISON OF YEAR ENDED DECEMBER 27, 1997 TO YEAR ENDED DECEMBER 28, 1996
Sales for the year ended December 27, 1997 totaled $962.3 million, up $74.6
million or 8% from the preceding year. The Anderson acquisition added $98.2
million in sales in the first quarter of 1997. This increase was offset by
reductions in parts shipped for passenger cars and selling price reductions on
products under long-term pricing agreements. Specifically, passenger car
production in 1997 for Excel's largest customer, Ford, was 10% lower than the
previous year. Also, discontinued programs such as Aerostar, Thunderbird and
Cougar adversely affected sales by $10.7 million. These items, including the
Anderson acquisition, accounted for the change in sales for 1997 to $759.6
million for the light vehicle segment from $730.3 million in 1996. Sales for
1997 for the RV/MT/HT segment were $202.8 million, up from $157.5 million in
1996, due primarily to the Anderson acquisition.
Gross profit totaled $115.3 million, or 12.0% of sales, as compared with
$104.4 million, or 11.8% of sales for the prior year. The increase was due to
the addition of the Anderson locations offsetting approximately $4.1 million in
start-up costs on new programs and approximately $4.7 million in costs
associated with the closure of two domestic plants. Gross profit for 1997 was
$76.8 million or 10.1% of sales for the light vehicle segment compared to $73.8
million or 10.1% of sales in 1996. Gross profit for the RV/MT/HT segment was
$38.5 million or 19.0% of sales in 1997 compared to $30.5 million or 19.4% of
sales in 1996.
Selling, administrative and engineering expenses totaled $79.3 million or
8.2% of sales for 1997, up from $65.7 million or 7.4% of sales in 1996. The
increase was due to the addition of Anderson locations, increases in product
development expenses and $1.2 million in costs associated with the closure of
the Italian operation.
Interest costs of $11.0 million for 1997 increased from $9.8 million in 1996
due to the senior notes issued in connection with the Anderson acquisition in
1996. Interest income of $2.0 million in 1997, recorded in other income, was up
slightly from $1.8 million in 1996.
The income tax provision was 35% of pre-tax income in 1997, down from 37.7%
in the preceding year. The decrease was due to lower estimated state income
taxes and favorable benefits of Excel's foreign sales corporation.
ADWEST
The following discussion is based upon the Consolidated Financial Statements
of Adwest included in this prospectus, which have been prepared in conformity
with U.K. GAAP which differs in certain
33
<PAGE>
significant respects from U.S. GAAP. The significant differences between U.S.
GAAP and U.K. GAAP as they relate to Adwest are summarized in Note 31 to the
Consolidated Financial Statements of Adwest.
The following table sets forth the percentage relationship of certain items
to turnover for Adwest for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Turnover.............................................................................. 100.0% 100.0% 100.0%
Net operating costs................................................................... 93.3 90.6 91.5
Operating profit...................................................................... 6.7 9.4 8.5
Exceptional items..................................................................... (2.2) -- --
Associated undertakings............................................................... -- -- --
Net interest.......................................................................... (1.7) (1.5) (2.1)
--------- --------- ---------
Loss on disposal of business.......................................................... (13.1) (.4) (5.4)
(Loss)/profit on ordinary activities before tax....................................... (10.3) 7.5 1.0
Tax on profit on ordinary activities.................................................. 0.9 2.4 1.8
--------- --------- ---------
(Loss)/profit for financial year...................................................... (11.2) 5.1 (0.8)
Minority interests.................................................................... 0.1 0.2 0.2
--------- --------- ---------
Retained (loss)/profit for financial year............................................. (11.3)% 4.9% (1.0)%
--------- --------- ---------
--------- --------- ---------
</TABLE>
COMPARISON OF YEAR ENDED JUNE 30, 1998 WITH YEAR ENDED JUNE 30, 1997
TURNOVER--Total group turnover for the year ended June 30, 1998 increased by
L58.4 million or 30.5% to L249.9 million from L191.4 million for the year ended
June 30, 1997. These results include the U.S. electronics division for all of
fiscal 1997 and the first ten months of fiscal 1998. Total turnover from the
automotive division (continuing operations) for the year ended June 30, 1998
increased by L71.3 million, or 47.3%, to L222.2 million from L150.8 million for
the year ended June 30, 1997. The increase in turnover is primarily the result
of the acquisition of Heidemann in September 1997.
OPERATING COSTS--Total group operating costs for the year ended June 30,
1998 increased by L55.1 million or 31.8% to L228.5 million from L173.4 million
for the year ended June 30, 1997. Operating costs from continuing operations for
the year ended June 30, 1998 increased by L67.4 million, or 49.5%, to L203.7
million from L136.2 million for the year ended June 30, 1997. Operating costs
from continuing operations, as a percentage of turnover from continuing
operations was 91.7% for the year ended June 30, 1998 compared to 90.3% for the
year ended June 30, 1997. The decline in gross margins is due to the short-term
reversal of profits in U.S. operations and relatively lower margins at some of
the newly acquired Heidemann facilities.
Selling, general and administrative expenses are included as a component of
operating costs in accordance with U.K. accounting requirements. Selling,
general and administrative expenses from continuing operations increased by L4.7
million to L14.4 million for the year ended June 30, 1998 from L9.7 million for
the year ended June 30, 1997. This increase is due primarily to incremental
costs related to the acquisition of Heidemann. As a percent of revenues,
selling, general and administrative expenses from continuing operations were
6.5% for the year ended June 30, 1998 and 6.4% for the year ended June 30, 1997.
INTEREST EXPENSE--Interest expense for the year ended June 30, 1998 was L5.2
million compared to L2.9 million for the year ended June 30, 1997. The increase
was due principally to borrowings incurred related to the acquisition of
Heidemann.
34
<PAGE>
INCOME TAXES--The effective income tax rate was 28.0% for the year ended
June 30, 1998 and 31.5% for the year ended June 30, 1997. The reduction in the
effective income tax rate is primarily related to offsetting the impact of high
tax rates in France and Germany with structuring the Heidemann acquisition and
low effective tax rates in Spain and the U.S.
DISCONTINUED OPERATIONS--The loss from discontinued operations for the year
ended June 30, 1998 was L13.5 million and L791,000 for the year ended June 30,
1997. During fiscal 1998, Adwest disposed of three business units. In May 1998,
Adwest announced the disposal of their U.S. electronics division for $38.0
million. Of that amount, $3.0 million has been retained in an escrow account,
with $1.0 million to be released annually upon expiration of certain warranties
and indemnities. In accordance with U.K. accounting requirements, the original
goodwill on the acquisition of these businesses totaling L17.6 million has been
included in discontinued operations in the consolidated profit and loss account
for the year ended June 30, 1998. In addition, Adwest disposed of the Heidemann
galvanizing business for DM6.3 million in aggregate consideration and the last
significant investment portfolio property for L900,000 in aggregate
consideration. The loss in fiscal 1998 is net of a gain on the disposal of these
divisions of L4.1 million offset by the write-off of the original goodwill of
L17.6 million in accordance with U.K. accounting requirements.
COMPARISON OF YEAR ENDED JUNE 30, 1997 WITH YEAR ENDED JUNE 30, 1996
TURNOVER--Total group turnover for the year ended June 30, 1997 decreased by
L32.2 million or 14.4% to L191.4 million from L223.7 million for the year ended
June 30, 1996. These results include the U.K. power systems division and the
property portfolio, which were substantially disposed of during 1996. Total
turnover from the automotive division (continuing operations) for the year ended
June 30, 1997 increased by L23.5 million, or 18.5%, to L150.8 million from
L127.3 million for the year ended June 30, 1996. The increase in turnover is
primarily the result of the acquisition of Adwest Rearsby in June of fiscal 1996
offset by an L8.2 million reduction in turnover at overseas entities caused by
the movement in average exchange rates between the two years.
OPERATING COSTS--Total group operating costs for the year ended June 30,
1997 decreased by L35.3 million or 16.9% to L173.4 million from L208.7 million
for the year ended June 30, 1996. Operating costs from continuing operations for
the year ended June 30, 1997 increased by L19.5 million, or 16.7%, to L136.2
million from L116.7 million for the year ended June 30, 1996. Operating costs
from continuing operations, as a percentage of turnover from continuing
operations was 90.3% for the year ended June 30, 1997 compared to 91.6% for the
year ended June 30, 1996. The increase in gross margins is primarily due to cost
reductions from improved design and technology within the automotive division.
Selling, general and administrative expenses are included as a component of
operating costs in accordance with U.K. accounting requirements. Selling,
general and administrative expenses from continuing operations increased by L2.5
million to L9.7 million for the year ended June 30, 1997 from L7.2 million for
the year ended June 30, 1996. This increase is due primarily to incremental
costs related to the acquisition of Rearsby. As a percent of revenues selling,
general and administrative expenses were 6.4% for the year ended June 30, 1997
and 5.7% for the year ended June 30, 1996.
EXCEPTIONAL ITEMS--During fiscal 1996, Adwest recorded a charge of L5.0
million related to a reorganization of the automotive division and redundancy
and disruption costs within the electronics division following cancellation of a
customer order.
INTEREST EXPENSE--Interest expense for the year ended June 30, 1997 was L2.9
million compared to L3.9 million for the year ended June 30, 1996. The decrease
was due principally to retirement of debt from increased operating cash flows
and the proceeds of the disposal of the U.K. power systems divisions and the
property portfolio.
35
<PAGE>
INCOME TAXES--The effective income tax rate was 31.5% for the year ended
June 30, 1997 and 33.2% for the year ended June 30, 1996. The reduction in the
effective income tax rate is primarily related to a reduction in the U.K.
corporate tax rate partially offset by the impact of a temporary increase in
corporate tax rates in France.
DISCONTINUED OPERATIONS--The loss from discontinued operations for the year
ended June 30, 1997 was L791,000 compared to a loss of L29.3 million for the
year ended June 30, 1996. The loss in fiscal 1997 represents loss from the
finalization of the disposal of the U.K. power systems entities and the property
portfolio. During fiscal 1996, Adwest disposed of its U.K. power systems
division and property portfolio. The loss on disposal of these divisions was
L9.1 million before goodwill. The write off of the original goodwill of L20.2
million in accordance with U.K. accounting requirements increased the overall
loss to L29.3 million.
LIQUIDITY AND CAPITAL RESOURCES
DURA
In connection with the Acquisitions, Dura Operating Corp. and certain of its
direct and indirect subsidiaries entered into the new credit facility. The new
credit facility provides for borrowings aggregating up to approximately $1,150
million, including (1) a $275.0 million tranche A term loan; (2) a $275.0
million tranche B term loan; (3) a $400.0 million revolving credit facility; and
(4) a $200.0 million interim term loan facility. As of March 31, 1999, there was
approximately $825.0 million of outstanding indebtedness under the new credit
facility and approximately $250.0 million of available borrowings under the
revolving credit facility for working capital and other corporate purposes. Dura
used approximately $300.1 million of the net proceeds of the notes offering to
repay a portion of its indebtedness under the new credit facility.
As of March 31, 1999, rates on borrowings under the new credit facility
ranged from 5.28% to 10.00%. Borrowings under the tranche A term loan are due
and payable in March 2005 and borrowings under the tranche B term loan are due
and payable in March 2006. The revolving credit facility is available until
March 2005. The new credit facility is secured by all of the assets of DASI,
Dura Operating Corp. and certain of their material subsidiaries and is
guaranteed by DASI and all of the Issuer's material subsidiaries, in each case
with exceptions for certain foreign subsidiaries.
We financed the Acquisitions primarily through borrowings under the new
credit facility and the issuance of Class A common stock. The following table
summarizes our sources and uses of funds for the Acquisitions (in millions):
<TABLE>
<CAPTION>
SOURCES OF FUNDS: AMOUNT
- -------------------------------------------- ---------
<S> <C>
New credit facility......................... $ 828.1
Issuance of Class A common stock(1)......... 170.7
Cash on hand................................ 49.8
---------
Total....................................... $ 1,048.6
---------
---------
<CAPTION>
USES OF FUNDS: AMOUNT
- -------------------------------------------- ---------
<S> <C>
Purchase of Excel's equity.................. $ 334.6
Purchase of Adwest's equity................. 207.2
Refinance Excel's existing debt............. 100.0
Refinance Adwest's existing debt............ 106.1
Refinance Dura's existing debt.............. 250.7
Prepayment penalties, net................... 9.5
Fees and expenses........................... 40.5
---------
Total................................. $ 1,048.6
---------
---------
</TABLE>
- ------------------------
(1) Based on a per share price of $33 9/16, which was the closing price of the
Class A common stock on January 15, 1999, the date on which the Excel
Acquisition purchase agreement was signed.
Following the Acquisitions, our principle source of liquidity will be cash
flow generated from operations and borrowings under our $400 million revolving
credit facility. We believe that such funds
36
<PAGE>
will be sufficient to meet our liquidity needs for at least the next twelve
months. Our principle use of liquidity will be to meet debt service
requirements, finance our capital expenditures and to provide working capital
availability. We expect that capital expenditures in 1999 will be approximately
$105.0 million. These capital expenditures will be used primarily for equipment
and dedicated tooling purchases and facility improvements.
Our ability to service our indebtedness will depend on our future
performance, which will be affected by prevailing economic conditions and
financial, business, regulatory and other factors. Certain of these factors are
beyond our control. We believe that, based upon current levels of operations, we
will be able to meet our debt service obligations when due. Significant
assumptions underlie this belief, including, among other things, that we will
continue to be successful in implementing our business strategy and that there
will be no material adverse developments in our business, liquidity or capital
requirements. If we cannot generate sufficient cash flow from operations to
service our indebtedness and to meet our other obligations and commitments, we
might be required to refinance our debt or to dispose of assets to obtain funds
for such purpose. There is no assurance that refinancings or asset dispositions
could be effected on a timely basis or on satisfactory terms, if at all, or
would be permitted by the terms of the Indenture or the new credit facility. In
the event that we are unable to refinance the new credit facility or raise funds
through asset sales, sales of equity or otherwise, our ability to pay principal
of, and interest on, the notes would be impaired.
During the first quarter of 1999, we generated cash from operations of
$387,000, compared to a $2.1 million use of cash in 1998. Cash generated from
operations before changes in working capital items was $18.1 million for 1999
compared to $7.6 million for 1998. Increases in working capital used cash of
$17.7 million in 1999 compared to $9.8 million in 1998. The increases in working
capital is primarily the result of the timing of cash receipts and cash
payments.
During 1998, we generated cash from operations of $7.7 million, compared to
$8.5 million in 1997. Cash generated from operations before changes in working
capital items was $63.2 million for 1998 compared to $30.5 million for 1997.
Increases in working capital used cash of $55.5 million in 1998 compared to
$22.0 million in 1997. The increases in working capital are primarily the result
of the timing of cash receipts and cash payments.
Net cash used in investing activities was $543.9 million for the first
quarter of 1999 as compared to $22.3 million in 1998. Net capital expenditures
totaled $6.0 million for the first quarter of 1999 primarily for equipment and
dedicated tooling purchases related to new or replacement programs with an
additional $540.1 million used for the acquisitions of Adwest and Excel. This
compares with net capital expenditures of $3.7 million in 1998 and $18.6 million
spent on the acquisition of Universal.
Net cash used in investing activities was $167.5 million for 1998 as
compared to $93.4 million in 1997. Net capital expenditures totaled $31.8
million for 1998 primarily for equipment and dedicated tooling purchases related
to new or replacement programs with an additional $135.7 million used for the
acquisitions of Universal, Trident and the Hinge Business. This compares with
net capital expenditures of $16.2 million in 1997 and $70.5 million spent on the
acquisitions of VOFA, GT Automotive and REOM Industries.
Net cash provided by financing activities totaled $564.2 million for the
first quarter of 1999 compared with $67.3 million in 1998. Approximately $582.9
million of cash was provided through net borrowings.
Net cash provided by financing activities totaled $176.6 million for 1998
compared with $87.6 million in 1997. Approximately $16.1 million of cash was
provided through net borrowings. In addition, we received $52.5 million of net
proceeds from the issuance of the Trust Preferred Securities in March 1998 and
$107.8 million of net proceeds from the June 1998 Offering.
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<PAGE>
On March 20, 1998, the Dura Trust completed the offering of $55.3 million of
its Trust Preferred Securities, resulting in net proceeds of approximately $52.5
million. The Trust Preferred Securities are redeemable, in whole or part, on or
after March 31, 2001 and all Trust Preferred Securities must be redeemed no
later than March 31, 2028. The Trust Preferred Securities are convertible, at
the option of the holder, into Class A common stock at a rate of 0.5831 shares
of Class A common stock for each Trust Preferred Security, which is equivalent
to a conversion price of $42 7/8 per share. The net proceeds of the offering
were used to repay outstanding indebtedness. Dividends on the Trust Preferred
Securities, net of the related income tax benefit, are reflected as minority
interest in the condensed consolidated statement of operations.
On June 17, 1998, DASI completed a public offering of 3,100,000 shares of
Class A common stock at an offering price of $32.75 per share. Net proceeds to
Dura, after underwriting discounts and offering expenses, were approximately $95
million and were used to retire outstanding indebtedness. Certain stockholders
of Dura converted 1,308,000 shares of Class B common stock of Dura into Class A
common stock and sold such shares concurrent with the June 1998 Offering. In
addition, an employee of Dura exercised an option to acquire 5,000 shares of
Class A common stock at an exercise price of $14.50 per share, and sold such
shares concurrent with the June 1998 Offering. On July 1, 1998, the
underwriters, pursuant to their over-allotment option, purchased an additional
400,000 shares of Class A common stock, resulting in net proceeds of
approximately $12.4 million.
EXCEL--HISTORICAL
Effective July 1, 1998, Excel purchased through its wholly owned subsidiary,
Excel Industries Germany GmbH, a 70% interest in Schade. The aggregate purchase
price for Schade was DM 17,036,400, or approximately $9,689,000 plus transaction
costs. Excel also assumed approximately $68.0 million of Schade's debt. The
amount of Excel's contribution to the capital of Schade was DM 27,340,000, or
approximately $15,548,000. Funds for the purchase price for the interests and
the contribution came from Excel's cash on hand.
The remaining 30% of Schade is owned by Hella KG Hueck & Co., another
international OEM supplier. The acquisition of Schade was accounted for as a
purchase. The excess of the purchase price over the estimated fair value of net
assets acquired, approximately $4.0 million, has been accounted for as goodwill
and is being amortized over 40 years using the straight-line method.
Working capital totaled $119.0 million as of January 2, 1999, and the
current ratio was 1.6 to 1. Cash and marketable securities totaled $30.3 million
as of January 2, 1999, an increase of $3.6 million from the prior year.
In 1998, cash flow from operations totaled $76.0 million, compared to $40.5
million in 1997. The increase, after considering the effect of the Schade
acquisition, was due to reductions in accounts receivable and tooling billed to
customers. Dividends increased to $6.2 million from $5.6 million due to the
additional common shares issued for the conversion of Excel's 10% convertible
subordinated notes in October 1997.
Long-term debt of $149.9 million as of January 2, 1999, or 43% of total
capitalization, is up from $105.9 million at the beginning of the year due to
the inclusion of Schade's debt at January 2, 1999. New borrowings consisted of
bank loans to Schade. Excel acquired treasury shares during 1998 to be used for
the issuance of shares under Excel's stock compensation and incentive plans and
for the exercise of outstanding warrants.
Expenditures for capital equipment in 1998 were $46.0 million up from $39.3
million in 1997 and $29.2 million in 1996. The increase in 1998 was mainly due
to capital expenditures in Schade in the last half of 1998. Capital additions
consisting mainly of machinery and equipment totaled $40.8 million in the light
vehicle segment and $4.8 million in the RV/MT/HT segment. Capital expenditures
for 1999
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<PAGE>
are budgeted at $50.0 million. Starting in 1998, Excel changed the method of
depreciating new capital expenditures from accelerated methods to the
straight-line method. The favorable effect of the change on net income for the
year ending January 2, 1999 was approximately $1.1 million or $.09 per share.
There are claims and pending legal proceedings against Excel and its
subsidiaries with respect to taxes, workers' compensation, warranties and other
matters arising out of the ordinary conduct of the business. The ultimate
results of these claims and proceedings at January 2, 1999 is not determinable,
but, in the opinion of management, adequate provision for anticipated costs has
been made or insurance coverage exists to cover such costs.
ADWEST--HISTORICAL
During fiscal 1998, Adwest provided cash flow from operations of L26.4
million, compared to L25.2 million for the year ended June 30, 1997. Cash
generated from operations before changes in working capital items was L31.2
million in fiscal 1998 compared to L25.6 million for the year ended June 30,
1997. The increase in working capital items is primarily the result of new
program ramp-ups in a number of subsidiaries.
Net cash used for capital expenditure was L16.8 million in fiscal 1998
compared to L5.9 million in fiscal 1997. The increase in capital expenditure
during 1998 is related to plant expansion at Adwest Driver Systems and Adwest
Heidemann Einbeck and additional equipment and dedicated tooling purchases
related to new or replacement programs.
Net cash used for acquisitions and disposals was L11.4 million in fiscal
1998 compared to cash provided from acquisitions and disposals of L11.8 million
in fiscal 1997. The 1998 cash used for acquisitions can be summarized as follows
(in thousands):
<TABLE>
<CAPTION>
AMOUNT
-----------
<S> <C>
Heidemann acquisition............................................ L 46.8
Disposal of U.S. Electronics..................................... (21.2)
-----------
Total...................................................... 25.6
Less Heidemann debt assumption................................... (14.2)
-----------
Total cash used for acquisitions........................... L 11.4
-----------
-----------
</TABLE>
Net cash provided from financing activities was L10.2 million for the year
ended June 30, 1998 compared to cash used for financing activities of L10.0
million for the year ended June 30, 1997. During 1998, approximately L34.8
million of cash was provided through additional borrowings primarily related to
the acquisition and refinancing of Heidemann. This amount was partially offset
by debt repayments of L24.8 million. The net cash used for financing activities
for the year ended June 30, 1997 relates exclusively to debt repayments.
Adwest paid dividends of L6.4 million for each of the years ended June 30,
1998 and 1997.
Adwest acquired Heidemann and its subsidiary undertakings on September 11,
1997 for DM132.0 million of consideration including the assumption of DM40.0
million of Heidemann indebtedness. Heidemann manufactures gearshifts, steering
columns and fuel caps in Germany and Spain.
SEASONALITY
Dura 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. Excel's automotive operations normally
experience reduced sales volume in the months of July, August and December as
vacation periods, model changeover and startups and, in the case of December,
39
<PAGE>
holidays which commence prior to Christmas and run through New Year's Day,
affect the number of production days. Adwest experiences decreased revenues
during August and December, as it shuts down operations during these months due
to vacation periods and holidays. The RV/MT/HT segment is seasonal in that sales
in the quarter October through December are normally at reduced levels.
EFFECTS OF INFLATION
Inflation potentially affects us in two principal ways. First, a portion of
our 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, we have limited ability to pass through inflation-related cost increases
due to the competitive nature of the markets that we serve. In the past few
years, however, inflation has not been a significant factor.
MARKET RISK
We are exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. We do not enter into derivatives or other
financial instruments for trading or speculative purposes. We enter into
financial instruments to manage and reduce the impact of changes in foreign
currency exchange rates and interest rates. The counterparties are major
financial institutions.
We manage our interest rate risk by balancing the amount of our fixed and
variable debt. For fixed rate debt, interest rate changes affect the fair market
value of such debt but do not impact earnings or cash flows. Conversely for
variable rate debt, interest rate changes generally do not affect the fair
market value of such debt but do impact future earnings and cash flows, assuming
other factors are held constant. At December 31, 1998, we had fixed rate debt of
$81.1 million and variable rate debt of $250.8 million. Holding other variables
constant (such as foreign exchange rates and debt levels) a one percentage point
increase in interest rates would have decreased the unrealized fair market value
of the fixed rate debt at December 31, 1998 by approximately $4.0 million and
would be expected to have an estimated impact on pre-tax earnings and cash flows
for next year of approximately $2.5 million.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of our revenues during the year ended December 31,
1998 were derived from manufacturing operations in Europe, Latin America and
Canada. The results of operations and the financial position of our operations
in these countries are principally measured in their respective currency and
translated into 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 Dollar against the respective foreign currency.
A significant portion of our assets at December 31, 1998 are based in our
foreign operations and are translated into 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, our consolidated stockholders' investment will fluctuate depending
upon the weakening or strengthening of the Dollar against the respective foreign
currency.
Our strategy for management of currency risk relies primarily upon
conducting our operations in such countries' respective currency and we may,
from time to time, engage in hedging programs intended to reduce our exposure to
currency fluctuations.
40
<PAGE>
INTRODUCTION OF THE EURO
Eleven of the fifteen member countries of the European Union (the
"participating countries") adopted the Euro as their common legal currency on
January 1, 1999, based on fixed conversion rates between their existing
sovereign currencies (the "legacy currencies") and the Euro. Following
introduction of the Euro, the legacy currencies are scheduled to remain legal
tender in the participating countries as denominations of the Euro between
January 1, 1999 and January 1, 2002 (the "transition period"). During the
transition period, public and private parties may pay for goods and services
using either the Euro or the participating country's legacy currency. The Euro
will then trade on currency exchanges and be available for non-cash
transactions. We do not expect this conversion to have a material impact on our
operating results, financial condition or cash flows.
YEAR 2000
DURA
We are currently working to resolve the potential impact of the year 2000 on
the processing of time-sensitive information by our computerized information
systems. Any of our programs that have time-sensitive software may recognize
"00" as the year 1900 rather than the year 2000. This could result in
miscalculations, classification errors or system failures.
While our various operations are at different stages of Year 2000 readiness,
we have completed our global compliance review. Based on the information
available to date, we do not anticipate any significant readiness problems with
respect to our systems.
Our facilities have completed the inventory and assessment of their internal
information technology ("IT") and non-IT systems (including business, operating
and factory floor systems) and are working on remediation, as appropriate, for
these systems. The remediation may include repair, replacement, or upgrading, of
specific systems and components, with priorities based on a business risk
assessment. We expect that remediation activities for our internal systems will
be completed during the third quarter of 1999, and contingency plans, as needed,
before the end of the year.
The most reasonably likely worst case scenario that we currently anticipate
with respect to Year 2000 is the failure of some of our suppliers, including
utilities suppliers, to be ready. This could cause a temporary interruption of
materials or services that we need to make our products, which could result in
delayed shipments to customers and lost sales and profits to us. We have
completed an assessment of our critical suppliers and have developed contingency
plans to address the risks that we have identified. These plans include
resourcing materials or building inventory banks. We have aggressively addressed
this issue with all major suppliers and believe that contingency plans are in
place.
We have spent approximately $2.1 million on Year 2000 activities to date and
anticipate that we will incur additional future costs not to exceed $3.0 million
in total in addressing Year 2000 issues.
The outcome of our Year 2000 program is subject to a number of risks and
uncertainties, some of which (such as the availability of qualified computer
personnel and the Year 2000 responses of third parties) are beyond our control.
Therefore, there can be no assurances that we will not incur material
remediation costs beyond the above anticipated future costs, or that our
business, financial condition, or results of operations will not be
significantly impacted if Year 2000 problems with our systems, or with the
products or systems of other parties with whom we do business, are not resolved
in a timely manner.
EXCEL
In 1997, Excel began a program to insure that Year 2000 compliance issues
would be addressed. This program addresses IT, computer controlled manufacturing
processes and non-IT systems, as well
41
<PAGE>
as obtaining assurances from vendors supplying services and materials that they
will be Year 2000 compliant. This program has been chaired by an internal
committee made up of corporate personnel who have been using guidelines issued
by the Automotive Industry Action Group.
Excel's program consists of five phases: Inventory, Risk Evaluation,
Contingency Plan, Remediation and Testing. Excel has completed the Inventory and
Risk Evaluation portions of the program. Remediation, Contingency Planning and
Testing will be completed by the end of the second quarter of 1999. Excel's
program has been evaluated by independent third parties and has received overall
ratings of Low to Moderate Risk.
Each of Excel's plant facilities has assigned a Year 2000 program
coordinator to be a part of the committee to enable changes to made efficiently.
Status reports, action plans and timeliness are reported to Excel's executive
officers on a regular basis.
All critical informational systems software, manufacturing processes and
non-IT systems, including those of Schade, have been deemed Year 2000 compliant.
Any additions or changes made to existing applications, which have already been
tested, are also reviewed for Year 2000 compliance. Excel continues to review
vendors and suppliers as they complete their respective compliance programs.
Costs for the reviews and changes to date have been minimal. Future costs are
not expected to exceed $500,000.
Excel has yet to identify the most reasonably likely worst case scenario.
This will be done in conjunction with the contingency planning and testing
phases of Excel's program.
ADWEST
In 1997, Adwest began a program to insure that Year 2000 compliance issues
would be addressed. This program addresses IT, computer controlled manufacturing
processes and non-IT systems, as well as obtaining assurances from vendors
supplying services and materials that they will be Year 2000 compliant. This
program has been chaired by an internal committee made up of corporate personnel
who have been using guidelines issued by the Automotive Industry Action Group.
Adwest's program consists of five phases: Inventory, Risk Evaluation,
Contingency Plan, Remediation and Testing. Adwest has completed the Inventory
and Risk Evaluation portions of the program. Remediation, Contingency Planning
and Testing will be completed by the end of the second quarter of 1999. Adwest's
program has been evaluated by independent third parties and has received overall
ratings of Low to Moderate Risk.
Each of Adwest's plant facilities has assigned a Year 2000 program
coordinator to be a part of the committee to enable changes to made efficiently.
Status reports, action plans and timeliness are reported to Adwest's executive
officers on a regular basis.
The most reasonably likely worst case scenario that Adwest currently
anticipates with respect to Year 2000 is the failure of some of its suppliers,
including utilities suppliers, to be ready. This could cause a temporary
interruption of materials or services that it needs to make its products, which
could result in delayed shipments to customers and lost sales and profits.
Adwest has completed an assessment of its critical suppliers and has developed
contingency plans to address the risks that it has identified. These plans
include resourcing materials or building inventory banks. Adwest has
aggressively addressed this issue with all major suppliers and believes that
contingency plans are in place. Adwest estimates it will spend approximately
$8.3 million in addressing Year 2000 issues. The outcome of Adwest's Year 2000
program is subject to a number of risks and uncertainties, some of which (such
as the availability of qualified computer personnel and the Year 2000 responses
of third parties) are beyond its control. Therefore, there can be no assurances
that Adwest will not incur material remediation costs beyond the above
anticipated future costs, or that its business, financial condition, or results
of operations will not be significantly impacted if Year 2000 problems with its
42
<PAGE>
systems, or with the products or systems of other parties with whom it does
business, are not resolved in a timely manner.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective for
years beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge criteria are met. "Special
accounting for qualifying hedges allow a derivative's gains or losses to offset
related results on the hedged item in the income statement and requires that a
company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. We have not yet quantified the
impact of adopting SFAS No. 133 and have not yet determined the timing or method
of adoption.
43
<PAGE>
BUSINESS
GENERAL
We are the world's largest independent designer and manufacturer of driver
control systems for the global automotive industry. We are also a leading global
supplier of window systems, door systems and engineered mechanical components.
Our products include:
- driver control products--automotive cables, parking brake mechanisms and
transmission shifter mechanisms;
- window system products--encapsulated windows and push out and sliding
windows;
- door system products--window regulators, door latches, frames and hinges;
and
- other products--seating systems, engine control products and engineered
mechanical components, such as underbody tire carriers, jacks, brake,
clutch and accelerator pedals, turn signal and tilt lever assemblies,
injection molded plastic parts, hood hinges, automotive lighting products
and latches.
We sell our products to every major North American, European and Japanese
automotive OEM, including Ford, General Motors, DaimlerChrysler, Volkswagen,
BMW, Toyota, Honda, PSA (Peugeot and Citroen), Renault and Nissan. We
manufacture products for many of the most popular car, light truck and sport
utility models, including all of the top ten selling vehicles in North America
and nine of the top ten selling vehicles in Europe for 1998. We have over 80
manufacturing and product development facilities located in the United States,
Australia, Brazil, Canada, the Czech Republic, France, Germany, India, Mexico,
Portugal, Spain and the U.K. On a pro forma basis, we had revenues of $2.5
billion for the year ended December 31, 1998.
In March 1999, we completed both the Excel Acquisition and the Adwest
Acquisition. Excel is a leading supplier of window systems, door systems,
seating systems and injection molded plastic parts for the global automotive
market and appliances, hardware products, window systems, door systems and
seating systems for the RV/MT/HT industries in North America. On a pro forma
basis giving effect to a 1998 acquisition, Excel had net sales of $1.2 billion
for the year ended January 2, 1999. Adwest is a leading European supplier of
driver control products, including transmission shifter mechanisms, parking
brake mechanisms, steering columns and gears, cables and engine control
products, such as engine thermostats, radiator caps and fuel caps, primarily for
European automotive OEMs. Adwest had revenues of $399.7 million for the twelve
month period ended December 31, 1998.
INDUSTRY TRENDS
Our performance and growth is directly related to certain trends within the
automotive market, including the consolidation of the component supply industry,
the growth of system sourcing and the increase in global sourcing.
SUPPLIER CONSOLIDATION. During the 1990s, OEMs have continued to reduce
their supplier base in certain product segments, awarding sole-source contracts
to full-service suppliers. As a result, OEMs currently work with a smaller
number of full-service suppliers each of which supplies a greater proportion of
the total vehicle. These requirements can best be met by suppliers with
sufficient size, geographic scope and financial resources to meet such demands.
For full-service suppliers such as us, this 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
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<PAGE>
normally do not receive additional business. Although these supplier policies
have already resulted in significant consolidation of component suppliers in
certain segments, we believe that opportunities exist for further consolidation
within our 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. We have
capitalized on this trend by designing our mechanisms and cable systems to
function together and by providing mechanism and cable 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.
We have over 40 manufacturing facilities located in Australia, Brazil,
Canada, the Czech Republic, France, Mexico, Germany, India, Spain, Portugal and
the U.K. In addition, we have formed, or are 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 us access to new geographic markets and
customers, but also the capability of offering complementary products. We also
have nine technical centers located at our facilities in Europe and we have
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, we believe we can continue to expand on our international presence.
COMPETITIVE STRENGTHS
We believe that we possess a number of competitive strengths that have been
further enhanced by the Acquisitions, including:
- - WELL POSITIONED TO TAKE ADVANTAGE OF MARKET TRENDS: We believe that we are
well positioned to meet the demands of OEMs for fewer, full-service and
globally positioned suppliers. As further described below, we believe our
advanced design capabilities, broad product lines and ability to supply
complete systems, combined with our global production capabilities, will
enable us to take advantage of these market trends.
ADVANCED DESIGN CAPABILITIES: We seek to maintain a technological
advantage through our investment in product development and advanced
engineering. Our design and engineering staff works in partnership with
OEMs throughout the design, prototype development and manufacturing
implementation of our products. This partnership approach generates
cost-saving ideas that reduce product development cycle time and improve
vehicle quality by assuring better integration of components into the
assembled vehicle. Our CAD systems are compatible with those of our major
customers, enabling us to communicate design developments with customer
engineers throughout the design and development stage.
BROAD PRODUCT LINES AND COMPLETE SYSTEMS CAPABILITIES: We believe that
the breadth of our product capabilities in the markets in which we
compete is unmatched by any competitor and
45
<PAGE>
has been further enhanced by the Acquisitions. As a result of the
Acquisitions, we are one of a limited number of suppliers that can
develop and produce complete driver control systems globally, which
include the mechanical assembly as well as the actuating cables. OEMs
favor suppliers that can provide entire systems versus individual
components due to the improved quality and lower cost of installing a
system.
GLOBAL PRESENCE: Adwest's operations and technical capabilities in
France, Germany, India, Spain and the U.K., combined with Excel's
operations and technical capabilities in the Czech Republic, Germany,
Mexico, Portugal, Spain and the U.K., complement our existing global
operations to provide expanded global production capabilities for both
North American and international OEMs. As a result of the Acquisitions,
we have global leadership positions in several key products, including
automotive cables, parking brake mechanisms, transmission shifter
mechanisms, window systems and door systems. On a pro forma basis,
approximately 36% of our 1998 revenues were generated from sales in
Europe. We believe that this global production capability provides us
with a competitive advantage in obtaining business on the OEMs' "world
car" platforms.
- - STRONG OEM PARTNERSHIPS: We have formed strong partnerships with our major
OEM customers due to our high level of product quality, customer service,
product design and engineering capabilities. Our application of innovative
operating techniques, combined with investments in sophisticated capital
equipment, has led to a high level of product quality, industry-low defect
rates and the receipt of numerous supplier awards including the Ford Q-1
Certification, DaimlerChrysler Gold Pentastar Award, GM Target for
Excellence, Nummi Delivery Performance Award and the Isuzu Quality
Achievement Award. Stringent internal controls, including strong inventory
and project management systems, enable us to provide high customer service
levels. OEMs are demanding increasingly more from their suppliers in regard
to just-in-time inventory management, particularly during the critical launch
period of a model. Our strong performance in this area has substantially
strengthened our relationships with our OEM customers.
- - WELL POSITIONED ON POPULAR PRODUCT PLATFORMS: We manufacture products for
many of the most popular car, light truck and sport utility vehicle models.
In North America, these include all of the top ten selling vehicles for 1998:
the Ford Taurus, Explorer, Ranger and F-Series pickups, the GM full-size
pickup, the Dodge Caravan and Ram pickup, the Honda Accord and Civic, and the
Toyota Camry. In Europe, these include nine of the top ten selling vehicles
for 1998: the Volkswagen Golf, Passat and Polo, the GM/Opel Astra, Corsa and
Vectra, the Renault Megane and the Ford Escort/Focus and Fiesta. The Excel
Acquisition increased our content per vehicle on key light trucks and SUVs,
such as the Ford Explorer and Windstar, Dodge Durango and GM full size
pickup, as well as on high volume passenger cars such as the Chrysler
Concorde, Dodge Intrepid and Ford Taurus and Escort. Pro forma for the
Acquisitions, over half of our North American automotive sales in 1999 were
to the light truck and SUV segment, the fastest growing segment of the light
vehicle market. The Adwest Acquisition increased our content per vehicle on
high volume European passenger cars such as the Ford Mondeo, Volkswagen Golf
and Polo, BMW 3 Series and the GM Epsilon. The Acquisitions have increased
our 1998 North American content per vehicle from $36.55 to $97.77 on a pro
forma basis.
- - SIGNIFICANT ACQUISITION EXPERIENCE: Our leadership team, the members of which
have an average of 20 years of experience in the automotive supply industry,
has successfully completed eleven acquisitions and two joint ventures over
the last three years, including the Acquisitions and the acquisition of
Trident in April 1998, an acquisition which more than doubled our size in
terms of revenues at that time. We have been successfully integrating the
acquired operations and generating significant operational efficiencies and
cost savings. In addition, we have generally retained key personnel from
acquired companies, which has enabled us to strengthen our global management
team as we have grown.
46
<PAGE>
BUSINESS STRATEGY
Our primary business objective is to capitalize on the consolidation, system
sourcing and globalization trends in the automotive supply industry in order to
continue to be the leading provider of the component parts and systems that we
supply to OEMs worldwide. The key elements of our operating and growth
strategies are as follows:
OPERATING STRATEGY
- CONTINUOUS OPERATIONAL IMPROVEMENTS: We continuously 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 the reduction of scrap.
Manufacturing flexibility enables our facilities to produce systems in a
cost-effective manner and strengthens our ability to meet the just-in-time
and in-line sequence delivery schedules of many of our customers. In
addition, we utilize a common set of key metrics used to measure actual
performance in comparison to standards and goals.
- CAPITALIZE ON OPPORTUNITIES FOR OPERATING SYNERGIES: The Acquisitions are
expected to provide us with a number of opportunities to reduce costs and
improve operational efficiency. The similarity of the manufacturing
processes and technical capabilities of Dura, Excel and Adwest is expected
to result in significant cost savings and operating synergies. Immediately
following the execution of acquisition agreements, we established
cross-functional teams comprised of representatives from Dura, Excel and
Adwest, which identified synergies expected to be realized from
consolidation of our design, engineering and administrative functions,
plant restructuring and realignment and coordination of raw material
purchases. In addition, the cross-functional teams formulated an
integration plan, which is currently being implemented.
- FOSTER A DECENTRALIZED, PARTICIPATORY CULTURE: Our decentralized approach
to managing our manufacturing facilities encourages decision making and
employee participation in areas such as manufacturing processes and
customer service. This "team" approach fosters a unified culture and
enhances communication of strategic direction and goals, while
facilitating a greater success rate in reaching and exceeding our
objectives. We provide ownership-related incentives to not only our
managers, but also to our salaried and hourly employees, through grants
under Dura's 1998 Stock Incentive Plan and participation in the Dura
Employee Stock Discount Purchase Plan.
GROWTH STRATEGY
- FOCUS ON SYSTEMS: OEMs are increasingly seeking suppliers capable of
providing complete systems rather than suppliers who only provide separate
component parts. A key element of our growth strategy has been to add to
our ability to provide complete systems to our OEM customers. The Adwest
Acquisition significantly enhanced our ability to provide transmission
shifter systems and parking brake systems on a global basis while the
Excel Acquisition expanded our product offerings by adding new product
systems including window systems and door systems.
- INCREASE PLATFORM AND CUSTOMER PENETRATION: A key element of our strategy
is to increase volume by adding new customers and to strengthen our
existing customer relationships by broadening our range of products
through internal development efforts and acquisitions. During 1998,
through the acquisition of Trident, we increased our penetration of
certain foreign OEMs such as Volkswagen, Toyota, Honda, PSA (Peugeot and
Citroen), Renault and Nissan. The Acquisitions have further expanded our
relationships with most of the North American and European OEMs. We have
also obtained significant firm orders on a number of new platforms
47
<PAGE>
for the years 1999 through 2001 for incremental new business in North
America and Europe. We believe that our geographic diversity and product
depth strengthen our ability to pursue new vehicle platform contracts in
the future.
- EXTEND GLOBAL MANUFACTURING REACH: In 1998, over 70% of total worldwide
passenger vehicle production occurred outside North America. To meet OEMs'
increasing preference for suppliers with global capabilities, we have
expanded our manufacturing operations into new geographic markets through
strategic acquisitions and two joint ventures. Consistent with this
strategy, the acquisitions of the VOFA Group (Germany, Spain), REOM
Industries (Aust) Pty Ltd. (Australia), Trident (Brazil, Canada, France,
Germany, U.K.), Pollone, S.A. (Brazil), Excel (Czech Republic, Germany,
Mexico, Portugal, Spain, U.K.) and Adwest (France, Germany, India, Spain,
U.K.) enhanced our ability to serve our customers globally. Increased
international sales will also allow us to mitigate the effects of cyclical
downturns in a given geographic region and further diversify our OEM
customer base.
- PURSUE STRATEGIC ACQUISITIONS: We compete in what we believe to be a $12
to $14 billion, highly fragmented, worldwide automotive market that
provides numerous potential acquisition and joint venture opportunities.
Since 1996, we have successfully completed eleven strategic acquisitions
and formed two joint ventures. Our management has substantial experience
in completing and integrating acquisitions within the automobile parts
industry and believes that this experience will help us select and pursue
acquisition opportunities that meet our criteria of: (1) providing
additional and complementary product, manufacturing and technical
capabilities; (2) broadening our geographic coverage and strengthening our
ability to supply products on a global basis; (3) increasing both the
number of models for which we supply products and the content level on
existing models; and (4) increasing our customer penetration.
THE ACQUISITIONS
EXCEL ACQUISITION
On March 23, 1999, we acquired Excel through a merger of Excel with and into
the Issuer. In the merger, DASI issued an aggregate of approximately 5.1 million
shares of its Class A common stock and paid $155.5 million in cash to Excel's
former shareholders. The Excel Acquisition had a transaction value of
approximately $471.3 million, plus fees and expenses. The cash consideration and
related fees and expenses paid in the Excel Acquisition (including acquired
indebtedness) were financed through borrowings under the new credit facility.
Excel is a leading tier-one and tier-two supplier to the automotive and
RV/MT/HT industries. Excel produces window systems, door systems and seating
systems and injection molded plastic parts for North American OEMs, which
accounted for approximately 75% of Excel's 1998 North American net sales. The
balance of Excel's net sales in North America relate to the design and
manufacture of appliances, hardware products, window systems, door systems and
seating systems for the RV/MT/HT industries. Excel is the leading independent
supplier of window systems to the combined automotive, light truck and van, bus
and recreational vehicle markets in North America.
On July 1, 1998, Excel acquired 70% of Schade, a designer and manufacturer
of window systems, ornament and roof moldings, door frames, plastic body
components (wind deflectors, air intakes and ventilation covers) and plastic
interior fittings or equipment (center consoles, roof covers and panels and
sliding roof covers) for European OEMs.
Excel and Schade supply products primarily to Ford/Jaguar, DaimlerChrysler,
GM, Volkswagen, BMW, Lear Corporation, Johnson Controls and Fleetwood
Enterprises through 31 facilities located in the Czech Republic, Germany,
Mexico, Portugal, Spain, the U.K. and the United States. For the year
48
<PAGE>
ended January 2, 1999, Excel generated net sales of $1.1 billion and, on a pro
forma basis giving effect to the acquisition of Schade, net sales of $1.2
billion.
ADWEST ACQUISITION
On March 15, 1999, Dura acquired through a cash tender offer approximately
95% of the outstanding ordinary shares of Adwest. The aggregate consideration
(including acquired indebtedness) and related fees and expenses paid in the
Adwest Acquisition were financed through borrowings under the new credit
facility. We intend to acquire all of the remaining ordinary shares within the
next six months. We estimate that the aggregate cost of the Adwest Acquisition,
including the amount necessary to acquire the remaining outstanding shares, will
be approximately $295 million, plus fees and expenses.
Adwest is a leading European supplier of driver control products, including
transmission shifter mechanisms, parking brake mechanisms, steering columns and
gears, cables and engine control products, such as engine thermostats, radiator
caps and fuel caps. Prior to the Adwest Acquisition, our primary strength in
Europe was the design and manufacture of automotive cables. Following the Adwest
Acquisition, we have the capability to supply complete driver control systems in
Europe. Adwest supplies its products primarily to Volkswagen, BMW, PSA (Peugeot
and Citroen), Ford, Renault, GM, Nissan, Volvo and other European OEMs. Adwest's
operations consist of 17 facilities in France, Germany, India, Spain, the U.K.
and the United States. Adwest had revenues of $399.7 million for the twelve
month period ended December 31, 1998.
STRATEGIC BENEFITS OF THE ACQUISITIONS
As a result of the Acquisitions, we have significantly increased our product
offerings, scale and global reach. We believe that we are now able to provide
greater value to our customers due to the addition of several new and
complementary product lines, as well as our ability to provide complete
transmission shifter systems and parking brake systems on a global basis. The
Acquisitions represent our two largest acquisitions to date and have increased
our 1998 revenues from $739.5 million to over $2.5 billion on a pro forma basis.
We believe that the strategic benefits of the Acquisitions include the
following:
ENHANCED SYSTEMS CAPABILITIES AND PRODUCT OFFERINGS. OEMs are increasingly
seeking suppliers capable of providing complete systems rather than suppliers
who only provide separate component parts. A key element of our acquisition
strategy has been to add to our ability to provide complete systems to our OEM
customers. The Excel Acquisition further diversifies our revenue base by
bringing complete product systems, including window systems and door systems.
Adwest is a leading provider of transmission shifter mechanisms in Europe and
provides us with needed mechanism manufacturing capability and established
transmission shifter contracts. Adwest's parking brake systems and broad array
of cable assembly products complement our existing product lines and enhance our
ability to deliver more complete systems to the OEMs at a lower overall cost.
INCREASED CUSTOMER PENETRATION. As a result of the Acquisitions, we are a
supplier to almost every major automotive OEM on a worldwide basis. The Excel
Acquisition significantly expanded our penetration within each of the three
major North American OEMs (GM, Ford and DaimlerChrysler), which were the top
three customers of both Dura and Excel for 1998. Adwest's strong relationship
with a broad customer base, specifically with Volkswagen (currently Adwest's and
Schade's largest customer and the highest volume producer of automobiles in
Europe) and BMW, further strengthens and diversifies our global position. Adwest
currently supplies Ford Europe with its engine thermostats and has been
appointed the sole supplier worldwide of transmission shifters to Volkswagen for
their new generation of Polo, Golf and Audi models.
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<PAGE>
INCREASED MODEL PENETRATION. The Excel Acquisition increases our content
per vehicle on key light trucks and sport utility vehicles, such as the Ford
Explorer, Ford Windstar, Dodge Durango and GM full size pickup, as well as on
high volume passenger cars such as the Chrysler Concorde, Dodge Intrepid and
Ford Taurus and Escort. The Adwest Acquisition increases our content per vehicle
on high volume European passenger cars such as the Ford Mondeo, Volkswagen Golf
and Polo, BMW 3 Series and GM Epsilon.
EXPANDED GLOBAL CAPABILITIES. OEMs are increasingly demanding that their
suppliers have global production capabilities. Adwest's operations and technical
capabilities in France, Germany, India, Spain and the U.K., combined with
Excel's operations and technical capabilities in the Czech Republic, Germany,
Mexico, Portugal, Spain and the U.K., complement Dura's current European
initiatives to provide expanded global production capabilities for both North
American and international OEMs. On a combined basis, we have global leadership
positions in several key products, including cables, transmission shifter
mechanisms, parking brake mechanisms, window systems and door systems. On a pro
forma basis, approximately 36% of our 1998 revenues were generated from sales in
Europe.
CRITICAL MASS. On a pro forma basis, Dura would have had revenues of $2.5
billion for the year ended December 31, 1998 and an equity market capitalization
of over $575.0 million at December 31, 1998. Size is a critical factor in the
automotive industry where increasing scale is necessary for long-term success as
OEMs continue to reduce suppliers, focusing only on those with quality products,
leading edge design and engineering capabilities, service and long term
sustainability.
OPERATIONAL EFFICIENCIES. The Acquisitions are expected to provide us with
a number of opportunities to reduce costs and improve operational efficiency.
The similarity of the manufacturing processes and technical capabilities of
Dura, Excel and Adwest is expected to result in significant cost savings and
operating synergies. We have established cross-functional teams, which have
identified synergies expected to be realized from our consolidation of design,
engineering and administrative functions, plant restructuring and realignment,
coordination of raw material purchases and other operating improvements. We
expect to realize aggregate annual cost savings from the Acquisitions of
approximately $15.0 million in 1999 (which represents only partial year credit
given the timing of the Acquisitions), $25.0-$30.0 million in 2000 and $35.0
million thereafter.
OTHER RECENT ACQUISITIONS
In addition to the Acquisitions, we have completed the following recent
acquisitions:
TRIDENT. In April 1998, we acquired Trident, a leading global designer and
manufacturer of automotive cables. Trident's products include parking brake and
manual transmission shifter cables, clutch, accelerator and speed control cables
and lighting products. At the time of the acquisition, Trident had annual
revenues of approximately $300 million and held a substantial share of the North
American and European automotive cable markets. The acquisition of Trident
significantly expanded our penetration with North American OEMs, making us the
largest supplier of driver control systems and cable-related systems to Ford, GM
and DaimlerChrysler. This acquisition also doubled sales to Honda, Volkswagen
and PSA (Peugeot and Citroen), substantially increased sales to BMW, Mercedes
and Renault and added new customers such as Fiat and Porsche. This acquisition
also added 12 major design and manufacturing facilities located in the United
States, Brazil, Canada, France, Germany and the U.K. and a strategic alliance in
Japan, enhancing our strategic geographic position.
GT AUTOMOTIVE. In August 1997, we acquired GT Automotive Systems, a
designer and manufacturer of column-mounted transmission shifter mechanisms and
turn signal and tilt lever assemblies. At the time of the acquisition, GT
Automotive had annual revenues of approximately $70.0 million and a substantial
share of the North American column-mounted transmission shifter mechanisms
market. GT Automotive's strong position in this market, combined with our
existing position in console-based transmission shifter mechanisms, increased
our share of the North American transmission shifter market. In addition, the
acquisition added Nissan as a customer.
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<PAGE>
VOFA. In January 1997, we acquired the VOFA Group, a manufacturer of
transmission shifter cables, brake cables and other light duty cables for the
European automotive and industrial markets. At the time of the acquisition, VOFA
had annual revenues of approximately $85.0 million. The acquisition provided us
with additional technical and manufacturing expertise in cables and a strong
presence in Europe. In addition, the acquisition added new customers, such as
Mercedes, Volkswagen and BMW.
In addition, we have successfully completed six other strategic acquisitions
and two joint ventures since the initial public offering of our Class A common
stock in August 1996.
PRODUCTS
We are the world's largest independent designer and manufacturer of driver
control systems for the global automotive industry. We are also a leading global
supplier of window systems and door systems. We believe, based upon our
experience in the automotive supply industry, that we hold the #1 or #2 market
position for our principal products in the following markets. The table below
sets forth our estimated pro forma combined market position in North America and
Europe in 1998:
<TABLE>
<CAPTION>
MARKET
PRODUCT CATEGORY REGION POSITION
- ------------------------------------ ---------------------------------------------- ---------
<S> <C> <C>
Automotive cables North America................................. #1
Europe........................................ #1
Parking brake mechanisms North America................................. #1
Europe........................................ #1
Transmission shifter mechanisms North America................................. #1
Europe........................................ #2
Window systems North America................................. #1
Europe........................................ #2
Window regulators North America................................. #1
</TABLE>
We also hold the #1 market position in Europe for engine thermostats and
ornamentation products, the #2 market position in Europe for body components and
the #1 position in North America for tire carriers.
Although a portion of our products are sold directly to OEMs as finished
components, we use most of our products to produce "systems" or "subsystems,"
which are groups of component parts located throughout the vehicle which operate
together to provide a specific vehicle function. Systems currently produced by
us include parking brake, transmission shifter and latch systems. As a result of
the Acquisitions, we significantly expanded our ability to supply OEMs with
additional systems, such as window, door, seating and engine control systems.
A brief summary of each of our principal product categories is set forth
below:
<TABLE>
<CAPTION>
PRODUCT CATEGORY DESCRIPTION
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Driver Control Systems:
AUTOMOTIVE CABLES.................. cables used for parking brakes, transmission shifters (manual and
automatic), throttles and light duty cables (such as cables used for oil
level gauges, hood releases and fuel doors)
PARKING BRAKE MECHANISMS........... components used for both foot and hand operated parking brakes
TRANSMISSION SHIFTER
MECHANISMS....................... manual and automatic console-based and column-mounted transmission
shifters
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRODUCT CATEGORY DESCRIPTION
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Window Systems....................... various types of automotive windshields and rear, vent, quarter, pushout
and sliding windows
Door Systems......................... window regulators (both manual and automatic), door latches, door frames,
door hinges and related components
Seating Systems...................... seat and height adjuster systems and recliner mechanisms
RV/MT/HT Products.................... appliances (such as water heaters, furnaces, stoves and ranges), seating
components, door and window assemblies, wing ventilator, fixed and
moveable windows
Other Products....................... engineered mechanical components (such as underbody tire carriers, jacks,
brake, clutch and accelerator pedals and turn signal and tilt lever
assemblies), hood hinges, injection molded plastic parts (including door,
window and body components), steering gears, rack and pinion gears,
headlamps, latches (primary, secondary and combination hood, deck lid and
tailgate) and engine control products (engine thermostats, radiator caps
and fuel caps)
</TABLE>
The following table sets forth the approximate composition by product
category of the revenues for Dura, Excel and Adwest for each of their respective
latest fiscal years and for Dura for 1998 on a pro forma basis:
<TABLE>
<CAPTION>
LAST FISCAL YEAR
--------------------------------------------
PRO
PRODUCT CATEGORY DURA EXCEL ADWEST FORMA
- ------------------------------------------------------------------------------ --------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Driver Control Systems:
Automotive cables........................................................... 38% -- 8% 14%
Parking brake mechanisms.................................................... 18% -- 4% 7%
Transmission shifter mechanisms............................................. 17% -- 38% 12%
Window Systems................................................................ -- 32% -- 16%
Door Systems.................................................................. -- 19% -- 9%
Seating Systems............................................................... -- 11% -- 5%
RV/MT/HT Products............................................................. -- 21% -- 10%
Other Products................................................................ 27% 17% 50% 27%
--------- --------- ----- ---------
Total................................................................... 100% 100% 100% 100%
--------- --------- ----- ---------
--------- --------- ----- ---------
</TABLE>
For additional financial information regarding the revenues of Dura and
Excel by product segment for each of their last three years, see Note 8 to the
audited consolidated financial statements of Dura and Note 11 to the audited
consolidated statements of Excel, respectively, included elsewhere in this
prospectus.
CUSTOMERS AND MARKETING
The North American automotive market is dominated by GM, Ford and
DaimlerChrysler, with Japanese and foreign manufacturers accounting for
approximately 20% of the market. In North America, we supply our products
primarily to Ford, GM, DaimlerChrysler and Toyota. As a result of the
Acquisitions, we have further expanded our global presence and have added new
customers and increased penetration into certain existing customers such as
Volkswagen and BMW. As a result of our acquisition of Excel, we also sell
certain of our automotive products to other tier 1 suppliers, such as Lear
Corporation, Johnson Controls Inc. and Fleetwood Enterprises, Inc.
In 1998, approximately 70% of total worldwide passenger vehicle production
occurred outside of North America. As a result of our recent acquisitions, we
derive a significant amount of our revenues
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<PAGE>
from sales to OEMs located outside of North America. Set forth below is a
summary of our sales by geographic region for 1997 and 1998 and 1998 on a pro
forma basis:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
PRO FORMA
REGION 1997 1998 1998
- ------------------------------------------------------------------------------------ --------- --------- -----------
<S> <C> <C> <C>
North America....................................................................... 79% 77% 61%
Europe.............................................................................. 20% 20% 36%
Other............................................................................... 1% 3% 3%
--------- --------- -----
Total............................................................................... 100% 100% 100%
--------- --------- -----
--------- --------- -----
</TABLE>
Our foreign operations in 1996 were not material.
The following is a summary of the significant customers of Dura, Excel and
Adwest for each of their respective latest fiscal years and for Dura for 1998 on
a pro forma basis:
<TABLE>
<CAPTION>
LAST FISCAL YEAR
--------------------------------------------
PRO
CUSTOMER DURA EXCEL ADWEST FORMA
- ------------------------------------------------------------------------------ --------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Ford/Jaguar................................................................... 36% 36% 12% 32%
GM............................................................................ 23% 5% 8% 12%
DaimlerChrysler............................................................... 15% 9% 2% 10%
Volkswagen.................................................................... 4% 4% 18% 7%
BMW........................................................................... 2% 3% 17% 5%
PSA (Peugeot and Citroen)..................................................... 3% -- 14% 4%
Toyota........................................................................ 4% -- 2% 2%
Honda......................................................................... 2% -- 2% 1%
Renault....................................................................... 1% -- 11% 2%
Other......................................................................... 10% 43% 14% 25%
--------- --------- ----- ---------
Total................................................................... 100% 100% 100% 100%
--------- --------- ----- ---------
--------- --------- ----- ---------
</TABLE>
For additional financial information regarding the principal geographic
areas of operations and the major customers of Dura, Excel and Adwest for each
of the last three years, see Note 8 to the audited consolidated financial
statements of Dura, Note 11 to the audited consolidated financial statements of
Excel and Note 2 to the audited consolidated financial statements of Adwest,
respectively, included elsewhere in this prospectus.
Our customers award contracts for a particular car platform, which may
include more than one car model. Such contracts range from one year to the life
of the models, which is generally three to seven years, and do not require the
purchase by the customer of any minimum number of parts. We also compete for new
business to supply parts for successor models. Because we supply parts for a
broad cross-section of both new and mature models, our reliance on any
particular model is minimized. We manufacture 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 we have orders to supply products on current or new
model vehicles:
<TABLE>
<CAPTION>
CUSTOMER CAR MODELS* TRUCK AND VAN MODELS*
- ---------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Ford.............................. Continental/Town Car, Contour/ AUTOEUROPA MPV, Econoline, ESCORT VAN,
Mystique/MONDEO, Cougar, Crown Expedition/Navigator, F-Series,
Victoria/ Grand Marquis, Explorer/ Mountaineer, PAMPA, Ranger,
Escort/Tracer, FIESTA, Mazda 626, TRANSIT, Villager/ Quest, Windstar,
Mustang, Ka, Taurus/ Sable Mazda Pickup
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CUSTOMER CAR MODELS* TRUCK AND VAN MODELS*
- ---------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
GM................................ Cutlass/Malibu/Grand Am, ASTRA, Blazer/Jimmy/Bravada, C/K
Aurora/Park Avenue/Bonneville/ Pickup/Tahoe/Sierra/Yukon/
LeSabre, Century, CORSA, Corvette, Escalade/Denali, GMT 800,
Deville/Seville/ Eldorado, Silhouette/TransSport/Venture/
Firebird/Camaro, KADETT, Lumina/Monte Montana, CORSA PICKUP, D-20, D-40,
Carlo/ Regal/Intrigue/Grand Prix, D-60, Express, Postal, S-10
Alero, Saturn, Innovate, Sunfire/ Pickup/Sonoma, Safari/Astro, Savana,
Cavalier, VECTRA, Silverado, Suburban, UPS
DaimlerChrysler................... Breeze, Cirrus, Intrepid/ Caravan/Voyager/Town & Country,
Concorde/300M, Neon, Prowler, Sebring, Cherokee/Grand Cherokee,
Viper, Stratus, A, C, E, M AND S Dakota/Durango, Eurostar, RamVan &
CLASS, CABRIO Pickup, Wrangler, L-608 D, L709E, LS
1935, SKN, SPRINTER
Toyota............................ Avalon, Camry, Carina, COROLLA, LEXUS, Sienna, Toyota Pickup
PRIZM, SOLARA
Volkswagen........................ BEETLE, A4, A8, GOL, GOLF, LUPO, BUS, KOMBI, SAVEIRO, TRANSPORTER
PARATI, PASSAT, POLO, QUANTUM,
SANTANA, SUB-POLO, VW SYNCHRO, AUDI
A3, TT, SKODA, MPV GP, ROLLS ROYCE
BMW............................... Z5 COUPE, Z3(B16), 3, 5, 7 AND 8 --
SERIES
Citroen........................... EVASION, SAXO, XSARA, XANTIA, XM, ZX BERLINGO, JUMPER
Fiat S.P.A........................ ULYSSE --
Honda............................. Accord, Acura, Civic --
Nissan............................ SENTRA, MICRA, PRIMERA --
Peugeot........................... 106, 306, 406, 605, 806 EXPERT, PARTNER
Porsche AG........................ 968, 986, 996 --
Renault........................... CLIO, ESPACE, LAGUNA, MEGANE, SAFRANE, KANGOO, MASTER
TWINGO
Rover Group Limited............... METRO, ROVER 800 DISCOVERY, ROVER
SEAT, S.A......................... AROTA, CORDOBA, IBIZA, TOLEDO, S5 --
</TABLE>
- ------------------------
* Models manufactured outside of North America are italicized.
Most of the parts we produce 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 we have been awarded
new business (i.e., parts not currently supplied by us):
<TABLE>
<CAPTION>
MODEL YEAR OEM MODEL(1) TYPE OF BUSINESS
- ---------- ------------------------------- ---------------------------------- -------------------------------
<S> <C> <C> <C>
2000...... GM............................. Impala/Monte Carlo Transmission shifter mechanisms
Deville, Bonneville/LeSabre/ Hood latch
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
MODEL YEAR OEM MODEL(1) TYPE OF BUSINESS
- ---------- ------------------------------- ---------------------------------- -------------------------------
<S> <C> <C> <C>
Antares
ASTRA, VECTRA Transmission shifter cable
Corsa Door cables, manual
transmission cables and parking
brake cables
Ford........................... TRANSIT Parking brake system
T-Bird Hood and deck hinge
Equator Hood hinge
Explorer Hood hinge and transmission
shifter mechanisms
SUV Hood hinge
P-207 Parking brake mechanisms, door,
door glass and rear slide glass
CD 132 B-pillar cappings
CT 170 Door
UW-137 Seats
DaimlerChrysler................ Mid Size Hood hinge, transmission
shifter mechanisms, parking
brake mechanisms
Ram Van, Dakota Transmission shifter mechanisms
PT44 Door
Peugeot........................ Z8 Parking brake mechanisms
306NF Roof moldings
406 Front brake cable
Toyota......................... Avalon Accelerator pedal
120N SUV Door hinge
Mercedes....................... SPRINTER Transmission shifter cables
Volkswagen..................... POLO Transmission shifter cables
T5 Sliding window
Golf, Audi A3 Transmission shifter mechanisms
Audi B6 Cross beam
BMW............................ E46/5 Roof moldings, climate control
cable, door cable
2001...... Ford........................... Explorer Transmission shifter
mechanisms, glass
Lincoln LS Seat release cable, parking
brake and hood latch systems
U231 Glass
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
MODEL YEAR OEM MODEL(1) TYPE OF BUSINESS
- ---------- ------------------------------- ---------------------------------- -------------------------------
<S> <C> <C> <C>
Mondeo Transmission shifter mechanisms
and cables
Jaguar, X350, X400 Quarter windshield, back lite,
trim
Mustang Hood hinge
T-Bird Parking brake mechanisms
C212 B-pillar cappings
Navigator Transmission shifter
mechanisms, door
U204 SUV Window latch and hood release
cables
PN96 Glass
GM............................. GMX-320 Parking brake mechanisms
GMX-240 Jack and tire carrier
GMT-560 Clutch
GMT-360 Parking brake mechanisms,
transmission shifter mechanisms
A Quarter panel glass and remote
access door glass
DaimlerChrysler................ Ram Truck Hood hinge
PT-74 Door
S203 C-pillar caps/molding, side
window
Toyota......................... 887T SUV Accelerator pedal
Honda.......................... SUV Tire carrier
Nissan......................... Altima Jack
Almera Brake, accelerator, hood lock,
fuel filler cables
Volkswagen..................... MPV GP Transmission shifter mechanism
2002...... Ford........................... Ranger Rear slide glass
Transit Climate control cables
Windstar Liftgate glass
Mondeo Transmission shifter system
DaimlerChrysler................ C Class Parking brake cable
GM............................. GMT-355, Saturn Glass
Corsa, Epsilon Transmission shifter mechanisms
Gamma Parking brake and door release
cables
Citroen........................ Xsara Parking brake cables
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
MODEL YEAR OEM MODEL(1) TYPE OF BUSINESS
- ---------- ------------------------------- ---------------------------------- -------------------------------
<S> <C> <C> <C>
Peugeot........................ 206 Clutch cable
Honda.......................... Civic Glass
Volkswagen..................... Beetle, Synchro Transmission shifter mechanisms
Sharan, Passat Climate control cables
BMW............................ 7 series Parking brake cables
Volvo.......................... 850 Door cables
</TABLE>
- ------------------------
(1) Models manufactured outside of North America are italicized.
Major customers for our RV/MT/HT products include Fleetwood Enterprises,
Winnebago, Damon, Jayco, Thor, Coachmen, Motor Coach Industries and Navistar
International Corporation. Separate sales and engineering groups are located in
Rockford, Illinois and Elkhart, Indiana to service customers in this business
segment. Similar to the automotive industry, customers in the RV/MT/HT segment
generally issue purchase orders for products on an annual basis and periodically
issue releases against those purchase orders. Accordingly, this segment does not
have a significant backlog of orders at any particular time.
Our sales and marketing efforts are designed to create overall awareness of
our engineering, design and manufacturing capabilities and to have us considered
and selected to supply our products for new and redesigned models of our OEM
customers. Our sales and marketing staff works closely with our design and
engineering personnel to prepare the materials used for bidding on new business
as well as to provide a consistent interface between us and our key customers.
Most of our sales and marketing personnel have engineering backgrounds which
enable them to understand and participate in the design and engineering aspects
of acquiring new business as well as ongoing customer service. Our sales and
marketing personnel are organized, together with our design and engineering
personnel, into customer-dedicated program teams. Each program team is under the
leadership of a program manager, who, in turn, reports to our vice president of
sales and marketing. Each of our major customers has its own dedicated program
manager. We currently have sales and marketing personnel located in every major
region in which we operate. From time to time, we also participate in industry
trade shows and advertise in industry publications.
DESIGN AND ENGINEERING SUPPORT
We believe that engineering service and support are key factors in
successfully obtaining new business. We utilize 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, we establish cross-functional teams for each new program to ensure
efficient product development from program conception through product launch.
We have technical centers located in Australia, France, Germany, the U.K.
and the United States. We have established a separate advanced technology group
to help maintain our position as a technology leader. The advanced technology
group has developed many innovative features in our products, including many
features which were developed in conjunction with our customers. In recent
years, we have introduced plastics into many traditionally metal products, such
as transmission shifter mechanisms and parking brake mechanisms. In other
material alternatives, we are investigating the potential use of injection
molded magnesium through a process known as Thixomolding and we are looking into
overmolding of metallic and structural materials. Our advanced technology group
developed a combination transmission shifter and transfer case 4x4 shifter
mechanism, which is now in production on the Chrysler Grand Cherokee. We also
utilize CAD in the design process, which enables
57
<PAGE>
us to share data files with our customers via compatible systems during the
design stage, thereby improving function, fit and performance within the total
vehicle. We also utilize CAD links with our manufacturing engineers to enhance
manufacturability and quality of the designs early in the development process.
We have more than 360 patents granted or in the application process. The
patents granted expire over several years beginning in 1999. Although we believe
that, taken together, the patents are significant, the loss or expiration of any
particular patent would not be material to us.
MANUFACTURING
We employ a number of different manufacturing processes. We utilize 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 us to maintain our product output consistent with our
customers' requirements and reduce our level of inventory. In addition, we
utilize high volume production lines for final assembly of our automotive
lighting and door handle products.
Mechanical assemblies consist of between five and 50 individual components,
which are attached to form an integrated mechanism. Our 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 our outside suppliers. However, we manufacture our own
stampings, a process which consists of passing sheet metal through dies in a
stamping press to form the metal into three-dimensional parts. We produce
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, our processes are continuously upgraded to increase flexibility,
improve operating safety and minimize changeover times of the dies.
Our door systems and body components use similar processes coupled with roll
forming and stretch bending. Roll forming is a continuous process in which
coiled steel is passed through a series of rollers which progressively form the
metal into a consistently shaped section. When viewed from one end, the profile
may be u-shaped or v-shaped for glass channels and roof rails. More complex
shapes are processed for upper door profiles. Stretch bending involves clamping
a length of the rolled profile at numerous points and then twisting or bending
the metal to form contoured surfaces, such as door frames. Door and body
components also require welding, grinding and polishing operations to provide a
smooth finish.
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.
58
<PAGE>
Our window systems broadly include two categories of products: mechanically
framed glass products and molded framed glass. Mechanically framed glass
products are produced by putting glass panes through a series of value-added
processes, which include adding handles, hinges, aluminum and steel based edge
frame assemblies, electrical connectors and fasteners. The production of molded
framed glass products involves two primary molding media: RIM (Reaction
Injection Molding: Polyurethane) and PVC (Poly Vinyl Chloride). Both media
provide a "surround" to the glass panes that incorporates the styling, sealing
and mechanical attachment features of the product. Our ability to utilize either
media provides OEMs with the maximum advantage in terms of cost, styling
imperatives and robustness. The glass panes used in the production of our window
systems are purchased from outside suppliers.
Our injection molded plastic parts are manufactured through injection
molding of a variety of resins on molding machines of various sizes and types.
Headlamp and taillamp housings are also manufactured through the injection
molding process. The interior of the housings are then coated and at times
vacuum metalized to obtain the proper reflective qualities. Lenses are added to
the housings on a semi-automated production line.
We utilize 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. We encourage employee involvement in all production
activity and view such involvement as a key element in our success. We also
aggressively pursue involvement from our suppliers, which is necessary to assure
a consistent flow of raw materials and components on a timely basis with
consistently high quality. We utilize our component suppliers where practical in
the design and prototype stages of new product development to facilitate the
most comprehensive, state-of-the-art designs available. We have made substantial
investments in manufacturing technology and product design capability to support
our products, including modern manufacturing equipment, fineblanking,
sophisticated CAD 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 supplier's facilities and operating systems
performed by independent certified auditors. Certification and on-going
maintenance of certification is mandatory for future supply consideration. Dura
has received QS-9000 certification at all of its facilities, except its
operations in France, which is scheduled for certification in 1999. Excel has
received QS-9000 certification at all of its automotive facilities, except
Stockton, IL, while all of its non-automotive facilities have an ISO 9001 or ISO
9002 certification, and Adwest has received QS-9000 certification at all of its
facilities except Rearsby, U.K., Cauvigny and Boynes, France and Lippstadt,
Germany.
Our plants have been recognized by our customers with various awards, such
as the Daimler/ Chrysler Gold Pentastar Award, GM Target for Excellence, Nummi
Delivery Performance Award and the Isuzu Quality Achievement Award. We have also
received an "A" rating at Peugeot and Renault. We have received Ford Q-1
certification at all facilities shipping current model Ford products.
COMPETITION
We operate in a highly competitive environment. We principally compete 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
our products include product quality and reliability, cost, timely delivery,
technical expertise and development capability, new product innovation and
customer service. The number of our competitors has decreased due to the
supplier consolidation
59
<PAGE>
resulting from changing OEM policies. Some of our competitors have substantial
size, scale and financial resources.
In addition, there is substantial and continuing pressure from the major
OEMs to reduce costs, including the cost of products purchased from outside
suppliers such as Dura. If we are unable to generate sufficient production cost
savings in the future to offset price reductions, our gross margin could be
adversely affected.
Set forth below is a brief summary of our most significant competitors in
each of our principal product categories:
AUTOMOTIVE CABLES. Our primary competitors in automotive cables are
Teleflex Incorporated ("Teleflex") and Hi-Lex Corporation ("Hi-Lex") in North
America and Kuester & Co. GmbH, Ficosa International, S.A. ("Ficosa") and Sila
Holding Industriale ("Sila") in Europe.
PARKING BRAKES. Our primary competitors in parking brakes are Ventra Group,
Inc. and Magna International Inc. ("Magna") in North America and Scharwaechter
GmbH & Co. ("Edscha"), Ficosa and Aries Industries in Europe.
TRANSMISSION SHIFTERS. Our primary competitors in transmission shifter
mechanisms is Grand Haven Stamped Products in North America and Teleflex,
Ficosa, and Sila in Europe.
WINDOW SYSTEMS. Our primary competitors in window systems are Donnelly
Corporation, Libbey-Owens Ford Co., PPG Inc. and Guardian Industries, Inc. in
North America and Sekurit and Pilkington in Europe.
DOOR SYSTEMS. Our primary competitors in door systems are Meritor
Automotive, Inc. ("Meritor"), Peregrine Inc. and Hi-Lex in North America and
Brose Fahrzeagteile Glaswerke GmbH & Co. ("Brose"), Meritor and Magna in Europe.
SEATING SYSTEMS. Our primary competitors in seating systems are Lear
Corporation and Johnson Controls, Inc. in North America and Bertraud Faure,
Brose, C. Rob Hammerstein GmbH & Co. KG, Lear Corporation and Keiper Recaro GmbH
& Co. in Europe.
RV/MT/HT PRODUCTS. Our primary competitors in RV/MT/HT products include
Suburban Manufacturing Company, Maytag Appliances/Magic Chef RV Products, The
Hammerblow Corporation and Hehr International, Inc.
SUPPLIERS AND RAW MATERIALS
Our principal raw materials include: (1) coil steel and resin in mechanism
production, (2) glass in window systems, (3) metal wire and resin in cable
production, and (4) resins and lighting components in automotive lighting
production. We do not manufacture or sell primary glass. The types of steel we
purchase include hot and cold rolled, galvanized, organically coated and
aluminized steel. In general, the wire used by us is produced from steel with
many of the same characteristics with the exception that it has a higher carbon
content. We utilize plastic resin to produce the protective coating for our
cables and to produce transmission shifter components, as well as our automotive
lighting and injection molded plastic parts. We employ just-in-time
manufacturing and sourcing systems enabling us to meet customer requirements for
faster deliveries while minimizing our need to carry significant inventory
levels. We have not experienced any significant shortages of raw materials and
normally do not carry inventories of raw materials or finished products in
excess of those reasonably required to meet production and shipping schedules.
We typically negotiate 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
60
<PAGE>
competitive prices. These relationships allow us to order precise quantities and
types of steel for delivery on short notice, thereby permitting us to maintain
low inventories. In addition, we occasionally "spot buy" steel from service
centers to meet customer demand, engineering changes or new part tool trials.
Other raw materials purchased by us include dies, motors, fasteners,
springs, rivets and rubber products, all of which are available from numerous
sources.
EMPLOYEES
As of March 31, 1999, Dura had approximately 21,000 employees. Overall,
approximately 24% of our employees on a combined basis are salaried and the
balance are hourly.
Approximately 39% of our employees are currently covered by collective
bargaining agreements as follows:
<TABLE>
<CAPTION>
LOCATION COLLECTIVE BARGAINING AGREEMENT EXPIRATION
- --------------------------- --------------------------------------------------------------- ------------------
<S> <C> <C>
Australia.................. Australian Metals Workers No term
Brazil..................... Sindicato dos Metalugicos do ABC No term
Canada..................... CAW June 1999
September 1999
June 2000
Czech Republic............. KOVO December 1999
France..................... Confederation Francaise de L' Encadrement December 1999
Confederation Francaise Democratique du Travail December 1999
Germany.................... IG-Metall February 2000
March 2000
Mexico..................... Confederation Travajadores Mexico Annually
Portugal................... Sindicato dos trabalhadores da Industria Metalurgica e June 1999
Metalomecanica do distrito da Guarda
Spain...................... Comisiones Oberera December 1999
United Kingdom............. Managerial Scientific & Financial June 1999
March 2000
AEEU July 2000
December 2000
AUEW June 1999
TGWU June 1999
United States.............. UAW May 1999*
April 2000
June 2000
December 2000
June 2001
September 2002
Universal Employees December 2000
United Paper Workers June 1999
Teamsters December 2000
Independent April 2001
</TABLE>
- ------------------------
* Tentative agreement reached
Although we believe that our relationship with our unionized employees is
good, there can be no assurance that we will be able to negotiate new agreements
on favorable terms. In the event that we
61
<PAGE>
are unsuccessful in negotiating new agreements, these facilities could be
subject to work stoppages, which would have a material adverse effect on our
operations.
PROPERTIES
Our corporate office is located in Minneapolis, Minnesota and occupies
approximately 5,700 square feet. Our operating headquarters is located in
Rochester Hills, Michigan and occupies approximately 65,000 square feet, a
portion of which is used for product development activities. Both of these
facilities are leased.
We believe that the productive capacity and utilization of our facilities is
sufficient to allow us to conduct our operations in accordance with our business
strategy. All of our owned facilities are subject to liens under the new credit
facility. The following table shows the principal facilities of Dura, Excel and
Adwest as of December 31, 1998, as well as the total number of facilities on a
combined basis:
<TABLE>
<CAPTION>
NUMBER OF SITES
--------------------------------------------------
COUNTRY DURA EXCEL ADWEST TOTAL
- --------------------------------------------------------------- ----- ----- ----------- -----
<S> <C> <C> <C> <C>
United States.................................................. 19 22 1 42
Canada......................................................... 4 -- -- 4
United Kingdom(1).............................................. 3 1 5 9
Germany........................................................ 4 3 3 10
France......................................................... 4 -- 4 8
Portugal....................................................... -- 2 -- 2
Spain.......................................................... 1 1 3 5
Mexico......................................................... 1 1 -- 2
Australia...................................................... 1 -- -- 1
Brazil(2)...................................................... 2 -- -- 2
India(3)....................................................... -- -- 1 1
Czech Republic................................................. -- 1 -- 1
-- -- -- --
Total.......................................................... 39 31 17 87
-- -- -- --
-- -- -- --
</TABLE>
- ------------------------
(1) One of Adwest's facilities located in the U.K. is owned by a corporation in
which Nippon Cable Systems Inc. (TSK) owns a 35% equity interest.
(2) As a result of the Excel Acquisition, Dura will hold a 51% equity interest
of Pollone, S.A., a Brazilian auto supplier that operates through one
facility located in Sao Paulo, Brazil.
(3) Facility is owned by a joint venture in which we hold a 49% ownership
interest.
Our manufacturing facilities have a combined square footage in excess of
9,600,000, approximately 72% of which is owned and approximately 28% is leased.
Nine of our U.S. facilities, which encompass 630,000 square feet on a combined
basis, are dedicated to producing our RV/MT/HT products. To increase efficiency,
we expect to consolidate the operations of certain of our manufacturing
facilities and technical centers over the next twelve months.
In some cases, several of our manufacturing sites, technical centers and/or
product development centers and sales activity offices are located at a single
multiple-purpose site. As of December 31, 1998, on a combined basis, we had an
aggregate of 15 technical centers, with 6 located in the United States, 8
located in Europe and 1 in Australia.
We believe that substantially all of our property and equipment is in good
condition and that we have sufficient capacity to meet our current manufacturing
needs. Utilization of our facilities varies
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<PAGE>
with North American and European light vehicle production and general economic
conditions in such regions.
LEGAL PROCEEDINGS
We face an inherent business risk of exposure to product liability claims in
the event that the failure of our products results in personal injury or death,
and there can be no assurance that we will not experience any material product
liability losses in the future. In addition, if any of the products we have
designed prove to be defective, we may be required to participate in a recall
involving such products.
In late 1994, Ford issued a recall of a series of manual transmission Ford
F-Series pickups to repair the self-adjust parking brakes originally
manufactured by the Brake and Cable Business. Ford had received several reports
that the brakes failed. Pursuant to a letter agreement entered into in
connection with our acquisition of the Brake and Cable Business in August 1994,
we agreed to reimburse Ford for up to $6.0 million of Ford's costs of the
recall. We have reimbursed Ford for the full amount under this agreement. We are
also involved in a product recall relating to the same issue with respect to the
Ford Mondeo in Europe. We have agreed to pay 50% of the costs of that recall not
to exceed $1.0 million, which payments totaled $0.4 million as of December 31,
1998.
The type of alleged failures that prompted the F-Series recalls have also
led to a number of claims and lawsuits filed against Ford, one of which
culminated in a July 1998 award of punitive damages against Ford of more than
$151 million (which has subsequently been reduced on appeal to $69 million) and
Ford is appealing the decision. We may be subject to claims brought directly
against us 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 we are liable for claims arising
out of accidents that take place on or after August 31, 1994 and that we 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).
To date, two cases have been brought directly against us 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 Dura or Alkin is
responsible for all damages or liabilities arising out of these claims. We
dispute this position. As of December 31, 1998, Ford had tendered its defense of
approximately 30 such claims to Dura and Alkin, and indicated that it would look
to Dura and Alkin for indemnification were Ford ultimately found to be liable
and required to make any payments relating to such claims. Dura and Alkin have
submitted these claims to their insurance carriers. We have 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 do not believe that
these claims have adversely affected our business relationship with Ford.
From time to time, in the ordinary course of our business, we receive notice
from a customer that a product may not be properly functioning. For example, in
November 1998, we were notified by Ford of an alleged failure of one of Dura's
cables used to control the speed control on certain of Ford's vehicles. In March
1999, we were notified by Ford of its decision to institute a recall of certain
of its vehicles, including Explorers, Mountaineers, Rangers, Mustangs and
F-Series pickups, relating to the speed control cable. Ford has reported that
certain of such vehicles could be equipped with a speed control cable that could
interfere with the speed control pulley and thus result in a "stuck" throttle.
In June 1999, Ford notified us that as many as 987,839 vehicles could be
affected at an alleged cost of up to $60 per vehicle. Based upon our tests and
investigations to date, we do not believe that our product
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<PAGE>
is responsible for the problems associated with the speed control unit. To date,
we have not been provided with any documents from Ford that support its
allegations.
We have also received notices from GM, Renault and Audi with respect to
alleged failures of products that we have supplied to them. In all of these
cases, it is possible that such manufacturers will seek contribution from us
with respect to the costs they incur if recalls are undertaken or for costs
associated with possible repairs. Based upon the information available to us, we
do not expect any of these matters either individually or collectively to result
in payments that will have a material effect on our results of operations and
financial position.
In early November 1996, we were served with a lawsuit brought by affiliates
of AIG, our excess insurance carrier, in Toronto, Canada seeking a declaratory
judgment that the umbrella and excess liability policies that it had issued to
Onex do not provide coverage in connection with allegedly defective self-adjust
parking brakes manufactured by Alkin prior to August 31, 1994. The AIG policies
at issue provided (a) the first layer of excess coverage (beyond our $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 us
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. Dura and Onex dispute the
allegations of the Ontario lawsuit and have filed a counterclaim against the AIG
affiliates for breach of contract.
We believe that we maintain adequate insurance, including product liability
coverage, to cover the claims described above. We have also established reserves
in amounts we believe adequate to cover any adverse judgments. However, any
adverse judgment in excess of our insurance coverage and such reserves could
result in a material adverse effect to our results of operations and financial
condition.
In February 1998, we were contacted by an attorney for the Lemelson Medical,
Education & Research Foundation Limited Partnership (the "Foundation"), alleging
that our operations implicate the fields of machine vision, gauging, location
analysis, flaw detection, verification and recognition in a manner that
allegedly infringes the Foundation's patents. Attorneys for the Foundation have
threatened to initiate litigation against us unless we agree to pay royalty fees
pursuant to a negotiated license agreement. Our investigation of this matter is
still in its preliminary stages. In mid 1998, Excel received a similar notice.
We have received notice from an attorney representing Teleflex alleging that
a transmission shifter cable manufactured by us in Europe infringes a U.S.
patent held by Teleflex. We are currently in the process of investigating this
matter and believe, based on the information available at this time, that this
matter will not have a material adverse effect on our operations.
ENVIRONMENTAL MATTERS
We are subject to federal, state, local and foreign environmental and
occupational health and safety laws and regulations. While we devote resources
designed to maintaining compliance with these requirements, we cannot assure you
that we operate at all times in complete compliance with all such requirements.
We could be subject to potentially significant fines and penalties for any
noncompliance that may occur. Although we have made and will continue to make
capital and other expenditures to comply with environmental requirements, we do
not expect to incur material capital expenditures for environmental controls in
1999 or 2000.
Some of our operations generate hazardous substances. Like all
manufacturers, if a release of hazardous substances occurs or has occurred at or
from any of our current or former properties or at a
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landfill or another location where we have disposed of wastes, we may be held
liable for the contamination, and the amount of such liability could be
material.
In 1995, the Michigan Department of Environmental Quality ("MDEQ"),
requested that we and Wickes conduct an environmental investigation at and
around our Mancelona, Michigan facility, which we acquired from Wickes in 1990.
The investigation detected trichloroethylene ("TCE") in groundwater at the
facility and offsite locations. We do not believe we used TCE since we acquired
the Mancelona facility, although TCE may have been used by prior operators. We
have arranged and paid for the sampling of several residential drinking water
wells in the area and for the replacement of drinking water wells found to
contain TCE above drinking water standards. Sampling of residential wells, and
replacement of such wells, when necessary, will continue. We will likely incur
additional costs to further investigate, monitor or remediate the contamination,
and possibly to provide additional alternative drinking water supplies. Such
costs may be material. In 1998, a ski resort in the vicinity wrote to us and
asserted that we are liable for the cost it will incur to install a water supply
system, which the ski resort claims is necessitated by the presence of TCE in
groundwater in the area. We responded with a letter denying all liability. We
are seeking a negotiated resolution of the ski resort's potential claims.
The Mancelona groundwater contamination matter is subject to an indemnity
from Wickes. In connection with our acquisition of certain assets from Wickes in
1990, Wickes agreed to indemnify us with respect to certain environmental
liabilities associated with Wickes' operation of the subject facilities subject
to a $750,000 basket (which has been reached), up to a $2.5 million cap. We will
be obligated to indemnify Wickes with respect to any liabilities above such cap.
Wickes has acknowledged that we made a timely and adequate claim for
indemnification with respect to the Mancelona matter, and has been paying
indemnification claims relating to the Mancelona matter, subject to a
reservation of rights.
In 1998, we acquired Universal. The seller in the Universal transaction
agreed to indemnify us for environmental liabilities arising from the operation
of the acquired facilities prior to the acquisition. Following the acquisition,
pursuant to the indemnity, the seller continued to address certain environmental
matters, including the cleanup of TCE-contaminated soil at our Butler, Indiana
facility. In 1998, the seller filed for reorganization under the federal
bankruptcy laws and appears to have ceased performing its obligations under the
indemnity. In March 1999, the sellers requested bankruptcy court approval to
reject their contractual indemnity obligations to us. Subject to our right to
seek repayment in the bankruptcy proceeding, it is likely that we will be
responsible for completing the cleanup at our Butler facility. Although we
cannot assure you, based on estimates provided by the environmental consultant
that has been performing the cleanup, we do not expect the cost to complete the
cleanup to be material.
In 1998, Excel entered into a partial consent decree to settle its liability
for past costs at the Main Street Well Field Site in Elkhart, Indiana, where TCE
was found in a municipal well field near Excel's Elkhart facility. Excel is one
of several potentially responsible parties involved at the site. Under the
settlement, Excel has a continuing payment obligation for operation and
maintenance of a groundwater treatment system and for a soil vapor extraction
system. These obligations will likely continue for several years. The annual
cost to operate these systems is not material. In addition, Excel expects to
receive certain payments from other parties involved at the site.
We are involved as a potentially responsible party at several waste disposal
sites. Although the environmental laws provide for joint and several liability
at such sites, liability is typically allocated among the viable parties
involved. We believe that we have no liability at some of these sites, and that
adequate reserves are in place for current estimates of our share of liability
at the other sites. We cannot assure you, however, that our liability at these
sites will not materially exceed the current amount of our reserves.
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<PAGE>
In 1997, Adwest acquired Heidemann. Areas of contamination from historical
operations exist at the Heidemann facilities located in Rotenburg, Einbeck, and
Kohler, Germany. We are currently operating treatment systems to clean up
contamination at the Rotenburg and the two Einbeck facilities and are monitoring
groundwater contamination at the Kohler facility. When Adwest acquired these
facilities, the seller posted a DM 5 million escrow, in part, to cover
environmental claims filed during an 18-month period following the acquisition.
Adwest filed environmental claims totaling DM 2 million against the escrow for
expenses to remediate contamination at the Rotenburg and Einbeck facilities and
upgrade the wastewater treatment system at the Rotenburg facility. We expect to
negotiate with the seller in the near future regarding the amount of recovery
for these environmental claims. We may incur costs beyond the amount recovered
from the escrow to continue to operate and maintain the treatment systems, and
to perform additional investigation and clean up, if necessary. Based on current
information, such costs are not expected to be material. However, should
additional or more extensive contamination be discovered, we may incur material
expenditures to address such contamination.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our
Directors and executive officers as of June 15, 1999:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
S. A. Johnson........................................ 59 Chairman and Director
James O. Futterknecht, Jr............................ 52 Vice Chairman and Director
J. Richard Jones..................................... 57 Vice Chairman and Director
Karl F. Storrie...................................... 61 President, Chief Executive Officer and Director
David R. Bovee....................................... 49 Vice President
Joe A. Bubenzer...................................... 47 Senior Vice President
Mervyn J. Edgar...................................... 50 Vice President
Stephen E. K. Graham................................. 41 Vice President and Chief Financial Officer
Robert R. Hibbs...................................... 37 Vice President and Director
John J. Knappenberger................................ 52 Vice President
Milton D. Kniss...................................... 51 Vice President
Michael C. Paquette.................................. 57 Vice President
Robert A. Pickering.................................. 56 Vice President
Scott D. Rued........................................ 42 Vice President
Robert E. Brooker, Jr................................ 62 Director
W. H. Clement........................................ 71 Director
Jack K. Edwards...................................... 55 Director
John C. Jorgensen.................................... 61 Director
William L. (Barry) Orscheln.......................... 48 Director
Eric J. Rosen........................................ 38 Director
Ralph R. Whitney, Jr................................. 64 Director
</TABLE>
S. A. JOHNSON has served as Chairman and a Director of Dura since November
1990. Mr. Johnson is the founder, Chief Executive Officer and President of
Hidden Creek. Mr. Johnson is also the President of J2R Corporation. Prior to
forming Hidden Creek, Mr. Johnson served from 1985 to 1989 as Chief Operating
Officer of Pentair, Inc., a diversified industrial company. From 1981 to 1985,
Mr. Johnson was President and Chief Executive Officer of Onan Corp., a
diversified manufacturer of electrical generating equipment and engines for
commercial, defense and industrial markets. Mr. Johnson served as Chairman and a
director of Automotive Industries Holding, Inc., a supplier of interior trim
components to the automotive industry, from May 1990 to August 1995. Mr. Johnson
is also Chairman and a director of Tower Automotive, Inc., a manufacturer of
engineered metal stampings and assemblies for the automotive industry.
JAMES O. FUTTERKNECHT, JR. has served as Director of Dura since May 1999.
Mr. Futterknecht joined Excel in 1970, was Vice President--Corporate Sales from
1976 until 1984, was Vice President-- Automotive Products from 1984 until 1987,
was Vice President--Automotive Sales and Engineering from 1987 to 1990 and was
Executive Vice President from 1990 to 1992. He was elected as President and
Chief Operating Officer and was appointed as an Excel director in 1992. In 1995,
he was elected to the additional offices of Chairman of the Board and Chief
Executive Officer. Mr. Futterknecht is also a director of Control Devices, Inc.
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J. RICHARD JONES has served as Vice Chairman and a Director of Dura since
May 1998. Prior to the acquisition of Trident, Mr. Jones served as Group
President and Chief Executive Officer of Trident's predecessor from June 1992
until December 1997 and as Chairman, Chief Executive Officer and Director of
Trident from December 1997 until April 1998. From 1988 to June 1992, he served
as President and Chief Operating Officer of the Process Automation Group of FKI
(formerly known as the Process Control Group of FKI). In 1990, while serving in
such capacity, he assumed the responsibility for the reorganization of the FKI
Automotive Group. Prior thereto, Mr. Jones was Division President of Bristol
Babcock, Inc., a process control company involved in the design and manufacture
of telemetry equipment for the gas and water industry, and held a variety of
positions in engineering, vehicular systems and operational management for the
Varity Corporation.
KARL F. STORRIE has served as President, Chief Executive Officer and a
Director of Dura since March 1991. Prior to joining Dura and from 1986, Mr.
Storrie was Group President of a number of aerospace manufacturing companies
owned by Coltec Industries, a multi-divisional public corporation. Prior to
becoming a Group President, Mr. Storrie was a Division President of two
aerospace design and manufacturing companies for Coltec Industries from 1981 to
1986. During his thirty-five year career, Mr. Storrie has held a variety of
positions in technical and operations management. Mr. Storrie is also a director
of Argo-Tech Corporation, a manufacturer of aircraft fuel, boost and transfer
pumps.
DAVID R. BOVEE has served as Vice President of Dura since November 1990 and
Chief Financial Officer of Dura from November 1990 to May 1997. Mr. Bovee also
serves as Assistant Secretary for Dura. Prior to joining Dura, Mr. Bovee served
as Vice President at Wickes in its Automotive Group from 1987 to 1990.
JOE A. BUBENZER has had responsibility for European operations since June
1997. From October 1993 to May 1997, Mr. Bubenzer served as Vice President
Sales/Engineering since joining Dura in October 1993 and was named Senior Vice
President in 1995. Prior to joining Dura 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.
MERVYN J. EDGAR has served as Vice President of Dura since May 1998. Prior
to the acquisition of Trident, Mr. Edgar served as General Manager of Trident
from 1990 to May 1998 and as Manufacturing Manager of FKI Dominion Controls
Division in Stratford, Ontario and Milan, Tennessee from 1989 to 1990.
STEPHEN E. K. GRAHAM has served as Vice President and Chief Financial
Officer since joining Dura 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 Dura since August 1994 and as
Vice President since November 1990. Mr. Hibbs, a stockholder of J2R Corporation,
has also served as Vice President-Corporate Development of Hidden Creek since
January 1994 and as its Director from April 1990 through December 1993. Prior
thereto, Mr. Hibbs worked in the corporate finance area with Drexel Burnham
Lambert, an investment banking firm, in New York from 1988 to 1990.
JOHN J. KNAPPENBERGER has served as Vice President of Quality and Materials
of Dura since December 1995. Mr. Knappenberger assumed the responsibility for
sales and engineering in June 1997. Prior to joining Dura, 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
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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 Dura since
January 1994. From April 1991 until January 1994, Mr. Kniss served as Director
of Michigan Operations for Dura. 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.
MICHAEL C. PAQUETTE has served as Vice President of Human Resources of Dura
since March 1999. From 1995 to February 1999, Mr. Paquette was Vice President of
Corporate Human Resources of Excel. From 1983 to 1995, Mr. Paquette was Vice
President of Human Resources for the Power Generation Group of Cummins Engine
Company, a manufacturer of diesel engines and related components.
ROBERT A. PICKERING has served as Vice President of Dura since March 1999,
with responsibility for recreational and heavy vehicle and mass transit
operations. From December 1996 to March 1999, Mr. Pickering was Vice President
of Excel. From 1989 to 1996, Mr. Pickering was employed by Atwood Industries,
serving as Vice President of Manufacturing of Atwood Automotive Division from
1989 to 1991 and President of Atwood Mobile Products from 1991 to 1996. Prior to
joining Atwood Industries, Mr. Pickering's employment included seven years with
Tech Form Industries, an automotive OEM supplier, six years with Volkswagen of
America, and ten years with the Chevrolet Division of General Motors.
SCOTT D. RUED has served as Vice President of Dura since November 1990. Mr.
Rued, a stockholder of J2R, has also served as Executive Vice President and
Chief Financial Officer of Hidden Creek since January 1994 and served as its
Vice President Finance and Corporate Development from June 1989 through 1993.
Mr. Rued has served as Vice President, Corporate Development and a director of
Tower Automotive, Inc. since April 1993. Mr. Rued served as Vice President,
Chief Financial Officer and a director of Automotive Industries Holding, Inc.
from April 1990 to August 1995. Mr. Rued is also a director of The Rottlund
Company, Inc., a corporation engaged in the development and sale of residential
real estate.
ROBERT E. BROOKER, JR. has served as a Director of Dura since September
1996. From 1993 to 1995, Mr. Brooker was President and Chief Operating Officer
of Connell Limited Partnership. Prior thereto, Mr. Brooker served six years as
President and Chief Executive Officer at Lord Corporation. Mr. Brooker is also a
director of Full Circle Investments, a private investment company.
W. H. CLEMENT has served as a Director of Dura since 1993. Mr. Clement
serves as a consultant to Hidden Creek. From 1975 until May 1994, Mr. Clement
served as Chief Executive Officer or as President of Automotive Industries
Holding, Inc. and its predecessor. Mr. Clement is also a director of F&M
National Corporation, a bank holding company, and Tower Automotive, Inc.
JACK K. EDWARDS has served as a Director of Dura since December 1996. Mr.
Edwards joined Cummins Engine Co., Inc. in 1972 and has served as Executive Vice
President and Group President-- Power Generation and International since March
1996. Mr. Edwards is also a director of David J. Joseph Co., a processor and
trader of steel scrap.
JOHN C. JORGENSEN has served as a director of Dura since May 1998. Mr.
Jorgensen has served as President of ORTECH CO. since March 1992, Senior Vice
President of Manufacturing for Orscheln Management Co. since April 1996 and
Executive Vice President of Orscheln Products L.L.C. since March 1992. Prior to
1992, Mr. Jorgensen was responsible for the operations at Orscheln Co.
Manufacturing.
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<PAGE>
WILLIAM L. (BARRY) ORSCHELN has served as a Director of Dura since August
1994. Mr. Orscheln has also served as President of Alkin Co. (and its
predecessors) since March 1994, as President of Orscheln Farm and Home since
September 1995, as President of Orscheln Properties Co., L.L.C., since October
1994 and as President of Orscheln Management Co. since December 1987. Mr.
Orscheln has served as a director of UMB Bank, a bank holding company, since
July 1989 and as a director of Orscheln Management Co. since 1987.
ERIC J. ROSEN has served as a Director of Dura since January 1995. Mr. Rosen
is Managing Director of Onex Investment Corp., a diversified industrial
corporation and an affiliate of Onex, and served as a Vice President of Onex
Investment Corp. from 1989 to February 1994. Prior thereto, Mr. Rosen worked in
the merchant banking group at Kidder, Peabody & Co. Incorporated from 1987 to
1989. Mr. Rosen is also a director of Tower Automotive, Inc.
RALPH R. WHITNEY, JR. has served as a Director of Dura since May 1999. Mr.
Whitney was a director of Excel from 1983 to March 1999 and was Chairman of the
Board from 1983 to 1985. Mr. Whitney has been a principal of Hammond, Kennedy,
Whitney & Company, Inc., a New York, New York financial intermediary and private
investment banking firm, since 1971. Mr. Whitney is also a director of Adage,
Inc., Control Devices, Inc., IFR Systems, Inc., Selas Corporation of America and
Baldwin Technologies, Inc.
The Dura board currently has twelve directors. Each director is elected to
serve until the next annual meeting of stockholders or until a successor is duly
elected and qualified. Executive officers of Dura are duly elected by the board
to serve until their respective successors are elected and qualified. There are
no family relationships between any of the directors or executive officers of
Dura.
There are three committees of the board: the executive committee, the
compensation committee and the audit committee. The executive committee, which
is currently composed of Messrs. Johnson, Storrie and Orscheln, exercises the
powers of the board during intervals between board meetings and acts as an
advisory body to the board by reviewing various matters prior to their
submission to the board. The compensation committee, which is currently composed
of Messrs. Clement, Brooker and Edwards, reviews and makes recommendations to
the board regarding salaries, compensation and benefits of executive officers
and key employees of Dura and grants all options to purchase DASI's Class A
common stock. The audit committee is currently composed of Messrs. Hibbs, Rosen
and Whitney. Among other duties, the audit committee reviews the internal and
external financial reporting of Dura, reviews the scope of the independent audit
and considers comments by the auditors regarding internal controls and
accounting procedures and management's response to these comments. Dura does not
have a nominating committee.
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EXECUTIVE COMPENSATION
The following table sets forth compensation packages for the years ended
December 31, 1998, 1997 and 1996 for Dura's chief executive officer and the four
other executive officers of Dura who were the most highly compensated officers
of Dura for the year ended December 31, 1998. We refer to these five individuals
as our "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- -------------
NAME AND SALARY BONUS OTHER ANNUAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR ($)(1) ($)(1) COMPENSATION GRANTED (#) COMPENSATION ($)(3)
- ------------------------------------ --------- ---------- ---------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Karl F. Storrie..................... 1998 $ 400,000 $ 550,000 (2) 90,000 $ 6,906
President and Chief Executive 1997 345,833 425,000 (2) 30,000 6,856
Officer 1996 294,168 400,000 (2) 80,000 3,725
Joe A. Bubenzer..................... 1998 239,000 160,000 -- 30,000 5,322
Senior Vice President 1997 187,083 150,000 (2) 12,500 5,322
1996 168,000 140,000 (2) 10,000 2,637
Milton D. Kniss..................... 1998 200,000 190,000 (2) 37,500 5,724
Vice President 1997 167,917 150,000 (2) 12,500 5,724
1996 144,000 135,000 (2) 10,000 4,512
John J. Knappenberger............... 1998 175,000 130,000 (2) 30,000 5,664
Vice President(4) 1997 147,500 120,000 (2) 10,000 5,614
1996 135,000 110,000 47,156(4) 27,373 3,375
Stephen E. K. Graham................ 1998 175,000 125,000 (2) 30,000 5,082
Vice President and Chief Financial 1997 92,548 40,000 (2) 25,000 5,082
Officer(5)
</TABLE>
- ------------------------------
(1) Includes amounts deferred by employees under Dura's 401(k) employee savings
plan, pursuant to Section 401(k) of the Internal Revenue Code.
(2) None of the benefits and perquisites paid to each of the named executive
officers exceeded the lesser of $50,000 or 10% of the total annual salary
and bonus received by such named executive officers.
(3) The amounts disclosed in this column include amounts contributed by Dura to
its 401(k) employees savings plan and profit sharing plan and dollar value
of premiums paid by Dura for term life insurance on behalf of the named
executive officers.
(4) Includes $39,263 for reimbursement of relocation costs.
(5) Mr. Graham became an employee of Dura in June 1997.
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<PAGE>
OPTION GRANT TABLE
The following table shows all grants of options to acquire shares of DASI
Class A common stock granted to the named executive officers under the 1996 Key
Employee Stock Option Plan (the "1996 Plan") and the 1998 Stock Incentive (the
"1998 Plan").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES PRICE EXPIRATION --------------------------
NAME GRANTED (#)(1) IN FISCAL YEAR (PER SHARE) DATE 5% 10%
- ---------------------------------- --------------- ------------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
K.F. Storrie...................... 90,000 14.3% $ 29.00 12/17/08 $ 1,641,415 $ 4,159,668
J.A. Bubenzer..................... 30,000 4.8% 29.00 12/17/08 547,138 1,386,556
S.E.K. Graham..................... 30,000 4.8% 29.00 12/17/08 547,138 1,386,556
M.D. Kniss........................ 37,500 5.9% 29.00 12/17/08 683,923 1,733,195
J.J. Knappenberger................ 30,000 4.8% 29.00 12/17/08 547,138 1,386,556
</TABLE>
- ------------------------------
(1) These options vest ratably over four years commencing one year from the date
of grant.
(2) Amounts reflect certain assumed rates of appreciation set forth in the
executive compensation disclosure rules of the SEC. Actual gains, if any, on
stock option exercises depend on future performance of DASI's Class A common
stock and overall stock market conditions. No assurances can be made that
the amounts reflected in these columns will be achieved.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table shows aggregate exercise of options in the year ended
December 31, 1998 by the named executive officers and the aggregate value of
unexercised options held by each named executive officer as of December 31,
1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
YEAR-END(#) YEAR-END($)
VALUE ---------------- ----------------------
SHARES ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------------- ------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
K.F. Storrie....................... 5,000 $ 83,063 82,500/112,500 $ 1,544,063/$677,813
J.A. Bubenzer...................... -- -- 8,125/44,375 96,953/310,859
S.E.K. Graham...................... -- -- 6,250/48,750 42,656/281,719
M.D. Kniss......................... -- -- 8,125/51,875 96,953/349,297
J.J. Knappenberger................. -- -- 27,373/40,000 496,570/259,375
</TABLE>
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STOCK PLANS
1998 STOCK INCENTIVE PLAN
The 1998 Stock Incentive Plan was adopted by the board of directors in
December 1998 and was approved by our stockholders in March 1999. As of the date
of this prospectus, options for an aggregate of 589,600 shares of Class A common
stock have been granted under the 1998 Plan.
The 1998 Plan provides for the grant of incentive stock options to our
employees (including officers and employee directors) and for the grant of
nonstatutory stock options and stock purchase rights ("SPRs") to our employees,
directors and consultants. A total of (1) 1,000,000 shares of Class A common
stock, (2) any shares returned to the 1996 Plan as a result of termination of
options and (3) annual increases to be added on the date of each annual meeting
of stockholders of Dura commencing in 1999 equal to the lesser of 500,000 shares
of Class A common stock, 5% of the outstanding shares of Class A common stock,
or such lesser amount as may be determined by the board of directors, are
currently reserved for issuance pursuant to the 1998 Plan.
The administrator of the 1998 Plan (the "Administrator") has the power to
determine the terms of the options or SPRs granted, including the exercise price
of the option or SPR, the number of shares subject to each option or SPR, the
exercisability thereof, and the form of consideration payable upon such
exercise. In addition, the Dura board has the authority to amend, suspend or
terminate the 1998 Plan, provided that no such action may affect any share of
DASI common stock previously issued and sold or any option or SPR previously
granted under the 1998 Plan.
Options and SPRs granted under the 1998 Plan are generally not transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee and only by such optionee. Options granted under the 1998 Plan must
generally be exercised within three months after the end of an optionee's status
as an employee, director or consultant of Dura, or within twelve months after
such optionee's termination by death or disability, but in no event later than
the expiration of the option term.
In the case of SPRs, unless the Administrator determines otherwise, the
restricted stock purchase agreement shall grant DASI a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with Dura for any reason (including death
or disability). The purchase price for shares repurchased pursuant to the
restricted stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to Dura. The purchase option shall lapse at a rate determined by the
Administrator.
The exercise price of all incentive stock options granted under the 1998
Plan must be at least equal to the fair market value of the Class A common stock
on the date of grant. The exercise price of nonstatutory stock options and SPRs
granted under the 1998 Plan is determined by the Administrator, but with respect
to nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the exercise
price must be at least equal to the fair market value of the Class A common
stock on the date of grant. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of the outstanding
capital stock of Dura, the exercise price of any incentive stock option granted
must be at least equal to 110% of the fair market value on the grant date and
the term of such incentive stock option must not exceed five years. The term of
all other options granted under the 1998 Plan may not exceed ten years.
The 1998 Plan provides that in the event of a merger of Dura with or into
another corporation, or a sale of substantially all of Dura's assets, each
option and SPR shall be assumed or an equivalent option substituted for by the
successor corporation. If the outstanding options and SPRs are not assumed or
substituted for by the successor corporation, the Administrator shall provide
for the
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<PAGE>
optionee to have the right to exercise the option or SPR as to all of the
optioned stock, including shares as to which it would not otherwise be
exercisable. If the Administrator makes an option or SPR exercisable in full in
the event of a merger or sale of assets, the Administrator shall notify the
optionee that the option or SPR shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the option or SPR will
terminate upon the expiration of such period.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
The Dura Employee Stock Discount Purchase Plan (the "Employee Stock Purchase
Plan") was approved by our board of directors and stockholders in August 1996.
The Employee Stock Purchase Plan was established to give employees desiring to
do so a convenient means of purchasing shares of Class A common stock through
payroll deductions.
Subject to certain restrictions, each of our employees who is a U.S.
resident or a U.S. citizen temporarily on location at a facility outside of the
U.S. is eligible to participate in the Employee Stock Purchase Plan if he or she
has been employed by Dura for more than six months. Participation is
discretionary with each eligible employee. We have reserved 500,000 shares of
Class A common stock for issuance in connection with the Employee Stock Purchase
Plan. As of March 31, 1999, 77,076 shares had been purchased under the Employee
Stock Purchase Plan. Each eligible employee is entitled to purchase a maximum of
200 shares per year. Elections to participate and purchases of stock are made on
a quarterly basis. Each participating employee contributes to the Employee Stock
Purchase Plan by choosing a payroll deduction in any specified amount, with a
minimum deduction of $10 per payroll period. A participating employee may
increase or decrease the amount of his/her payroll deduction, including a change
to a zero deduction as of the beginning of any calendar quarter. Elected
contributions are credited to participants' accounts at the end of each calendar
quarter. In addition, employees may make lump sum contributions at the end of
the year to enable them to purchase the maximum number of shares available for
purchase during the plan year.
Each participating employee's contributions are used to purchase shares for
the employee's share account within 15 days after the last day of each calendar
quarter. The cost per share is 85% of the lower of the closing price of the
Class A common stock on the Nasdaq National Market on the first or the last day
of the calendar quarter. Shares purchased under the Employee Stock Purchase Plan
carry full rights to receive dividends declared from time to time, and any
dividends attributable to shares in the employee's share account are
automatically used to purchase additional shares for such employee's share
account. A participating employee has full ownership of all shares in his/her
share account and may withdraw them for sale or otherwise by written request to
the compensation committee of the Dura board following the close of each
calendar quarter. Subject to applicable federal securities and tax laws, the
Dura board has the right to amend or to terminate the Employee Stock Purchase
Plan. Amendments to the Employee Stock Purchase Plan do not affect a
participating employee's right to the benefit of the contributions made by such
employee prior to the date of any such amendment. In the event the Employee
Stock Purchase Plan is terminated, the compensation committee is required to
distribute all shares held in each participating employee's share account plus
an amount of cash equal to the balance in each participating employee's cash
account.
INDEPENDENT DIRECTOR STOCK OPTION PLAN
The Director Option Plan was approved by our board of directors and
stockholders in August 1996 to encourage stock ownership by certain directors of
Dura and to provide those individuals with an additional incentive to manage
Dura and to provide a form of compensation that would attract and retain highly
qualified individuals as members of Dura's board. The Director Option Plan
provides for the issuance of options to independent Directors, as defined,
covering 100,000 shares of Class A common stock, subject to certain adjustments
reflecting changes in Dura's capitalization.
74
<PAGE>
The terms of each option granted under the Director Option Plan may not
exceed ten years from the date of grant. The option price for each option must
equal 100% of the fair market value of the Class A common stock on the date the
option is granted. In general, no option may be exercised in whole or in part
prior to the expiration of at least six months from the date of grant of the
option. In consideration of the grant of an option, an optionee is required to
agree to continue to serve as a director of Dura for the lesser of 12 months
from the date the option is granted or for the remainder of the optionee's term
as a director of Dura. Notwithstanding this requirement, nothing contained in
the Director Option Plan or any agreement to be executed pursuant to the
Director Option Plan obligates Dura, its board or its stockholders to retain an
optionee as a director of Dura. As of March 31, 1999, options to purchase an
aggregate of 21,000 shares of Class A common stock have been granted under the
Director Option Plan.
75
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the equity
ownership of Dura as of June 30, 1999 by:
- each person or entity known to Dura who beneficially owns five percent or
more of a class of common stock of DASI,
- each director and named executive officer and
- all directors and executive officers of Dura as a group.
Unless otherwise stated, each of the persons named in the table has sole
voting and investment power with respect to the securities beneficially owned by
it or him as set forth opposite its or his name. Beneficial ownership of the
common stock listed in the table has been determined in accordance with the
applicable rules and regulations promulgated under the Exchange Act.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------ -----------------------
<S> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND NUMBER OF PERCENT OF NUMBER OF PERCENT OF
5% STOCKHOLDERS SHARES CLASS(+) SHARES CLASS(+)
- --------------------------------------------------------------------- ----------- ----------- ---------- -----------
ONEX DHC LLC(1)(2)................................................... -- -- 1,972,913 59.3%
Alkin Co.(2)(3)...................................................... -- -- 1,366,810 40.9%
J2R Corporation(2)(4)................................................ -- -- 308,211 9.3%
S. A. Johnson(2)(4).................................................. -- -- 317,879 9.6%
Karl F. Storrie(2)(5)................................................ 86,900 * 115,531 3.5%
David R. Bovee(2).................................................... 7,500 * 31,308 *
Joe A. Bubenzer(2)................................................... 9,325 * 23,814 *
Mervyn J. Edgar...................................................... 5,900 * -- --
Stephen E. K. Graham................................................. 11,250 * -- --
Robert R. Hibbs(2)(6)................................................ -- -- 316,160 9.5%
John J. Knappenberger................................................ 34,709 * -- --
Milton D. Kniss(2)................................................... 8,175 * 8,961 *
Michael C. Paquette.................................................. 15,095 * -- --
Robert A. Pickering.................................................. 9,570 * -- --
Robert E. Brooker, Jr................................................ 26,545 * -- --
W. H. Clement(2)..................................................... 2,000 * -- --
Jack K. Edwards...................................................... 6,512 * -- --
James O. Futterknecht................................................ 42,285 * -- --
J. Richard Jones..................................................... 16,667 * -- --
John C. Jorgensen(2)(3).............................................. -- -- 1,366,810 40.9%
William L. Orscheln(2)(3)............................................ -- -- 1,366,810 40.9%
Eric J. Rosen(1)(2).................................................. 5,000 * 1,972,913 59.3%
Scott D. Rued(2)(7).................................................. -- -- 308,211 9.3%
Ralph R. Whitney, Jr................................................. 18,800 * -- --
American Express Company(8).......................................... 950,114 6.8% -- --
Dresdner RCM Global Investors LLC(9)................................. 676,400 4.8% -- --
All directors and officers as a group (21 persons)................... 306,233 2.1% 3,267,165 97.8%
</TABLE>
- ------------------------
* Less than one percent.
(+) Based on 14,061,079 shares of Class A common stock outstanding as of June
30, 1999 and 3,325,303 shares of Class B common stock outstanding as of June
30, 1999.
76
<PAGE>
(1) Reflects shares of Class B common stock held by Onex DHC LLC, which has
shared voting power over 1,972,913 shares of Class B common stock (see
footnote (2)) and sole dispositive power over 1,394,913 shares of Class B
common stock. Mr. Rosen, a Director of Dura, is Managing Director of Onex
Investment Corp. and disclaims beneficial ownership of all shares of Class B
Common Stock owned by Onex DHC LLC. Onex DHC LLC and Onex Investment Corp.
are both wholly owned subsidiaries of Onex Corporation. The address for Onex
DHC LLC and Mr. Rosen is c/o Onex Investment Corp., 712 Fifth Avenue, 40th
Floor, New York, New York 10019.
(2) Onex, J2R, Messrs. Johnson, Storrie, Bovee, Bubenzer, Hibbs, Kniss, Clement,
Rosen and Rued and certain of Dura's other existing stockholders have
entered into agreements pursuant to which such stockholders agreed to vote
their shares of Class B common stock in the same manner as Onex votes its
shares on all matters presented to Dura's stockholders for a vote and, to
the extent permitted by law, granted to Onex DHC LLC a proxy to effectuate
such agreement. As a result, Onex has voting control of approximately 59.3%
of the common stock.
(3) Includes 14,420 shares issuable upon the exercise of currently exercisable
options issued to Alkin Co. in connection with Dura's acquisition of the
Brake and Cable Business. Messrs. Jorgensen and Orscheln are officers of
Alkin Co. and, other than Mr. Orscheln, each disclaims beneficial ownership
of the shares owned by Alkin Co. other than the shares subject to each of
their outstanding options. The address for Alkin Co. is 2000 U.S. Highway 63
South, Moberly, Missouri 65270, and the address of each such individual is
c/o Alkin Co. at the same address.
(4) Includes 308,211 shares owned by J2R, of which Mr. Johnson is President, and
9,668 shares owned by Mr. Johnson. The address for Mr. Johnson and J2R is
c/o Dura Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota
55402.
(5) Includes 1,400 shares owned by Mr. Storrie's wife. Mr. Storrie disclaims
beneficial ownership of such shares.
(6) Includes 308,211 shares owned by J2R, of which Mr. Hibbs is a stockholder,
and 7,949 shares owned by Mr. Hibbs. Mr. Hibbs disclaims beneficial
ownership of the shares owned by J2R. The address for Mr. Hibbs is c/o Dura
Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota 55402.
(7) Includes 308,211 shares owned by J2R, of which Mr. Rued is a stockholder.
Mr. Rued disclaims beneficial ownership of the shares owned by J2R. The
address for Mr. Rued is c/o Dura Automotive Systems, Inc., 4508 IDS Center,
Minneapolis, Minnesota 55402.
(8) American Express Company ("AEC") and American Express Financial Corporation
("AEFC") each reported as of December 31, 1998 shared dispositive power with
respect to 950,114 shares of Class A common stock and shared voting power
with respect to 400,114 shares of Class A common stock. IDS Discovery Fund
Inc. reported as of December 31, 1998 sole voting power and shared
dispositive power with respect to 550,000 shares of Class A common stock,
representing 11.4% of the outstanding shares of Class A common stock. The
address for AEC is American Express Tower, 200 Vesey Street, New York, New
York 10285 and the address for AEFC and IDS Discovery Fund Inc. is IDS Tower
10, Minneapolis, Minnesota 55440.
(9) Dresdner RCM Global Investors LLC, RCM Limited L.P. and RCM General
Corporation each reported as of December 31, 1998 sole voting power with
respect to 609,900 shares of Class A common stock and sole dispositive power
with respect to 676,400 shares of Class A common stock. The address for
these entities is Four Embarcadero Center, Suite 2900, San Francisco,
California 94111. Dresdner Bank AG also reported beneficial ownership of
680,200 shares of Class A common stock as a result of its being the parent
corporation of Dresdner RCM US Holdings LLC. The address for Dresdner Bank
AG is Jurgen-Ponto-Platz 1, 60301 Frankfurt, Germany.
77
<PAGE>
SELLING STOCKHOLDERS
The shares of Class A common stock covered by this prospectus are being
offered by or for the account of the Selling Stockholders listed in the table
below (the "Selling Stockholders"). All of the shares of Class A common stock
listed in the following table relate to shares that may be acquired by such
Selling Stockholders upon the exercise of outstanding warrants. All of these
warrants were issued by Excel Industries, Inc. ("Excel") in connection with its
acquisition of Anderson Industries, Inc. on April 3, 1996. The warrants were
assumed by Dura in connection with its acquisition of Excel, which was completed
on March 23, 1999. Pursuant to the terms of the merger agreement, each
outstanding warrant was converted into a warrant to (A) purchase that number of
shares of Class A common stock equal to one-half of the number of shares of
Excel common stock subject to the warrant multiplied by 0.8 and (B) receive cash
equal to one-half of the number of shares of Excel common stock subject to the
warrant multiplied by $25.50. The exercise price for the warrants is $16.56 per
share of Class A common stock. None of the Selling Stockholders has had within
the past three years any material relationship with Dura or any of its
predecessors or affiliates.
The following table sets forth the name of each Selling Stockholder, the
number of shares of Class A common stock beneficially owned by each Selling
Stockholder immediately prior to the date of this prospectus, the number of
shares covered by this prospectus, the number of shares of Class A common stock
to be beneficially owned by each Selling Stockholder upon completion of this
offering, and the percentage of shares to be owned by each Selling Stockholder
upon completion of the offering. However, because the Selling Stockholders may
offer all or a portion of the shares covered by this prospectus at any time and
from time to time hereafter, the exact number of shares that each Selling
Stockholder may retain after completion of the offering cannot be determined at
this time. The last two columns of this table assume that all shares covered by
this prospectus will be sold by the Selling Stockholders and that no additional
shares of Class A common stock are bought or sold by the Selling Stockholders.
Each of the Selling Stockholders named in the table has sole voting and
investment power with respect to the shares beneficially owned by it or her.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NUMBER OF OWNED AFTER
SHARES COVERED OFFERING
SHARES BENEFICIALLY BY THIS ------------------------
NAME OWNED PRIOR TO OFFERING PROSPECTUS NUMBER PERCENT
- ------------------------------------------------------ ----------------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Ralph F. Anderson, as Trustee of the Testamentary
Trust U/W/O Edith Anderson.......................... 8,398 8,398 -- --
John R. Anderson, as Trustee of the John Anderson
Revocable Trust U/A/D 9/21/77....................... 23,714 23,634 80 *
Linda Anderson........................................ 234 234 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the John Anderson Discretionary Trust U/A/D
12/28/76............................................ 16,418 16,418 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of John Anderson Gift Trust U/A/D 12/28/76.......... 3,400 3,400 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the David Descendants Trust U/A/D 12/28/76....... 5,812 5,812 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the David Family Trust U/A/D 12/28/76............ 9,024 9,024 -- --
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NUMBER OF OWNED AFTER
SHARES COVERED OFFERING
SHARES BENEFICIALLY BY THIS ------------------------
NAME OWNED PRIOR TO OFFERING PROSPECTUS NUMBER PERCENT
- ------------------------------------------------------ ----------------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Kristin Descendants Trust U/A/D 12/28/76..... 5,812 5,812 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Kristin Family Trust U/A/D 12/28/76.......... 9,024 9,024 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Tracy Descendants Trust U/A/D 12/28/76....... 5,812 5,812 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Tracy Family Trust U/A/D 12/28/76............ 9,024 9,024 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Jeffrey Descendants Trust U/A/D 4/15/83...... 5,812 5,812 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Jeffrey Family Trust U/A/D 4/15/83........... 9,024 9,024 -- --
Judith E. Graff and John R. Anderson, as Co-Trustees
of the Judith E. Graff Family Trust U/A/D
12/28/76............................................ 5,563 5,563 -- --
Judith E. Graff and John R. Anderson, as Co-Trustees
of the Judith E. Graff Discretionary Trust U/A/D
12/28/76............................................ 1,621 1,621 -- --
Judith E. Graff, as Trustee of the Judith E. Graff
Revocable Trust U/A/D 9/15/78....................... 15,526 15,526 -- --
Allan B. Muchin and Richard A. Behr, as Co-Trustees of
the Jeffrey Anderson Trust U/A/D 5/1/80............. 467 467 -- --
John R. Anderson, as Trustee of the Tracy E. Anderson
Trust U/A/D 3/8/96.................................. 467 467 -- --
John R. Anderson, as Trustee of the Kristin L.
Anderson Trust U/A/D 3/8/96......................... 467 467 -- --
John R. Anderson, as Trustee of the David J. Anderson
Trust U/A/D 3/8/96.................................. 3,475 3,475 -- --
Allan B. Muchin and Richard A. Behr, as Co-Trustees of
the John Anderson Children's Trust U/A/D 12/4/87.... 13,387 13,387 -- --
</TABLE>
- ------------------------
* Less than one percent.
79
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Dura, Onex, J2R, Alkin Co. and S.A. Johnson and Robert R. Hibbs and certain
other investors are parties to a stockholders agreement pursuant to which each
party has agreed to vote his or its shares in the same manner that Onex votes
its shares of Dura's common stock.
Dura, Onex and certain stockholders including J2R, Alkin Co., S.A. Johnson
and Karl F. Storrie are parties to a registration agreement pursuant to which
Dura has granted certain of its stockholders rights to register shares of Dura's
common stock.
Dura paid fees to Hidden Creek of approximately $3.7 million in 1998 in
connection with the acquisitions of Universal, Trident and the Hinge Business,
the June 1998 Offering and the March 1998 sale of the Trust Preferred
Securities. In addition, Hidden Creek received a fee of $2.0 million for
services rendered in connection with the Excel Acquisition and a fee of $2.0
million for services rendered in connection with the Adwest Acquisition. S.A.
Johnson, the Chairman of the Dura board, is the founder, Chief Executive Officer
and President of Hidden Creek and Messrs. Robert R. Hibbs, a Vice President and
Director of Dura, and Scott D. Rued, a Vice President of Dura, are executive
officers of Hidden Creek. Certain officers and employees of Hidden Creek
continue to provide services to Dura. A portion of the salaries and expenses of
such Hidden Creek officers and employees, approximately $200,000, is allocated
to Dura annually.
In connection with the December 1991 private placement of common stock, Mr.
Storrie acquired 139,531 shares of Class B common stock, of which 115,531 shares
are still held by Mr. Storrie. Dura loaned Mr. Storrie $75,000 in connection
with such purchase. Mr. Storrie has repaid $12,900 of the outstanding balance as
of March 31, 1999. The loan bears interest at 1% above the prime rate, matures
on December 31, 2000 and is secured by a pledge of the shares.
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The total amount of authorized capital stock of DASI consists of 60,000,000
shares of Class A common stock, par value $0.01 per share, 10,000,000 shares of
Class B common stock, par value $0.01 per share and 5,000,000 shares of
preferred stock, par value $1.00 per share. As of June 30, 1999, 14,061,079
shares of Class A common stock, 3,325,303 shares of Class B common stock and no
shares of preferred stock were issued and outstanding. As of June 30, 1999,
there were: (1) 2,957,520 shares of Class A common stock reserved for issuance
under Dura's stock option plans and Employee Stock Purchase Plan, of which
options to purchase 1,259,463 shares of Class A common stock were outstanding;
(2) 3,325,303 shares of Class A common stock reserved for issuance upon the
conversion of the Class B common stock and (3) 1,289,000 shares of Class A
common stock reserved for issuance upon the conversion of the Trust Preferred
Securities.
The following summary of certain provisions of DASI's capital stock
describes all material provisions of, but does not purport to be complete and is
subject to, and qualified in its entirety by, our restated certificate of
incorporation and by-laws, which are filed with the SEC. See "Where You Can Find
More Information."
CLASS A COMMON STOCK
All of the outstanding shares of Class A common stock are validly issued,
fully paid and nonassessable. Subject to the prior rights of the holders of any
preferred stock, the holders of outstanding shares of Class A common stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board may from time to time determine. The
shares of Class A common stock are not convertible and the holders thereof have
no preemptive or subscription rights to purchase any securities of Dura. Upon
liquidation, dissolution or winding up of
80
<PAGE>
Dura, the holders of Class A common stock are entitled to receive pro rata the
assets of Dura which are legally available for distribution, after payment of
all debts and other liabilities and subject to the prior rights of any holders
of preferred stock then outstanding. Each outstanding share of Class A common
stock is entitled to one vote on all matters submitted to a vote of
stockholders. Except as otherwise required by law or our restated certificate,
the Class A common stock and Class B common stock vote together on all matters
submitted to a vote of the stockholders, including the election of directors.
The Class A common stock is traded on the Nasdaq National Market under the
symbol "DRRA."
CLASS B COMMON STOCK
The issued and outstanding shares of Class B common stock generally have
identical rights to those of the Class A common stock except with respect to
voting power and conversion rights. Each share of Class B common stock is
entitled to ten votes on all matters submitted to a vote of stockholders, as
compared to one vote for each share of Class A common stock. The Class B common
stock automatically ceases to have any voting rights, other than as required by
law, at any time that Onex Corporation, J2R Corporation and certain stockholders
affiliated with Hidden Creek Industries, in the aggregate, do not beneficially
own at least 10% of the total outstanding shares of common stock. As of June 30,
1999, these stockholders collectively owned approximately 19% of the total
outstanding shares of common stock. The Class B common stock is convertible at
the option of the holder, and mandatorily convertible upon any transfer of the
Class B common stock while it still has ten votes per share (except to
affiliates), into Class A common stock on a share-for-share basis. The Class B
common stock is not registered under the Exchange Act and is not listed for
trading on any national securities exchange or on the Nasdaq Stock Market.
PREFERRED STOCK
The Dura board may, without further action by Dura's stockholders, from time
to time, direct the issuance of shares of preferred stock in series and may, at
the time of issuance, determine the rights, preferences and limitations of each
series. Satisfaction of any dividend preferences of outstanding shares of
preferred stock would reduce the amount of funds available for the payment of
dividends on shares of Class A common stock. Holders of shares of preferred
stock may be entitled to receive a preference payment in the event of any
liquidation, dissolution or winding-up of Dura before any payment is made to the
holders of shares of Class A common stock. Under certain circumstances, the
issuance of shares of preferred stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control by
a holder of a large block of Dura's securities or the removal of incumbent
management. Upon the affirmative vote of a majority of the total number of
directors then in office, the Dura board, without stockholder approval, may
issue shares of preferred stock with voting and conversion rights which could
adversely affect the holders of shares of Class A common stock. There are no
shares of preferred stock outstanding, and Dura has no present intention to
issue any shares of preferred stock. The affirmative vote of two-thirds of the
Dura board is required to issue any preferred stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A common stock is Firstar
Bank Milwaukee, N.A.
81
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
GENERAL. In connection with the Acquisitions, Dura Operating Corp. ("DOC"),
DASI and various direct and indirect wholly owned subsidiaries of DASI (the
"Borrowers"), entered into the new credit facility with Bank of America National
Trust and Savings Association ("Bank of America") and certain other lenders. The
new credit facility provides for aggregate borrowings by Dura of approximately
$1,150 million. As of March 31, 1999, there was $825.0 million of outstanding
indebtedness under the new credit facility and $250.0 million available under
the new credit facility for working capital and other corporate purposes.
The new credit facility includes (a) a $200.0 million interim term loan, (b)
a $275.0 million tranche A term loan, (c) a $275.0 million tranche B term loan
and (d) a $400.0 million revolving credit facility. The net proceeds from the
notes offering were used to repay to interim term loan.
INTEREST. Amounts outstanding under the new credit facility bear interest,
at Dura's option, at a rate per annum equal to either: (1) the Eurocurrency
interbank offered rate (the "Eurocurrency Rate") or (2) the alternate base rate,
in each case, plus an applicable margin. The "alternate base rate" is defined as
the higher of (x) Bank of America's reference rate, and (y) 0.50% per annum over
the federal funds rate. The applicable margin for the tranche A term loan and
the revolving credit facility is initially 2.25% for Eurocurrency Rate loans and
0.75% for alternate base rate loans. The applicable margin for tranche A term
loans and the revolving credit facility adjusts according to a performance
pricing grid based on Dura's ratio of senior indebtedness to EBITDA, ranging
from (1) for Eurocurrency loans, 2.25% to 1.50% and (2) for alternate base rate
loans, 0.75% to 0.00%. The applicable margin for the interim term loan is fixed
at 2.25% for Eurocurrency loans and 0.75% for alternate base rate loans. The
applicable margin for the tranche B term loan is fixed at 2.50% for Eurocurrency
loans and 1.00% for alternate base rate loans. As of March 31, 1999, Dura's
borrowings under the new credit facility bore interest at rates ranging from
5.28% to 10.00%.
MATURITY. Borrowings under the tranche A term loan are due and payable in
March 2005 and borrowings under the tranche B term loan are due and payable in
March 2006. The revolving credit facility is available until March 2005.
SECURITY AND GUARANTIES. The new credit facility is secured by a first
priority security interest in all existing and after-acquired tangible and
intangible assets of the Borrowers and their material subsidiaries, including,
without limitation, intellectual property, real property, all of the capital
stock owned by the Borrowers and each of their material subsidiaries and any
inter-company debt obligations (with exceptions for certain foreign
subsidiaries). All of the Borrowers' obligations under the new credit facility
are fully and unconditionally guaranteed by DASI and all of DOC's material
subsidiaries (with exceptions for certain foreign subsidiaries).
COVENANTS. The new credit facility requires Dura to meet certain financial
tests, including, without limitation, maximum levels of senior debt as a ratio
to EBITDA, minimum interest coverage, total debt as a ratio of EBITDA and net
worth. The new credit facility contains certain covenants which, among other
things, limit the incurrence of additional indebtedness, investments, dividends,
transactions with affiliates, asset sales, acquisitions, mergers and
consolidations, payments of certain other indebtedness, liens and encumbrances.
EVENTS OF DEFAULT. The new credit facility contains customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, cross-defaults to certain
other indebtedness (including the notes), certain events of bankruptcy and
insolvency, judgment defaults, failure of any guaranty or security document
supporting the new credit facility to be in full force and effect and a change
of control of Dura.
82
<PAGE>
9% SENIOR SUBORDINATED NOTES
DOC issued $300,000,000 aggregate principal amount of 9% senior subordinated
notes ("dollar notes") pursuant to an Indenture, dated as of April 22, 1999 (the
"Dollar Notes Indenture"), by and among DOC, DASI, the subsidiaries of DOC named
therein and U.S. Bank Trust National Association, as trustee (the "Trustee") and
issued [EURO]100,000,000 aggregate principal amount of 9% senior subordinated
notes (the "euro notes" and together with the dollar notes, the "notes")
pursuant to an Indenture, dated as of April 22, 1999 (the "Euro Notes Indenture"
and, together with the Dollar Notes Indenture, the "Indentures"), by and among
DOC, DASI, the subsidiaries of DOC named therein and the Trustee. The dollar
notes are limited in aggregate principal amount to $350,000,000 and the euro
notes are limited in aggregate principal amount of [EURO]150,000,000. The notes
have a scheduled maturity of May 1, 2004. Interest on the notes accrues at the
rate of 9% per annum and is payable semiannually in cash on each May 1 and
November 1, to the persons who are registered holders of the notes at the close
of business on April 15 and October 15, respectively, immediately preceding the
applicable interest payment date. The notes are not entitled to the benefit of
any mandatory sinking fund.
The notes are senior subordinated debt of DOC. Accordingly, they rank:
- behind all of the senior debt of DOC.
- equally with all existing and future subordinated, unsecured debt of DOC
that does not expressly provide that it is subordinated to the notes.
- ahead of all future debt of DOC that expressly provides that it is
subordinated to the notes.
- behind all of the liabilities of DOC's foreign subsidiaries.
The notes are unconditionally guaranteed on a senior subordinated basis by
DASI and by each material existing domestic subsidiary of DOC.
The notes are redeemable, at our option, in whole or in part from time to
time, on and after May 1, 2004, upon not less than 30 nor more than 60 days'
notice, at the following redemption prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period commencing
on May 1 of the year set forth below, plus, in each case, accrued interest to
the date of redemption:
<TABLE>
<CAPTION>
PERCENTAGE
-----------
<S> <C>
2004................................ 104.50%
2005................................ 103.00
2006................................ 101.50
2007 and thereafter................. 100.00
</TABLE>
At any time, or from time to time, on or prior to May 1, 2002, we may, at
our option, use the net cash proceeds of one or more equity offerings to redeem
up to 35% of the aggregate principal amount of dollar notes and up to 35% of the
aggregate principal amount of the euro notes originally issued at a redemption
price equal to 109% of the principal amount thereof plus accrued and unpaid
interest thereon, if any, to the date of such redemption; PROVIDED that at least
65% of the dollar notes and at least 65% of the euro notes originally issued
remain outstanding immediately after any such redemption.
The Indentures provide that, upon the occurrence of a change of control (as
defined below), each holder will have the right to require that DOC purchase all
or a portion of their notes, at a purchase price equal to 101% of the principal
amount thereof plus accrued interest thereon to the date of purchase. "Change of
control" is defined under the Indentures to include one or more of the following
events:
83
<PAGE>
- the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties or
assets of DOC and its restricted subsidiaries taken as a whole to any
"person" other than a principal or a related party of a principal (each as
defined in the Indentures);
- the adoption of a plan relating to the liquidation or dissolution of DOC;
- the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person," other
than the principals and their Related Parties, becomes the beneficial
owner, directly or indirectly, of more than 50% of the voting stock of
DOC, measured by voting power rather than number of shares;
- the first day on which a majority of the members of the Board of Directors
of DOC are not continuing directors;
- the first day on which DASI ceases to own 100% of the outstanding Equity
Interests of DOC; or
- DOC consolidates with, or merges with or into, any person, or any person
consolidates with, or merges with or into, DOC, in any such event pursuant
to a transaction in which any of the outstanding voting stock of DOC of
such other person is converted into or exchanged for cash, securities or
other property, other than any such transaction where the voting stock of
DOC outstanding immediately prior to such transaction is converted into or
exchanged for voting stock (other than disqualified stock) of the
surviving or transferee person constituting a majority of the outstanding
shares of such voting stock of such surviving or transferee person
(immediately after giving effect to such issuance).
The following events are defined in the Indentures as "Events of Default":
- default for 30 days in the payment when due of interest on, or liquidated
damages with respect to, any Notes whether or not prohibited by the
subordination provisions of the Indentures;
- default in payment when due of the principal of, or premium, if any, on
the notes whether or not prohibited by the subordination provisions of the
Indentures;
- failure by DOC or any of its restricted subsidiaries to comply with the
covenants described under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets;"
- default under any mortgage, indenture or instrument under which there is
issued and outstanding any Indebtedness for money borrowed by DOC or any
of it restricted subsidiaries (or the payment of which is guaranteed by
DOC or any of its restricted subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the dates of the Indentures, if
that default:
(a) is caused by a failure to pay principal of, or interest or premium, if
any, on such Indebtedness prior to the expiration of the grace period
provided in such indebtedness on the date of such default (a "Payment
Default"); or
(b) results in the acceleration of such indebtedness prior to its express
maturity, and, in each case, the principal amount of any such
indebtedness, together with the principal amount of any other such
Indebtedness the maturity of which has been so accelerated, aggregates
$20.0 million or more;
- failure by DOC or any of its restricted subsidiaries to pay final
judgements aggregating in excess of $20.0 million, which judgements are
not paid, vacated, discharged, stayed or non-appealable for a period of 60
days, and in the event such judgment is covered by insurance, an
enforcement proceeding has been commenced by any creditor upon such
judgement or decree which is not promptly stayed;
84
<PAGE>
- except as permitted by the Indentures, any guaranty shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any guarantor, or any person
acting on behalf of any guarantor, shall deny or disaffirm its obligations
under its subsidiary guaranty or DASI, or any person acting on behalf of
DASI, shall deny or disaffirm its obligations under the parent guaranty;
and
- certain events of bankruptcy or insolvency with respect to DASI, DOC or
any of its significant subsidiaries.
The Indentures contain certain covenants for the benefit of the holders of
the notes that, among other things, limit DOC's ability and any of its
restricted subsidiaries to:
- enter into certain transactions with affiliates;
- pay dividends or make certain other restricted payments;
- consummate certain asset sales;
- enter into certain transactions with affiliates;
- incur indebtedness that is senior in right of payment to the notes;
- incur liens;
- impose restrictions on the ability of a subsidiary to pay dividends or
make certain payments to DOC and its subsidiaries;
- merge or consolidate with any other person; or
- sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of DOC.
The foregoing summary of the material provisions of the Indentures is
qualified in its entirety by reference to all of the provisions of the
Indentures, which have been filed as an exhibit to the registration statement,
of which this prospectus forms a part. See "Where You Can Find More
Information."
85
<PAGE>
PLAN OF DISTRIBUTION
Dura is registering the shares on behalf of the Selling Stockholders. As
used herein, "Selling Stockholders" includes donees, pledgees, transferees or
other successors in interest selling shares received from a named Selling
Stockholder after the date of this prospectus. All costs, expenses and fees in
connection with the registration of the shares offered hereby will be borne by
Dura. Brokerage commissions and similar selling expenses, if any, attributable
to the sale of shares will be borne by the Selling Stockholders. Sales of shares
may be effected by Selling Stockholders from time to time on the Nasdaq, in the
over-the-counter market, in privately negotiated transactions, or otherwise. The
shares may be sold by the Selling Stockholders by one or more of the following
methods, without limitation:
- block trades in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of such exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- privately negotiated transactions;
- short sales;
- through the writing of options on the shares;
- in one or more underwritten offerings on a firm commitment or best effort
basis; and
- a combination of any such methods of sale.
The shares may be sold at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such market prices or at
negotiated prices. Such transactions may or may not involve brokers or dealers.
The Selling Stockholders have not advised Dura that they have entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The Selling Stockholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
In effecting sales, brokers and dealers engaged by the Selling Stockholders
may arrange for other brokers or dealers to participate. Broker-dealers may
agree with the Selling Stockholders to sell a specified number of such shares at
a stipulated price per share. To the extent such broker-dealer is unable to do
so acting as agent for a Selling Stockholder, to purchase as principal any
unsold shares at the stipulated price. Broker-dealers who acquire shares as
principals may thereafter resell such shares from time to time in transactions
on Nasdaq at prices and on terms then prevailing at the time of sale, at prices
related to the then-current market price or in negotiated transactions.
Broker-dealers may use block transactions and sales to and through
broker-dealers, including transactions of the nature described above.
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them. The pledgees, secured parties or persons to whom such securities have been
hypothecated will, upon foreclosure in the event of default, be deemed to be
Selling Stockholders. The number of a Selling Stockholder's shares offered under
this
86
<PAGE>
prospectus will decrease as and when it takes such actions. The plan of
distribution for such Selling Stockholder's shares will otherwise remain
unchanged. In addition, a Selling Stockholder may, from time to time, sell short
the common stock of Dura, and in such instances, this prospectus may be
delivered in connection with such short sales and the shares offered under this
prospectus may be used to cover such short sales.
A Selling Stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the common
stock of Dura in the course of hedging the positions they assume with such
Selling Stockholder, including, without limitation, in connection with
distributions of the common stock by such broker-dealers. A Selling Stockholder
may enter into option or other transactions with broker-dealers. A Selling
Stockholder may enter into option or other transactions with broker-dealers that
involve the delivery of the shares offered hereby to the broker-dealers, who may
then resell or otherwise transfer such shares. A Selling Stockholder may also
loan or pledge the shares offered hereby to a broker-dealer, and the
broker-dealer may sell the shares offered hereby so loaned or upon a default may
sell or otherwise transfer the pledged shares offered hereby.
The Selling Stockholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. Dura has agreed to indemnify each Selling Stockholder
against certain liabilities, including liabilities arising under the Securities
Act. The Selling Stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares
against certain liabilities, including liabilities arising under the Securities
Act.
The Selling Stockholders will be subject to the prospectus delivery
requirements of the Securities Act with respect to sales of shares through this
prospectus. Dura intends to inform the Selling Stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
Selling Stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they conform to the requirements of such Rule.
Upon Dura being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
- the name of each such selling stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus; and
- other facts material to the transaction.
In addition, upon Dura's being notified by a Selling Stockholder that a
donee, pledgee, transferee or other successor in interest intends to sell more
than 500 shares, a supplement to this prospectus will be filed.
87
<PAGE>
LEGAL MATTERS
The validity of the shares of Class A common stock offered hereby will be
passed upon on behalf of Dura by Kirkland & Ellis (a partnership that includes
professional corporations), Chicago, Illinois.
EXPERTS
The consolidated financial statements of Dura as of December 31, 1997 and
1998 and for each of the three years in the period ended December 31, 1998
included in this prospectus, the consolidated financial statements of Excel as
of December 27, 1997 and January 2, 1999 and for each of the three years in the
period ended January 2, 1999 included in this prospectus and the consolidated
financial statements of Trident as of March 31, 1998 and December 31, 1998 and
for the period from inception (September 19, 1997) to March 31, 1998, the
one-month period ended April 30, 1998 and the eight-month period ended December
31, 1998, each included in this prospectus, were audited by Arthur Andersen LLP,
independent public accountants, as set forth in its reports thereon, included
herein, and are included herein in reliance upon the authority of said firm as
an expert in auditing and accounting.
The consolidated financial statements of Adwest as of June 30, 1997 and 1998
and for each of the three years in the period ended June 30, 1998 included in
this prospectus have been audited by KPMG Audit Plc, independent certified
public accountants. Such financial statements have been included in reliance
upon the report of KPMG Audit Plc.
WHERE YOU CAN FIND MORE INFORMATION
Dura has filed a registration statement on Form S-1 regarding the shares of
Class A common stock being offered hereby with the SEC. This prospectus does not
contain all of the information included in the registration statement. Any
statement made in this prospectus concerning the contents of any other document
is not necessarily complete. If we have filed any other document as an exhibit
to the registration statement, you should read the exhibit for a more complete
understanding of the document or matter. Each statement regarding any other
document does not necessarily contain all of the information important to you.
Dura is subject to the information requirements of the Exchange Act (SEC
File No. 0-21139), and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial statements and other matters. Prior to its acquisition by Dura, Excel
was also subject to the information requirements of the Exchange Act (SEC File
No. 1-8684). The reports, proxy statements and other information filed by Dura
and Excel may be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and should be available for inspection and copying at the
regional offices of the SEC located at 7 World Trade Center, Suite 1375, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates by
writing to the SEC Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549 (telephone number: 1-800-SEC-0330). The SEC also maintains a Web site
that contains reports, proxy statements and other information regarding
registrants that file electronically with the SEC. The address of such site is
http://www.sec.gov. Such material relating to Dura can also be inspected at the
reading room of the library of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., 2(nd) Floor, Washington, D.C. 20006.
88
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
DURA AUTOMOTIVE SYSTEMS, INC.
Report of Independent Public Accountants............................................................... F-3
Consolidated Balance Sheets as of December 31, 1997 and 1998........................................... F-4
Consolidated Statements of Operations for the Years Ended December 31,
1996, 1997 and 1998.................................................................................. F-5
Consolidated Statements of Stockholders' Investment for the Years Ended December 31,
1996, 1997 and 1998.................................................................................. F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998............. F-7
Notes to Consolidated Financial Statements............................................................. F-8
Condensed Consolidated Balance Sheets at December 31, 1998 and March 31, 1999 (unaudited).............. F-36
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 1998 and 1999
(unaudited).......................................................................................... F-37
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1999
(unaudited).......................................................................................... F-38
Notes to Condensed Consolidated Financial Statements (unaudited)....................................... F-39
TRIDENT AUTOMOTIVE PLC.
Report of Independent Public Accountants............................................................... F-50
Consolidated Balance Sheets as of December 31, 1998 and March 31, 1998................................. F-51
Consolidated Statements of Operations for the eight-month period ended December 31, 1998, the one-month
period ended April 30, 1998, and the period from inception (September 19, 1997) to March 31, 1998.... F-52
Consolidated Statements of Shareholders' Equity for the eight-month period ended December 31, 1998, the
one-month period ended April 30, 1998, and the period from inception (September 19, 1997) to March
31, 1998............................................................................................. F-53
Consolidated Statements of Cash Flows for the eight-month period ended December 31, 1998, the one-month
period ended April 30, 1998, and the period from inception (September 19, 1997) to March 31, 1998.... F-54
Notes to Consolidated Financial Statements............................................................. F-55
Condensed Consolidated Balance Sheets at December 31, 1998 and March 31, 1999 (unaudited).............. F-78
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 1998 and 1999
(unaudited).......................................................................................... F-79
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1999
(unaudited).......................................................................................... F-80
Notes to Condensed Consolidated Financial Statements (unaudited)....................................... F-81
EXCEL INDUSTRIES, INC.
Report of Independent Public Accountants............................................................... F-91
Consolidated Balance Sheet as of December 27, 1997 and January 2, 1999................................. F-92
Consolidated Statement of Income for the Years Ended December 28, 1996,
December 27, 1997 and January 2, 1999................................................................ F-93
Consolidated Statements of Cash Flows for the Years Ended December 28, 1996, December 27, 1997 and
January 2, 1999...................................................................................... F-94
Consolidated Statements of Shareholders' Equity for the Years Ended December 28, 1996, December 27,
1997 and January 2, 1999............................................................................. F-95
Notes to Consolidated Financial Statements............................................................. F-96
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
ADWEST AUTOMOTIVE PLC
Independent Auditors' Report........................................................................... F-123
Consolidated Profit and Loss Account for the Years Ended June 30, 1996, 1997 and 1998.................. F-124
Consolidated Balance Sheet as of June 30, 1997 and 1998................................................ F-125
Consolidated Cash Flow Statement for the Years Ended June 30, 1996, 1997 and 1998...................... F-126
Statements of Consolidated Recognised Gains and Losses for the Years Ended June 30,
1996, 1997 and 1998.................................................................................. F-128
Reconciliation of Movements in Shareholders' Funds..................................................... F-128
Notes to the Accounts.................................................................................. F-129
Unaudited Interim Consolidated Profit and Loss Account for the Six Month Periods Ending December 31,
1997 and 1998........................................................................................ F-155
Unaudited Interim Consolidated Balance Sheet as of December 31, 1998................................... F-156
Unaudited Interim Consolidated Cash Flow Statement for the Six Month Periods Ending December 31, 1997
and 1998............................................................................................. F-157
Unaudited Interim Reconciliation of Movements in Shareholders' Funds for the Six Month Period Ending
December 31, 1997 and 1998........................................................................... F-158
Unaudited Interim Analysis of Net Debt at July 1, 1998 and December 31, 1998........................... F-159
Unaudited Interim Segmental Information for the Six Month Period Ending December 31, 1997 and 1998..... F-160
Notes to the Accounts (Unaudited)...................................................................... F-161
</TABLE>
F-2
<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, 1997 and 1998 and the related consolidated statements of
operations, stockholders' investment and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our 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, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
January 29, 1999
F-3
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1998
---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents............................................................... $ 4,148 $ 20,544
Accounts receivable, net of reserve for doubtful accounts of $1,953 and $4,150.......... 79,032 158,465
Inventories............................................................................. 30,301 50,498
Other current assets.................................................................... 24,800 45,924
---------- ----------
Total current assets.................................................................. 138,281 275,431
---------- ----------
Property, Plant and Equipment:
Land and buildings...................................................................... 44,553 71,489
Machinery and equipment................................................................. 73,892 144,931
Construction in progress................................................................ 6,616 10,899
Less--accumulated depreciation.......................................................... (23,523) (38,587)
---------- ----------
Net property, plant and equipment..................................................... 101,538 188,732
---------- ----------
Goodwill, net of accumulated amortization of $5,653 and $13,926........................... 160,063 435,960
Other Assets, net of accumulated amortization of $918 and $2,419.......................... 19,382 29,260
---------- ----------
$ 419,264 $ 929,383
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable........................................................................ $ 49,153 $ 99,512
Accrued liabilities..................................................................... 36,583 96,664
Current maturities of long-term debt.................................................... 2,241 15,489
---------- ----------
Total current liabilities............................................................. 87,977 211,665
---------- ----------
Long-Term Debt, net of current maturities................................................. 178,081 316,417
Other Noncurrent Liabilities.............................................................. 51,498 108,014
---------- ----------
Total liabilities..................................................................... 317,556 636,096
---------- ----------
Commitments and Contingencies (Notes 3, 9 and 10)
Mandatorily Redeemable Convertible Trust Preferred Securities............................. -- 55,250
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; 4,161,657 and
9,029,085 shares issued and outstanding............................................... 42 90
Common stock, Class B; par value $.01; 10,000,000 shares authorized; 4,654,380 and
3,325,303 shares issued and outstanding............................................... 46 33
Additional paid-in capital.............................................................. 63,402 171,377
Retained earnings....................................................................... 41,028 67,052
Accumulated other comprehensive loss--cumulative translation adjustment................. (2,810) (515)
---------- ----------
Total stockholders' investment........................................................ 101,708 238,037
---------- ----------
$ 419,264 $ 929,383
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1996 1997 1998
---------- ---------- ----------
Revenues..................................................................... $ 245,329 $ 449,111 $ 739,467
Cost of sales................................................................ 207,810 375,086 608,518
---------- ---------- ----------
Gross profit............................................................... 37,519 74,025 130,949
Selling, general and administrative expenses................................. 17,157 32,815 49,825
Amortization expense......................................................... 1,036 3,600 9,868
---------- ---------- ----------
Operating income........................................................... 19,326 37,610 71,256
Interest expense, net........................................................ 2,589 9,298 20,267
---------- ---------- ----------
Income before provision for income taxes, equity in losses of affiliate and
minority interest........................................................ 16,737 28,312 50,989
Provision for income taxes................................................... 6,609 11,670 20,933
Equity in losses of affiliate................................................ -- -- 1,481
Minority interest--dividend on trust preferred securities, net............... -- -- 1,908
---------- ---------- ----------
Income before extraordinary item........................................... 10,128 16,642 26,667
Extraordinary item--loss on early extinguishment of debt, net................ -- -- 643
---------- ---------- ----------
Net income............................................................... $ 10,128 $ 16,642 $ 26,024
---------- ---------- ----------
---------- ---------- ----------
Basic earnings per share:
Income before extraordinary item........................................... $ 1.57 $ 1.89 $ 2.49
Extraordinary item......................................................... -- -- (0.06)
---------- ---------- ----------
Net income............................................................... $ 1.57 $ 1.89 $ 2.43
---------- ---------- ----------
---------- ---------- ----------
Diluted earnings per share:
Income before extraordinary item........................................... $ 1.57 $ 1.88 $ 2.42
Extraordinary item......................................................... -- -- (0.05)
---------- ---------- ----------
Net income............................................................... $ 1.57 $ 1.88 $ 2.37
---------- ---------- ----------
---------- ---------- ----------
</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 STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------
CLASS A CLASS B ADDITIONAL
---------------------- ----------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
--------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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) -- --
Net income........................................... -- -- -- -- -- 16,642
Other comprehensive income--foreign currency
translation adjustment............................. -- -- -- -- -- --
Total comprehensive income...........................
--------- --- ---------- --- ----------- -----------
BALANCE, December 31, 1997............................. 4,161,657 42 4,654,380 46 63,402 41,028
Sale of stock under Employee Stock Discount Purchase
Plan............................................... 25,651 -- -- -- 512 --
Exercise of options.................................. 5,700 -- 7,000 -- 97 --
Collection of common stock subscriptions receivable.. -- -- -- -- 45 --
Public offering of Class A common stock, net......... 3,500,000 35 -- -- 107,321 --
Conversion from Class B to Class A................... 1,336,077 13 (1,336,077) (13) -- --
Net income........................................... -- -- -- -- -- 26,024
Other comprehensive income--foreign currency
translation adjustment............................. -- -- -- -- -- --
Total comprehensive income...........................
--------- --- ---------- --- ----------- -----------
BALANCE, December 31, 1998............................. 9,029,085 $ 90 3,325,303 $ 33 $ 171,377 $ 67,052
--------- --- ---------- --- ----------- -----------
--------- --- ---------- --- ----------- -----------
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE STOCKHOLDERS'
LOSS INVESTMENT
--------------- ------------
<S> <C> <C>
BALANCE, December 31, 1995............................. $ -- $ 27,683
Initial public offering of common stock, net......... -- 49,575
Repurchase of common stock, net...................... -- (19)
Net income........................................... -- 10,128
------ ------------
BALANCE, December 31, 1996............................. -- 87,367
Sale of stock under Employee Stock Discount Purchase
Plan............................................... -- 383
Exercise of options.................................. -- 85
Collection of common stock subscriptions receivable.. -- 41
Conversion from Class B to Class A................... -- --
Net income........................................... --
Other comprehensive income--foreign currency
translation adjustment............................. (2,810)
Total comprehensive income........................... 13,832
------ ------------
BALANCE, December 31, 1997............................. (2,810) 101,708
Sale of stock under Employee Stock Discount Purchase
Plan............................................... -- 512
Exercise of options.................................. -- 97
Collection of common stock subscriptions receivable.. -- 45
Public offering of Class A common stock, net......... -- 107,356
Conversion from Class B to Class A................... -- --
Net income........................................... --
Other comprehensive income--foreign currency
translation adjustment............................. 2,295
Total comprehensive income........................... 28,319
------ ------------
BALANCE, December 31, 1998............................. $ (515) $ 238,037
------ ------------
------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................................ $ 10,128 $ 16,642 $ 26,024
Adjustments required to reconcile net income to net cash provided by
operating activities--
Depreciation and amortization........................................... 6,079 12,303 27,571
Deferred income tax provision........................................... 3,331 1,521 7,833
Extraordinary loss on extinguishment of debt............................ -- -- 643
Other................................................................... -- -- (315)
Equity in losses of affiliates.......................................... -- -- 1,481
Change in other operating items:
Accounts receivable................................................... (2,248) (12,841) (13,536)
Inventories........................................................... 458 2,512 (905)
Other current assets.................................................. 3,038 (7,803) (7,631)
Accounts payable and accrued liabilities.............................. (994) 3,479 8,203
Other assets and liabilities.......................................... -- (7,297) (41,681)
---------- ----------- -----------
Net cash provided by operating activities........................... 19,792 8,516 7,687
---------- ----------- -----------
INVESTING ACTIVITIES:
Capital expenditures, net................................................. (6,260) (16,242) (31,822)
Acquisitions, net......................................................... (83,850) (70,481) (135,712)
Investments in joint ventures and other................................... (4,983) (6,663) --
---------- ----------- -----------
Net cash used in investing activities............................... (95,093) (93,386) (167,534)
---------- ----------- -----------
FINANCING ACTIVITIES:
Borrowings under revolving credit facilities.............................. 145,500 267,987 417,267
Repayments of revolving credit facilities................................. (68,500) (174,869) (385,052)
Long-term borrowings...................................................... -- -- 100,265
Repayments of long-term borrowings........................................ (51,320) (6,008) (116,351)
Proceeds from stock offering, net......................................... 49,575 -- 107,848
Proceeds from issuance of preferred securities............................ -- -- 52,525
Sale (repurchase) of common stock, net.................................... (19) 510 118
---------- ----------- -----------
Net cash provided by financing activities........................... 75,236 87,620 176,620
---------- ----------- -----------
EFFECT OF EXCHANGE RATES ON CASH............................................ -- (269) (377)
---------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS..................................... (65) 2,481 16,396
CASH AND CASH EQUIVALENTS, beginning of period.............................. 1,732 1,667 4,148
---------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period.................................... $ 1,667 $ 4,148 $ 20,544
---------- ----------- -----------
---------- ----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for--
Interest................................................................ $ 3,195 $ 8,715 $ 24,941
---------- ----------- -----------
---------- ----------- -----------
Income taxes............................................................ $ 2,087 $ 5,589 $ 11,446
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<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 engineered mechanisms for the global automotive industry. The
Company has manufacturing facilities located in Indiana, Michigan, Missouri,
Tennessee, Australia, Brazil, Canada, France, Germany, Mexico, Spain, and the
United Kingdom.
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,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Raw materials........................................................... $ 15,562 $ 23,067
Work-in-process......................................................... 9,126 11,155
Finished goods.......................................................... 5,613 16,276
--------- ---------
$ 30,301 $ 50,498
--------- ---------
--------- ---------
</TABLE>
OTHER CURRENT ASSETS:
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Excess of cost over billings on uncompleted tooling projects............ $ 12,603 $ 20,640
Deferred income taxes................................................... 9,350 14,023
Prepaid expenses........................................................ 2,847 11,261
--------- ---------
$ 24,800 $ 45,924
--------- ---------
--------- ---------
</TABLE>
F-8
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Excess of cost over billings on uncompleted tooling projects represents
costs incurred by the Company in the production of customer-owned tooling to be
used by the Company in the manufacture of its products. The Company receives a
specific purchase order for this tooling and is reimbursed by the customer
within one operating cycle. Costs are deferred until reimbursed by the customer.
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:
<TABLE>
<S> <C>
20 to 30
Buildings.................................................... years
Machinery and equipment...................................... 3 to 20 years
</TABLE>
Accelerated depreciation methods are used for tax reporting purposes.
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements which extend the useful life of the item are
capitalized and depreciated. The cost and accumulated depreciation of property,
plant and equipment retired or otherwise disposed of are removed from the
related accounts, and any residual values are charged or credited to income.
GOODWILL AND 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 debt financing costs which are being
amortized over the term of the applicable agreement, and the Company's net
investment in its joint ventures.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of the
remaining balance of its goodwill and other long-lived assets. If such events or
circumstances were to indicate that the carrying amount of these assets would
not be recoverable, the Company would estimate the future cash flows expected to
result from the use of the assets and their eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) were
less than the carrying amount of goodwill and other long-lived assets, 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
estimated life of the related tool. Amounts capitalized and included in other
assets were $4.2 million at December 31, 1997 and $5.1 million at December 31,
1998. If the Company forecasts that the amount of capitalized tooling and design
costs exceeds the amount to be realized through the sale of product, a loss is
recognized currently. Research and development and start-up costs, which are not
material, are expensed as incurred.
F-9
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Plant closure and consolidation costs................................... $ 4,210 $ 34,801
Compensation and benefits............................................... 11,284 21,557
Medical insurance....................................................... 8,036 11,057
Legal and environmental................................................. 2,265 4,752
Interest................................................................ 957 3,785
Loss contracts.......................................................... 1,951 2,721
Other................................................................... 7,880 17,991
--------- ---------
$ 36,583 $ 96,664
--------- ---------
--------- ---------
</TABLE>
OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1998
--------- ----------
<S> <C> <C>
Plant closure and consolidation costs.................................. $ 23,724 $ 46,154
Loss contracts......................................................... 11,371 16,557
Post-retirement medical benefits....................................... 7,188 16,533
Legal and environmental................................................ 7,496 14,673
Deferred income taxes.................................................. -- 8,652
Other.................................................................. 1,719 5,445
--------- ----------
$ 51,498 $ 108,014
--------- ----------
--------- ----------
</TABLE>
REVENUE RECOGNITION AND SALES COMMITMENTS:
The Company recognizes revenue as its products are shipped to its customers.
The Company enters into agreements with its customers at the beginning of a
given vehicle's life to produce products. Once such agreements are entered into
by the Company, fulfillment of the customers' purchasing requirements is the
obligation of the Company for the entire production life of the vehicle, with
terms of up to 7 years, and the Company has no provisions to terminate such
contracts. 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 and is recorded at the minimum amount necessary to fulfill the
Company's obligations to its customers.
F-10
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES:
The Company accounts for income taxes following the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, 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.
COMPREHENSIVE INCOME:
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." This statement established standards for
reporting and display of comprehensive income and its components. Comprehensive
income reflects the change in equity of a business enterprise during a period
from transactions and other events and circumstances from non-owner sources. For
the Company, comprehensive income represents net income adjusted for foreign
currency translation adjustments. In accordance with SFAS No. 130, the Company
has chosen to disclose comprehensive income in the consolidated statements of
stockholders' investment. Prior years have been restated to conform to SFAS No.
130 requirements.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and revolving credit facilities approximates fair value because
of the short maturity of these instruments. The carrying amount of the Company's
long-term debt approximates fair value because of the variability of the
interest cost associated with these instruments. The Notes were recorded at fair
value in connection with the acquisition of Trident Automotive plc in April 1998
(see Note 5) and the Company believes there has been no material change in the
estimated fair value since such date. The fair value of the Company's Preferred
Securities (see Note 4), based on Nasdaq market quote activity as of yearend,
approximated carrying value.
SEGMENT REPORTING:
In 1998, the Company adopted SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 supersedes SFAS No. 14
replacing the "industry segment" approach with the "management" approach. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS No. 131 did not affect results of operations or financial
position but did affect the disclosure of segment information (see Note 8).
COMMON STOCK:
The holder of each share of Class A common stock outstanding is entitled to
one vote per share and the holder of each share of Class B common stock
outstanding is entitled to ten votes per share.
F-11
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
STOCK OPTIONS:
The Company accounts for stock options under the provisions of Accounting
Principles Board Opinion ("APB") No. 25, under which no compensation expense is
recognized when the stock options are granted. The pro forma effects had the
Company followed the provisions of SFAS No. 123 are included in Note 3.
USE OF ESTIMATES:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The ultimate results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of the Company's foreign operations are translated
using the year-end rates of exchange. Results of operations are translated using
the average rates prevailing throughout the period. Translation gains or losses
are accumulated as a separate component of stockholders' investment.
RECLASSIFICATIONS:
Certain amounts previously reported in the 1996 and 1997 consolidated
financial statements have been reclassified to conform to the 1998 presentation.
The reclassifications had no effect on previously reported net income or
stockholders' investment.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective for
years beginning after June 15, 1999. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge criteria are met. Special accounting
for qualifying hedges allow a derivative's gains or losses to offset related
results on the hedged item in the statement of operations and requires that a
company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. The Company has not yet quantified
the impacts of adopting SFAS No. 133 and has not yet determined the timing of
adoption.
In April 1998, the Financial Accounting Standards Board issued Statement of
Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities,"
effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires
the expensing of start-up activities as incurred, versus capitalizing and
expensing them over a period of time. The Company is currently in the process of
assessing the impact of adopting SOP 98-5 and will adopt this new pronouncement
during 1999.
F-12
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' INVESTMENT:
PUBLIC OFFERING OF 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 "1996
Offering"). The Company received net proceeds of approximately $49.6 million
from the 1996 Offering. Net proceeds from the 1996 Offering were used to repay
certain outstanding indebtedness. Immediately prior to the completion of the
1996 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 1996 Offering, the Company had 8,793,254 shares of
common stock outstanding. In addition, the Company has options outstanding to
purchase 25,045 shares of Class B common stock at an exercise price of $1.45 per
share. The accompanying consolidated financial statements have been
retroactively restated to give effect to the recapitalization as if it had
occurred at the beginning of the earliest period presented.
On June 17, 1998, the Company completed a secondary offering of 3,100,000
shares of its Class A common stock at an offering price of $32.75 per share
("Offering"). Net proceeds to the Company, after underwriting discounts and
offering expenses, were approximately $95.0 million. Proceeds from the Offering
were used to retire outstanding indebtedness. Certain stockholders of the
Company converted 1,308,000 shares of Class B common stock of the Company into
Class A common stock and sold such Class A common stock concurrent with the
Offering. In addition, an employee of the Company exercised an option to acquire
5,000 shares of Class A common stock at an exercise price of $14.50 per share,
and sold such Class A shares concurrent with the Offering. On July 1, 1998, the
underwriters, pursuant to their over-allotment option, purchased an additional
400,000 Class A shares resulting in additional net proceeds of approximately
$12.4 million to the Company.
F-13
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' INVESTMENT: (CONTINUED)
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 (i) the effects of outstanding
stock options using the treasury stock method and (ii) the conversion of the
Preferred Securities from their date of issuance on March 20, 1998 as follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Net income............................................................. $ 10,128 $ 16,642 $ 26,024
Dividends on mandatorily redeemable convertible preferred securities,
net of tax........................................................... -- -- 1,908
--------- --------- ---------
Net income applicable to common stockholders........................... $ 10,128 $ 16,642 $ 27,932
--------- --------- ---------
--------- --------- ---------
Weighted average number of Class A common shares outstanding........... 1,434 3,907 6,763
Weighted average number of Class B common shares outstanding........... 5,000 4,901 3,945
--------- --------- ---------
6,434 8,808 10,708
Dilutive effect of outstanding stock options after application of the
treasury stock method................................................ 28 61 81
Dilutive effect of mandatorily redeemable convertible preferred
securities, assuming conversion...................................... -- -- 1,006
--------- --------- ---------
Diluted shares outstanding............................................. 6,462 8,869 11,795
--------- --------- ---------
--------- --------- ---------
Basic earnings per share............................................... $ 1.57 $ 1.89 $ 2.43
--------- --------- ---------
--------- --------- ---------
Diluted earnings per share............................................. $ 1.57 $ 1.88 $ 2.37
--------- --------- ---------
--------- --------- ---------
</TABLE>
STOCK OPTION PLAN:
During 1998, the board of directors approved the 1998 Stock Incentive Plan
(the "1998 Plan") subject to stockholder approval. Prior to consummation of the
1996 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 1998 Plan and 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 1998
Plan provides for the issuance of options at exercise prices equal to the stock
market price on the date of grant to Employee Participants covering up to
1,000,000 shares of Class A common stock of the Company plus any shares carried
over from the Stock Option Plan plus an annual
F-14
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' INVESTMENT: (CONTINUED)
increase, as defined in the 1998 Plan, subject to certain adjustments reflecting
changes in the Company's capitalization. Information regarding the option plans
is as follows:
<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE
UNDER EXERCISE EXERCISE
OPTION PRICE 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
Granted....................................................... 151,100 38.63 38.63
Granted....................................................... 589,600 29.00 29.00
Exercised..................................................... (5,700) 14.50-20.75 15.27
Forfeited..................................................... (46,875) 20.75-38.63 37.40
---------- -------------- -----------
Outstanding, December 31, 1998.................................. 1,004,798 $ 14.50-38.63 $ 27.57
---------- -------------- -----------
---------- -------------- -----------
</TABLE>
Of the outstanding options at December 31, 1998, options covering 179,623
shares are currently exercisable with a weighted average exercise price of
$18.39 per share.
The weighted average fair value of options granted was $8.92 during 1996,
$14.05 during 1997, and $16.61 during 1998.
As of December 31, 1998, the outstanding stock options granted in 1997 have
a remaining contractual life of 9 years and the outstanding stock options
granted in 1998 have a remaining contractual life of 10 years.
INDEPENDENT DIRECTOR STOCK OPTION PLAN:
Prior to consummation of the 1996 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, 1998, the Company had
granted options under the Director Option Plan to acquire 21,000 shares of the
Company's Class A common stock at an exercise price of $24.50 to $25.50 per
share. As of December 31, 1998, 12,000 of these options were exercisable.
F-15
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' INVESTMENT: (CONTINUED)
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN:
Prior to consummation of the 1996 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. Pursuant to this plan, 16,922 and 25,651
shares of Class A common stock were issued to employees during the years ended
December 31, 1997 and 1998, respectively. No shares were issued to employees
pursuant to this plan during 1996. The weighted average fair value of shares
sold in 1997 and 1998 was $22.63 and $25.94, respectively.
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 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,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C> <C>
Net income........................ As Reported--Basic $ 10,128 $ 16,642 $ 26,024
Pro Forma 10,093 16,504 25,530
As Reported--Diluted $ 10,128 $ 16,642 $ 27,932
Pro Forma 10,093 16,504 27,438
Basic earnings per share.......... As Reported $ 1.57 $ 1.89 $ 2.43
Pro Forma 1.57 1.87 2.38
Diluted earnings per share........ As Reported $ 1.57 $ 1.88 $ 2.37
Pro Forma 1.56 1.86 2.33
</TABLE>
The effect of the stock offered under the Employee Stock Purchase Plan was
not material for 1997 and 1998.
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, 5.7% to 6.5% in
1997 and 4.6% to 5.7% in 1998; expected life of seven years for 1996, 1997 and
1998; an average expected volatility of 50% in 1996, 39% in 1997 and 46% in
1998.
DIVIDENDS:
The Company has not declared or paid any cash dividends in the past. As
discussed in Note 6, the Company's debt agreement restricts the amount of
dividends the Company can declare or pay. As of December 31, 1998, under the
most restrictive debt covenants, the Company could not have paid any cash
dividends.
F-16
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. MANDATORILY REDEEMABLE CONVERTIBLE TRUST PREFERRED SECURITIES:
On March 20, 1998, Dura Automotive Systems Capital Trust (the "Issuer"), a
wholly owned statutory business trust of the Company, completed the offering of
$55.3 million of its 7 1/2% Convertible Trust Preferred Securities ("Preferred
Securities"), resulting in net proceeds to the Company of approximately $52.6
million. The Preferred Securities are redeemable, in whole or part, on or after
March 31, 2001 and all Preferred Securities must be redeemed no later than March
31, 2028. The Preferred Securities are convertible, at the option of the holder,
into Class A common stock of the Company at a rate of 0.5831 shares of Class A
common stock for each Preferred Security, which is equivalent to a conversion
price of $42 7/8 per share. The net proceeds of the offering were used to repay
outstanding indebtedness. Dividends on the Preferred Securities, net of the
related income tax benefit, are reflected as minority interest in the
accompanying consolidated statements of operations.
No separate financial statements of the Issuer have been included herein.
The Company does not consider that such financial statements would be material
to holders of Preferred Securities because (i) all of the voting securities of
the Issuer are owned, directly or indirectly, by the Company, a reporting
company under the Exchange Act, (ii) the Issuer has no independent operations
and exists for the sole purpose of issuing securities representing undivided
beneficial interests in the assets of the Issuer and investing the proceeds
thereof in 7 1/2% Convertible Subordinated Debentures due March 31, 2028 issued
by the Company, and (iii) the obligations of the Issuer under the Preferred
Securities are fully and unconditionally guaranteed by the Company.
5. ACQUISITIONS:
In August 1996, the Company formed a joint venture with Excel Industries
Inc. ("Excel") to participate equally in the acquisition of a 26% interest in
Pollone S.A. ("Pollone"), a manufacturer of automotive components and mechanical
assemblies headquartered in Brazil for $5 million in total, and has made
additional loans to Pollone of $10 million in total pursuant to notes which bear
interest at approximately 7% and mature from January 1999 through December 2001.
Certain of these notes are convertible into equity of Pollone, at the joint
venture's option. In January 1998, the joint venture exercised its option to
convert an additional $5 million of notes to common equity of Pollone,
increasing the joint venture's ownership to 51%, and as of such date, began
consolidating the results of Pollone into the results of the joint venture. The
Company accounts for its investment in the joint venture under the equity method
of accounting and recorded a charge for its share of the loss of the joint
venture's operations in 1998 of approximately $1.5 million. The joint venture
has an option to purchase an additional 19% of common equity of Pollone for
approximately $1.5 million. In addition, the joint venture partners have
guaranteed $6 million of outstanding debt of Pollone. The Company's total
investment in the joint venture of approximately $8.5 million as of December 31,
1998 is included in other assets in the accompanying consolidated balance sheet.
In January 1997, the Company acquired all of the outstanding common stock of
the VOFA Group ("VOFA") for approximately $38.0 million in cash and assumed
indebtedness. The cash portion of the purchase price was financed with
borrowings under the Company's bank credit agreement. In December 1998, the
Company made a final payment of approximately $6.0 million to the former owners
of VOFA for the achievement of certain operating targets by VOFA 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.
F-17
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACQUISITIONS: (CONTINUED)
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 $70.0 million.
Initial consideration for the acquisition of GT Automotive was $45.0 million in
cash and assumed indebtedness. In 1999, the Company will make a final payment of
approximately $11.0 million for the achievement of certain operating targets by
GT Automotive 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 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. Thixotech is currently pursuing the development of an alternative
manufacturing technology for component parts.
In December 1997, the Company acquired REOM Industries (Aust) Pty Ltd.
("REOM"), an Australian designer and manufacturer of jacks and parking brakes,
for approximately $3.7 million. The acquisition added market penetration in
parking brakes, added a new product (jacks) and established a presence in the
Pacific Rim.
In March 1998, the Company acquired Universal Tool & Stamping Co., Inc.
("Universal"), a manufacturer of jacks for the North American automotive
industry, for approximately $19.5 million. The acquisition provided the Company
with a market presence for jacks in North America and added Honda as a
significant new customer.
In April 1998, the Company acquired all of the outstanding equity interests
of Trident Automotive plc ("Trident"). Trident had revenues of approximately
$300.0 million in 1997, of which 69 percent was derived from sales of cable
assemblies, principally to the automotive OEM market, and the balance from door
handle assemblies, lighting and other products. Approximately 68 percent of
Trident's revenues were generated in North America, 27 percent in Europe and the
remainder in Latin America. Trident has manufacturing and technical facilities
in Michigan, Tennessee, Canada, the United Kingdom, Germany, France and Brazil.
Pursuant to the terms of the agreement, the Company acquired all of the
outstanding equity interests of Trident for total consideration of $93.2 million
in cash. In addition, the Company assumed $75.0 million of Trident's outstanding
10% Senior Subordinated Notes (the "Notes") due 2005. The Company also repaid
Trident's outstanding senior indebtedness of approximately $53.0 million. The
acquisition of Trident was financed with borrowings under a new credit facility
which is further described in Note 6.
In August 1998, the Company acquired the hinge business ("Hinge") of Tower
Automotive, Inc. for approximately $37.3 million. Hinge had annual revenues of
approximately $50.0 million and manufactures automotive hood and deck lid
hinges.
The acquisitions of the VOFA, GT Automotive, REOM, Universal, Trident, and
Hinge 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 Universal, Trident and Hinge have been recorded based upon
preliminary estimates of fair value as of the dates of acquisition. The
F-18
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACQUISITIONS: (CONTINUED)
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 in conjunction with the 1998 acquisitions included
approximately $45.4 million for costs associated with the shutdown and
consolidation of certain acquired facilities and $20.6 million for associated
severance and other related costs. At December 31, 1998 liabilities for
approximately $48.6 million for costs associated with the shutdown and
consolidation of certain acquired facilities and $32.4 million in severance
costs are recorded on the consolidated balance sheet. Results of operations for
these acquisitions have been included in the accompanying consolidated financial
statements since the dates of acquisition.
The accompanying unaudited consolidated pro forma results of operations for
the years ended December 31, 1997 and 1998 give effect to (i) the acquisitions
of GT Automotive, Universal, Trident and Hinge, (ii) the Offering, and (iii) the
offering of the Preferred Securities as if such transactions had occurred at the
beginning of the period and exclude the effects of the extraordinary loss (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
PRO FORMA
FOR YEARS ENDED
DECEMBER 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Revenues............................................................. $ 876,840 $ 886,849
Operating income..................................................... 63,811 75,830
Net income before extraordinary item................................. 21,806 26,996
Basic earnings per share............................................. $ 1.77 $ 2.19
Diluted earnings per share........................................... 1.77 2.15
</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.
6. DEBT:
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Bank Credit Agreement:
Term loans............................................................ $ -- $ 90,077
Revolving credit facilities........................................... -- 153,433
Trident 10% senior subordinated notes................................. -- 81,150
Revolving credit facility, due August 2002, interest at 3.94% to 8.50%
at December 31, 1997................................................ 165,158 --
Other................................................................. 15,164 7,246
---------- ----------
180,322 331,906
Less--Current maturities.............................................. (2,241) (15,489)
---------- ----------
$ 178,081 $ 316,417
---------- ----------
---------- ----------
</TABLE>
F-19
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. DEBT: (CONTINUED)
Future maturities of long-term debt as of December 31, 1998 are as follows
(in thousands):
<TABLE>
<S> <C>
1999.............................................................. $ 15,489
2000.............................................................. 16,324
2001.............................................................. 23,647
2002.............................................................. 26,289
2003.............................................................. 154,729
Thereafter........................................................ 95,428
---------
$ 331,906
---------
---------
</TABLE>
On April 30, 1998 in connection with the acquisition of Trident, the Company
entered into a new $402.5 million credit agreement ("Credit Agreement"). The
Credit Agreement provided for revolving credit facilities of $225.0 million,
term loans of $100.0 million, an acquisition facility of $30.0 million and a
twelve month interim loan of $47.5 million. Proceeds from the Offering were
partially used to retire the interim loan and $3.6 million of the term loans.
The Credit Agreement has a term of five years and borrowings bear interest at
the lenders reference rate or the Eurocurrency rate. The interest rate on
borrowings outstanding under the Credit Agreement ranged from 3.9% to 7.9% as of
December 31, 1998. The Credit Agreement contains various restrictive covenants
which limit indebtedness, investments, rental obligations and cash dividends.
The Credit Agreement also requires the Company to maintain certain financial
ratios including minimum liquidity and interest coverage. The Company was in
compliance with the covenants as of December 31, 1998. Borrowings under the
Credit Agreement are collateralized by the assets of the Company. In addition,
the Company has outstanding letters of credit in the amount of approximately
$1.9 million expiring through July 2000.
The Credit Agreement provides the Company with the ability to denominate a
portion of its revolving credit borrowings in foreign currencies up to an amount
equal to $100.0 million. As of December 31, 1998, $121.0 million of borrowings
were denominated in U.S. dollars, $7.1 million of borrowings were denominated in
Canadian dollars, $2.8 million of borrowings were denominated in Australian
dollars, $13.1 million of borrowings were denominated in Deutsche Marks, $4.7
million of borrowings were denominated in French francs, and $4.7 million in
British pound sterling.
The Notes, with a face value of $75 million, were issued by Trident on
December 12, 1997 and are due in December 2005. Interest is payable semiannually
on June 15 and December 15 of each year. The Notes are guaranteed by certain
subsidiaries of Trident. Each Guarantor is a direct or indirect wholly-owned
subsidiary of Trident and has fully and unconditionally guaranteed the Notes on
a joint and several basis. In connection with the acquisition of Trident, the
Notes were recorded at their fair value of $81.2 million. The premium in excess
of face value will be amortized over the life of the Notes using the effective
interest method. The Notes contain various restrictive covenants which the
Company was in compliance with as of December 31, 1998.
In connection with the termination of the Company's former credit facility,
the Company wrote-off deferred financing costs of approximately $643,000, net of
income taxes, in 1998. This charge is reflected as an extraordinary item in the
accompanying consolidated statement of operations.
F-20
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES:
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Current....................................................... $ 3,278 $ 10,149 $ 13,100
Deferred...................................................... 3,331 1,521 7,833
--------- --------- ---------
Total....................................................... $ 6,609 $ 11,670 $ 20,933
--------- --------- ---------
--------- --------- ---------
</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,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Federal provision at statutory rates.......................... $ 5,858 $ 9,909 $ 17,846
State taxes, net of federal benefit........................... 652 990 900
Foreign provision in excess of U.S. tax rate.................. -- 444 1,830
Amortization of non-deductible goodwill....................... 224 440 943
Foreign sales corporation benefit............................. (192) (260) (570)
Other, net.................................................... 67 147 (16)
--------- --------- ---------
Total....................................................... $ 6,609 $ 11,670 $ 20,933
--------- --------- ---------
--------- --------- ---------
</TABLE>
A summary of deferred tax assets (liabilities) is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Depreciation and property basis differences.............................. $ (4,100) $ (6,001)
Net operating loss carryforwards......................................... 1,475 5,620
Accrued compensation costs............................................... 1,230 3,077
Accrued plant closure and consolidation costs............................ 5,560 1,818
Tooling and design costs................................................. (1,480) (1,802)
Post-retirement benefit obligations...................................... 1,280 1,282
Inventory valuation adjustments.......................................... 1,330 1,025
Accrued legal and insurance costs........................................ 6,150 597
Other reserves and accruals not deductible for tax purposes.............. 568 1,671
Valuation allowance...................................................... (1,475) (1,916)
--------- ---------
$ 10,538 $ 5,371
--------- ---------
--------- ---------
</TABLE>
The valuation allowance was established for net operating losses acquired or
incurred in connection principally with foreign subsidiaries where realization
is not assured.
8. GEOGRAPHIC AND PRODUCT LINE INFORMATION:
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company manufactures engineered
mechanisms for the global automotive
F-21
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. GEOGRAPHIC AND PRODUCT LINE INFORMATION: (CONTINUED)
industry and operates in a single reportable business segment, automotive
products. The Company internally evaluates its business principally by product
category; however, because of the similar economic characteristics of the
operations, including the nature of products, production processes and
customers, those operations have been aggregated following the provisions of
SFAS No. 131 for segment reporting purposes.
The following is a summary of revenues and long-lived assets by geographic
location (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1997 1998
----------------------- -----------------------
LONG-LIVED LONG-LIVED
REVENUES ASSETS REVENUES ASSETS
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
North America............................... $ 356,249 $ 68,257 $ 570,464 $ 126,368
Europe...................................... 87,800 32,131 149,914 57,803
Other foreign countries..................... 5,062 1,150 19,089 4,561
---------- ----------- ---------- -----------
$ 449,111 $ 101,538 $ 739,467 $ 188,732
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
Revenues are attributed to geographic locations based on the location of
product production.
The following is a summary of the approximate composition by product
category of the Company's revenues:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Parking brake mechanisms........................................... $ 124,683 $ 134,856
Automotive cables.................................................. 170,988 282,616
Transmission shifter mechanisms.................................... 70,191 124,004
Other products..................................................... 83,249 197,991
---------- ----------
Revenues from external customers................................... $ 449,111 $ 739,467
---------- ----------
---------- ----------
</TABLE>
The Company sells its products directly to automobile manufacturers.
Customers that accounted for a significant portion of consolidated revenues for
each of the three years in the period ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Ford............................................................... 49% 42% 36%
GM................................................................. 36% 25% 23%
DaimlerChrysler.................................................... 8% 7% 15%
</TABLE>
As of December 31, 1997 and 1998, receivables from these customers
represented 71 percent and 70 percent of total accounts receivable.
F-22
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFIT PLANS:
PENSION PLANS AND POST-RETIREMENT BENEFITS:
The Company sponsors six 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. In addition, the Company has various
postretirement medical benefit plans for certain employee groups and has
recorded a liability for its estimated obligation under these plans. The change
in benefit obligation and plan assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
POST-RETIREMENT
BENEFITS
OTHER THAN PENSIONS
PENSION BENEFITS
DECEMBER 31, DECEMBER 31,
-------------------- --------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year... $ 3,393 $ 4,157 $ 5,761 $ 5,755
Service cost.............................. 185 1,371 97 243
Interest cost............................. 252 1,412 429 825
Plan participants' contributions.......... -- -- 167 131
Actuarial (gain) loss..................... 531 4,977 (92) 2,471
Acquisition of Trident.................... -- 23,720 -- 9,394
Benefits paid............................. (204) (195) (607) (1,134)
--------- --------- --------- ---------
Benefit obligation at end of year......... $ 4,157 $ 35,442 $ 5,755 $ 17,685
--------- --------- --------- ---------
--------- --------- --------- ---------
CHANGE IN PLAN ASSETS:
Fair value at plan assets at beginning
of year................................... $ 2,732 $ 3,206 $ -- $ --
Actual return on plan assets.............. 271 1,544 -- --
Acquisition of Trident.................... -- 20,870 -- --
Employer contributions.................... 407 1,064 459 401
Plan participants' contributions.......... -- -- 167 131
Benefits paid............................. (204) (195) (626) (532)
--------- --------- --------- ---------
Fair value of plan assets at end of
year.................................... $ 3,206 $ 26,489 $ -- $ --
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-23
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFIT PLANS: (CONTINUED)
All of the Company's plans have benefit obligations in excess of their
respective plan assets. The funded status of the Company's plans is as follows
(amounts in thousands):
<TABLE>
<CAPTION>
POST-RETIREMENT
BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
DECEMBER 31, DECEMBER 31,
-------------------- ---------------------
1997 1998 1997 1998
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Funded status....................................... $ (951) $ (8,953) $ (5,755) $ (17,685)
Unrecognized actuarial (gain) loss.................. 527 5,532 (1,344) 1,233
Unrecognized prior service cost..................... 347 301 (89) (81)
Adjustment to recognize minimum liability........... (874) (1,008) -- --
--------- --------- --------- ----------
Accrued benefit cost................................ $ (951) $ (4,128) $ (7,188) $ (16,533)
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
The following weighted-average assumptions were used to account for the
plans:
<TABLE>
<CAPTION>
POST-RETIREMENT
BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
DECEMBER 31, DECEMBER 31,
--------------------- ---------------------
1997 1998 1997 1998
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Discount rate.................................... 7.50% 5.75-6.75% 7.00-7.25% 6.75%
Expected return on plan assets................... 8.00% 8.00-9.50% N/A N/A
Rate of compensation increase.................... N/A 4.00-6.00% N/A N/A
</TABLE>
For measurement purposes, a 7 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1998. The rate was
assumed to decrease 2 percent in 1999 to 5 percent and remain level thereafter.
The components of net periodic benefit costs are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
POST-RETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSION
------------------------------- -------------------------------
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
------------------------------- -------------------------------
1996 1997 1998 1996 1997 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service cost....................... $ 236 $ 185 $ 1,377 $ 84 $ 101 $ 246
Interest cost...................... 243 252 1,424 558 433 830
Expected return on plan assets..... (237) (232) (1,600) -- -- --
Amortization of prior service
cost............................. 26 45 46 -- (8) (8)
Recognized actuarial (gain) loss... 39 (3) 15 127 (89) (72)
--------- --------- --------- --------- --------- ---------
Net periodic benefit cost.......... $ 307 $ 247 $ 1,262 $ 769 $ 437 $ 996
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
F-24
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFIT PLANS: (CONTINUED)
Assumed health care cost trend rates have a significant effect on the
amounts reported for the post-retirement medical benefit plans. A one
percentage-point change in assumed health care cost trend rates would have the
following effects (in thousands):
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------- -------------------
<S> <C> <C>
Effect on total of service and interest cost
components............................................ $ 66 $ (66)
----- -----
----- -----
Effect on the post-retirement benefit obligation........ $ 735 $ (658)
----- -----
----- -----
</TABLE>
RETIREMENT SAVINGS PLANS:
The Company sponsors employee retirement savings plans which allow qualified
employees to provide for their retirement on a tax-deferred basis. In accordance
with the terms of the retirement savings plans, the Company is required to match
certain of the participants' contributions and/or provide employer contributions
based on the Company's performance and other factors. Such employer
contributions totaled $1.6 million, $2.2 million and $2.8 million during fiscal
1996, 1997 and 1998.
10. COMMITMENTS AND CONTINGENCIES:
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, 1998 under these operating leases are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- --------------------------------------------------------------------------- ---------
<S> <C>
1999....................................................................... $ 6,741
2000....................................................................... 5,975
2001....................................................................... 5,194
2002....................................................................... 4,634
2003....................................................................... 3,952
Thereafter................................................................. 2,396
</TABLE>
LITIGATION:
The Company is from time to time subject to various legal actions and claims
incidental to its business, including those arising out of alleged defects,
product warranties, employment-related matters and environmental matters.
Litigation is subject to many uncertainties, and the outcome of individual
litigated matters is not predictable with assurance. After discussions with
counsel, it is the opinion of management that the Company has provided adequate
reserves to cover these matters and the ultimate outcome of such matters will
not have a material adverse impact on the consolidated financial position,
results of operations or cash flows of the Company.
F-25
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. RELATED PARTY TRANSACTIONS:
The Company paid fees to Hidden Creek Industries ("HCI"), an affiliate of
the Company, of approximately $750,000 in 1996 in connection with the
acquisitions and the 1996 Offering, $850,000 in 1997 in connection with the
acquisitions of VOFA and GT Automotive and $3.7 million in 1998 in connection
with the acquisition of Universal, Hinge and Trident, the Offering and the
Preferred Securities Offering. 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 $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 5 for discussion of acquisitions and
divestiture.
12. SUBSEQUENT EVENTS (UNAUDITED):
On March 23, 1999, the Company completed its merger with Excel Industries,
Inc. ("Excel"). In the aggregate, the stockholders of Excel received
consideration of approximately $155.5 million in cash and approximately 5.1
million shares of Dura Class A common stock. Upon completing of this
transaction, Excel became a wholly owned subsidiary of the Company.
Excel has annual revenues of approximately $1.1 billion of which 75 percent
is derived from the automotive/light truck market and the remainder from the
recreational vehicle, mass transit and heavy truck markets. Approximately 78
percent of Excel's revenues is generated in North America with the remainder in
Europe.
Excel has headquarters in Indiana and has manufacturing facilities in the
United States and Germany. Excel's products for the light vehicle segment
include plastic and metal encapsulated window assemblies, door systems, seat
systems and injection molded plastic products. In addition, Excel is a supplier
to the recreational vehicle, mass transit and heavy truck markets and its
products include appliances such as water heaters, furnaces, stoves and ranges,
mechanical components and systems, modular doors and a variety of window
assemblies. Excel's customers include Ford, DaimlerChrysler and General Motors
in the light vehicle segment and Fleetwood, Winnebago, Coachmen and Navistar in
the recreational vehicle, mass transit and heavy truck segments.
On March 15, 1999, the Company acquired through a cash tender offer
approximately 95% of the outstanding ordinary shares of Adwest Automotive plc
("Adwest"). Adwest has annual revenues of approximately $400 million and is a
supplier of driver control products primarily for European OEMs. The Company
paid approximately $320 million to acquire all of the outstanding shares of
Adwest, including the assumption of approximately $106.1 million in indebtedness
in connection with the acquisition of Adwest.
Adwest's products include driver control mechanisms such as gearshifters,
park brakes, pedal boxes and jacks, as well as engine control products, which
includes engine thermostats and fuel filler caps. Engine control products
represent approximately 20% of Adwest's total revenues. Adwest's customers
include Volkswagen, BMW, Ford, General Motors, Peugeot, and Renault. The Company
has manufacturing facilities in the United Kingdom, Germany, France, Spain and
the United States.
In connection with the acquisitions of Adwest and Excel, the Company entered
into an amended and restated $1.15 billion credit agreement ("Credit
Agreement"). The Credit Agreement provides for revolving credit facilities of
$400.0 million, a $275.0 million tranche A term loan, a $275.0 million tranche B
term loan and a $200.0 million interim term loan facility. As of March 31, 1999,
rates on
F-26
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
borrowings under the Credit Agreement ranged from 5.28% to 10.0%. Borrowings
under the tranche A term loan are due and payable in March 2005 and borrowings
under the tranche B term loan are due and payable in March 2006. The revolving
credit facility is available until March 2005. Borrowings under the interim loan
were due and payable in September 2000 and, as further discussed below, were
repaid in April 1999. The Credit Agreement contains various restrictive
covenants which limit indebtedness, investments, rental obligations and cash
dividends. The Credit Agreement also requires the Company to maintain certain
financial ratios including minimum liquidity and interest coverage. Borrowings
under the Credit Agreement are collateralized by the assets of the Company. In
connection with the termination of the Company's former credit facility, the
Company wrote-off deferred financing costs of approximately $2.7 million, net of
income taxes.
On April 23, 1999, the Company completed the offering of $300 million and
Euro 100 million of senior subordinated notes ("Subordinated Notes"). The
Subordinated Notes mature in May 2009 and bear interest at 9% per year, which is
payable semi-annually. Net proceeds from this offering of approximately $397.0
million were used to repay the $200.0 million interim term loan, approximately
$100.1 million to retire other indebtedness and approximately $96.9 million will
be used for general corporate purposes.
On June 24, 1999, the Company retired the Notes. The total consideration
paid was approximately $84 million in Note principal and premium and was funded
through borrowings under the Credit Agreement. The Company will record an
extraordinary loss on the early extinguishment of debt, net of income tax
benefit, of $2.7 million in the second quarter of 1999.
13. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a condensed summary of actual quarterly results of
operations for 1997 and 1998 (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>
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
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
1998:
First................ $ 125,746 $ 21,275 $ 10,864 $ 4,576 $ 0.52 $ 0.52
Second............... 187,433 32,019 17,951 5,902 0.63 0.61
Third................ 185,204 31,859 15,628 5,249 0.43 0.43
Fourth............... 241,084 45,796 26,813 10,297 0.83 0.80
---------- ---------- ----------- ---------
$ 739,467 $ 130,949 $ 71,256 $ 26,024 $ 2.43 $ 2.37
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
</TABLE>
The sum of per share amounts for the quarters does not 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-27
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
The following consolidating financial information presents balance sheet,
statement of operations and cash flow information related to the Company's
businesses. Each Guarantor is a direct or indirect wholly owned subsidiary of
the Company and has fully and unconditionally guaranteed the 9% senior
subordinated notes issued by Dura Operating Corp., on a joint and several basis.
Separate financial statements and other disclosures concerning the Guarantors
have not been presented because management believes that such information is not
material.
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
---------- ------------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $ 243,757 $ -- $ 1,572 $ -- $ 245,329
Cost of sales................................... 206,414 -- 1,396 -- 207,810
---------- --- ----------- --- ------------
Gross profit.................................. 37,343 -- 176 -- 37,519
Selling, general and administrative expenses.... 17,072 -- 85 -- 17,157
Amortization expense............................ 1,007 -- 29 -- 1,036
---------- --- ----------- --- ------------
Operating income.............................. 19,264 -- 62 -- 19,326
Interest expense, net........................... 2,589 -- -- -- 2,589
---------- --- ----------- --- ------------
Income before provision for income taxes and
equity in earnings of subsidiaries.......... 16,675 -- 62 -- 16,737
Provision for income taxes...................... 6,609 -- -- -- 6,609
Equity (loss) in earnings of subsidiaries....... 62 -- -- (62) --
---------- --- ----------- --- ------------
Net income (loss)........................... $ 10,128 $ -- $ 62 $ (62) $ 10,128
---------- --- ----------- --- ------------
---------- --- ----------- --- ------------
</TABLE>
F-28
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................ $ 10,128 $ -- $ 62 $ (62) $ 10,128
Adjustments required to reconcile net income to
net cash provided by operating activities --
Depreciation and amortization.................. 6,038 -- 41 -- 6,079
Deferred income tax provision.................. 3,331 -- -- -- 3,331
(Income)/loss from investment in
subsidiaries................................. (62) -- -- 62 --
Due (to)/from affiliates....................... (48) -- 48 -- --
Changes in other operating items............... 354 -- (100) -- 254
----------- --- ----------- ------ ------------
Net cash provided by operating activities.... 19,741 -- 51 -- 19,792
----------- --- ----------- ------ ------------
INVESTING ACTIVITIES:
Capital expenditures, net........................ (6,260) -- -- -- (6,260)
Acquisitions, net................................ (83,850) -- -- -- (83,850)
Investments in joint ventures and other.......... (4,983) -- -- -- (4,983)
----------- --- ----------- ------ ------------
Net cash used in investing activities........ (95,093) -- -- -- (95,093)
----------- --- ----------- ------ ------------
FINANCING ACTIVITIES:
Borrowings under revolving credit facilities..... 145,500 -- -- -- 145,500
Repayments of revolving credit facilities........ (68,500) -- -- -- (68,500)
Repayments of long-term borrowings............... (51,320) -- -- -- (51,320)
Proceeds from stock offering, net................ 49,575 -- -- -- 49,575
Repurchase of common stock, net.................. (19) -- -- -- (19)
----------- --- ----------- ------ ------------
Net cash provided by financing activities.... 75,236 -- -- -- 75,236
----------- --- ----------- ------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS.......... (116) -- 51 -- (65)
CASH AND CASH EQUIVALENTS, beginning of period... 1,732 -- -- -- 1,732
----------- --- ----------- ------ ------------
CASH AND CASH EQUIVALENTS, end of period......... $ 1,616 $ -- $ 51 $ -- $ 1,667
----------- --- ----------- ------ ------------
----------- --- ----------- ------ ------------
</TABLE>
F-29
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................... $ 1,292 $ 134 $ 2,722 $ -- $ 4,148
Accounts receivable, net...................... 57,506 6,486 15,040 -- 79,032
Inventories................................... 15,702 2,499 12,100 -- 30,301
Other current assets.......................... 23,180 1,366 254 -- 24,800
Due from affiliates........................... 4,237 5,661 294 (10,192) --
---------- ----------- ----------- ------------ ------------
Total current assets........................ 101,917 16,146 30,410 (10,192) 138,281
---------- ----------- ----------- ------------ ------------
Property, Plant & Equipment, net................ 54,851 9,197 37,490 -- 101,538
Investment in subsidiaries...................... 54,035 3,345 3,478 (57,848) 3,010
Notes Receivable from Affiliates................ 20,406 -- -- (20,406) --
Goodwill, net................................... 104,011 37,697 18,355 -- 160,063
Other Assets, net............................... 15,799 -- 573 -- 16,372
---------- ----------- ----------- ------------ ------------
$ 351,019 $ 66,385 $ 90,306 $ (88,446) $ 419,264
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable.............................. $ 34,332 $ 3,778 $ 11,043 $ -- $ 49,153
Due to affiliates............................. -- 3,584 6,608 (10,192) --
Accrued liabilities........................... 25,988 1,711 8,884 -- 36,583
Current maturities of long-term debt.......... 61 -- 2,180 -- 2,241
---------- ----------- ----------- ------------ ------------
Total current liabilities................... 60,381 9,073 28,715 (10,192) 87,977
---------- ----------- ----------- ------------ ------------
Long-Term Debt, net of current maturities....... 161,859 -- 16,222 -- 178,081
Other Noncurrent Liabilities.................... 24,261 6,867 20,370 -- 51,498
Notes Payable to Affiliates..................... -- -- 20,406 (20,406) --
---------- ----------- ----------- ------------ ------------
Total liabilities........................... 246,501 15,940 85,713 (30,598) 317,556
---------- ----------- ----------- ------------ ------------
Stockholders' Investment........................ 104,518 50,445 4,593 (57,848) 101,708
---------- ----------- ----------- ------------ ------------
$ 351,019 $ 66,385 $ 90,306 $ (88,446) $ 419,264
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-30
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $ 345,641 $ 15,824 $ 89,074 $ (1,428) $ 449,111
Cost of sales................................... 291,219 11,837 73,458 (1,428) 375,086
---------- ----------- ----------- ------------ ------------
Gross profit.................................. 54,422 3,987 15,616 -- 74,025
Selling, general and administrative expenses.... 25,062 1,048 6,705 -- 32,815
Amortization expense............................ 3,037 303 260 -- 3,600
---------- ----------- ----------- ------------ ------------
Operating income.............................. 26,323 2,636 8,651 -- 37,610
Interest expense, net........................... 6,479 18 2,801 -- 9,298
---------- ----------- ----------- ------------ ------------
Income before provision for income taxes,
equity in earnings (losses) of
subsidiaries................................ 19,844 2,618 5,850 -- 28,312
Provision for income taxes...................... 7,665 1,181 2,824 -- 11,670
Equity in earnings (losses) of subsidiaries..... 4,463 -- -- (4,463) --
---------- ----------- ----------- ------------ ------------
Net income (loss)............................. $ 16,642 $ 1,437 $ 3,026 $ (4,463) $ 16,642
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-31
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................................... $ 16,642 $ 1,437 $ 3,026 $ (4,463) $ 16,642
Adjustments required to reconcile net income to
net cash provided by (used for) operating
activities--
Depreciation and amortization................ 9,910 606 1,787 -- 12,303
Deferred income tax provision................ 1,521 -- -- -- 1,521
(Income)/loss from investment in
subsidiaries............................... (4,463) -- -- 4,463 --
Due (to)/from affiliates..................... (4,189) (2,077) 6,266 -- --
Changes in other operating items............. (1,791) 924 (21,083) -- (21,950)
---------- ----------- ----------- ------------ ------------
Net cash provided by (used for) operating
activities............................... 17,630 890 (10,004) -- 8,516
---------- ----------- ----------- ------------ ------------
INVESTING ACTIVITIES:
Capital expenditures, net...................... (13,952) (756) (1,534) -- (16,242)
Acquisitions, net.............................. (70,481) -- -- -- (70,481)
Investments in joint ventures and other........ (6,663) -- -- -- (6,663)
---------- ----------- ----------- ------------ ------------
Net cash used for investing activities....... (91,096) (756) (1,534) -- (93,386)
---------- ----------- ----------- ------------ ------------
FINANCING ACTIVITIES:
Borrowings under revolving credit facilities... 267,987 -- -- -- 267,987
Repayments of revolving credit facilities...... (174,869) -- -- -- (174,869)
Repayments of long-term borrowings............. (80) -- (5,928) -- (6,008)
Debt financing (to)/from affiliates (20,406) -- 20,406 -- --
Sale of common stock, net...................... 510 -- -- -- 510
---------- ----------- ----------- ------------ ------------
Net cash provided by financing activities.... 73,142 -- 14,478 -- 87,620
---------- ----------- ----------- ------------ ------------
EFFECT OF EXCHANGE RATES ON CASH................. -- -- (269) -- (269)
---------- ----------- ----------- ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS.......... (324) 134 2,671 -- 2,481
CASH AND CASH EQUIVALENTS, beginning of period... 1,616 -- 51 -- 1,667
---------- ----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of period......... $ 1,292 $ 134 $ 2,722 $ -- $ 4,148
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-32
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................... $ 1,247 $ (557) $ 19,854 $ -- $ 20,544
Accounts receivable, net...................... 70,332 41,863 46,270 -- 158,465
Inventories................................... 19,134 10,454 20,910 -- 50,498
Other current assets.......................... 12,576 25,780 7,568 -- 45,924
Due from affiliates........................... 8,878 16,822 5,421 (31,121) --
---------- ----------- ----------- ------------ ------------
Total current assets........................ 112,167 94,362 100,023 (31,121) 275,431
---------- ----------- ----------- ------------ ------------
Property, Plant & Equipment, net................ 62,464 48,546 77,722 -- 188,732
Investment in Subsidiaries...................... 202,697 27,736 40,238 (266,747) 3,924
Notes Receivable from Affiliates................ 47,329 -- 29,911 (77,240) --
Goodwill, net................................... 107,469 150,740 177,751 -- 435,960
Other Assets, net............................... 13,564 2,102 9,670 -- 25,336
---------- ----------- ----------- ------------ ------------
$ 545,690 $ 323,486 $ 435,315 $ (375,108) $ 929,383
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable.............................. $ 39,019 $ 22,638 $ 37,855 $ -- $ 99,512
Due to affiliates............................. 8,793 7,806 14,522 (31,121) --
Accrued liabilities........................... 28,167 46,131 22,366 -- 96,664
Current maturities of long-term debt.......... 7,064 16 8,409 -- 15,489
---------- ----------- ----------- ------------ ------------
Total current liabilities................... 83,043 76,591 83,152 (31,121) 211,665
---------- ----------- ----------- ------------ ------------
Long-Term Debt, net of current maturities....... 155,408 8,010 152,999 -- 316,417
Other Noncurrent Liabilities.................... 13,437 61,538 33,039 -- 108,014
Notes Payable to Affiliates..................... -- 27,668 49,572 (77,240) --
---------- ----------- ----------- ------------ ------------
Total liabilities........................... 251,888 173,807 318,762 (108,361) 636,096
---------- ----------- ----------- ------------ ------------
Mandatorily Redeemable Convertible
Trust Preferred Securities.................... 55,250 -- -- -- 55,250
Stockholders' Investment........................ 238,552 149,679 116,553 (266,747) 238,037
---------- ----------- ----------- ------------ ------------
$ 545,690 $ 323,486 $ 435,315 $ (375,108) $ 929,383
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-33
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $ 356,683 $ 184,956 $ 210,449 $ (12,621) $ 739,467
Cost of sales................................... 296,863 151,546 172,730 (12,621) 608,518
---------- ----------- ----------- ------------ ------------
Gross profit.................................. 59,820 33,410 37,719 -- 130,949
Selling, general and administrative expenses.... 21,445 11,183 17,197 -- 49,825
Amortization expense............................ 3,522 2,864 3,482 -- 9,868
---------- ----------- ----------- ------------ ------------
Operating income.............................. 34,853 19,363 17,040 -- 71,256
Interest expense, net........................... 7,970 2,808 9,489 -- 20,267
---------- ----------- ----------- ------------ ------------
Income before provision for income taxes,
equity in earnings (losses) of subsidiaries
and minority interest....................... 26,883 16,555 7,551 -- 50,989
Provision for income taxes...................... 10,030 6,176 4,727 -- 20,933
Equity in earnings (losses) of subsidiaries..... 11,722 -- 4,259 (17,462) (1,481)
Minority interest--dividend on trust preferred
securities, net............................... 1,908 -- -- -- 1,908
---------- ----------- ----------- ------------ ------------
Income (loss) before extraordinary item....... 26,667 10,379 7,083 (17,462) 26,667
Extraordinary item--loss on early extinguishment
of debt, net.................................. 643 -- -- -- 643
---------- ----------- ----------- ------------ ------------
Net income (loss)........................... $ 26,024 $ 10,379 $ 7,083 $ (17,462) $ 26,024
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-34
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................................... $ 26,024 $ 10,379 $ 7,083 $ (17,462) $ 26,024
Adjustments required to reconcile net income to
net cash provided by (used for) operating
activities--
Depreciation and amortization................ 11,587 6,466 9,518 -- 27,571
Deferred income tax provision................ 7,833 -- -- -- 7,833
Extraordinary loss on extinguishment of
debt....................................... 643 -- -- -- 643
Other........................................ (315) -- -- -- (315)
(Income)/loss from investment in
subsidiaries............................... (13,203) -- (4,259) 17,462 --
Due (to)/from affiliates..................... 4,152 (6,939) 2,787 -- --
Equity in losses of affiliates............... 1,481 -- -- -- 1,481
Changes in other operating items............. (21,127) (40,084) 5,661 -- (55,550)
----------- ----------- ----------- ------------ -------------
Net cash provided by (used for) operating
activities............................... 17,075 (30,178) 20,790 -- 7,687
----------- ----------- ----------- ------------ -------------
INVESTING ACTIVITIES:
Capital expenditures, net...................... (15,742) (6,181) (9,899) -- (31,822)
Acquisitions, net.............................. (135,712) -- -- -- (135,712)
----------- ----------- ----------- ------------ -------------
Net cash used for investing activities..... (151,454) (6,181) (9,899) -- (167,534)
----------- ----------- ----------- ------------ -------------
FINANCING ACTIVITIES:
Borrowings under revolving credit facilities... 352,296 8,000 56,971 -- 417,267
Repayments of revolving credit facilities...... (350,546) -- (34,506) -- (385,052)
Long-term borrowings........................... 50,000 -- 50,265 -- 100,265
Repayments of long-term borrowings............. (50,984) -- (65,367) -- (116,351)
Debt financing (to)/from affiliates (26,923) 27,668 (745) -- --
Proceeds from stock offering, net.............. 107,848 -- -- -- 107,848
Proceeds from issuance of preferred
securities................................... 52,525 -- -- -- 52,525
Sale of common stock, net...................... 118 -- -- -- 118
----------- ----------- ----------- ------------ -------------
Net cash provided by financing
activities............................... 134,334 35,668 6,618 -- 176,620
----------- ----------- ----------- ------------ -------------
EFFECT OF EXCHANGE RATES ON CASH................. -- -- (377) -- (377)
----------- ----------- ----------- ------------ -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS.......... (45) (691) 17,132 -- 16,396
CASH AND CASH EQUIVALENTS, beginning of period... 1,292 134 2,722 -- 4,148
----------- ----------- ----------- ------------ -------------
CASH AND CASH EQUIVALENTS, end of period......... $ 1,247 $ (557) $ 19,854 $ -- $ 20,544
----------- ----------- ----------- ------------ -------------
----------- ----------- ----------- ------------ -------------
</TABLE>
F-35
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER
MARCH 31, 31,
1999 1998
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 39,267 $ 20,544
Accounts receivable, net...................................... 471,282 158,465
Inventories................................................... 150,471 50,498
Other current assets.......................................... 129,082 45,924
--------- -----------
Total current assets.................................... 790,102 275,431
--------- -----------
Property, plant and equipment, net.................................. 523,287 188,732
Goodwill, net....................................................... 898,342 435,960
Deferred income taxes and other assets, net......................... 48,836 29,260
--------- -----------
$2,260,567 $ 929,383
--------- -----------
--------- -----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt.......................... $ 14,945 $ 15,489
Accounts payable.............................................. 283,125 99,512
Accrued liabilities........................................... 226,142 96,664
--------- -----------
Total current liabilities............................... 524,212 211,665
--------- -----------
Long-term debt, net of current maturities........................... 1,057,146 316,417
Other noncurrent liabilities........................................ 230,497 108,014
Mandatorily redeemable convertible trust preferred securities....... 55,250 55,250
--------- -----------
Stockholders' investment:
Preferred stock............................................... -- --
Common stock--Class A......................................... 140 90
Common stock--Class B......................................... 33 33
Additional paid-in capital.................................... 335,884 171,377
Retained earnings............................................. 70,544 67,052
Accumulated other comprehensive loss--cumulative translation
adjustment.................................................. (13,139) (515)
--------- -----------
Total stockholders' investment.......................... 393,462 238,037
--------- -----------
$2,260,567 $ 929,383
--------- -----------
--------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
F-36
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS--UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues.................................................................................. $ 264,701 $ 125,746
Cost of sales............................................................................. 218,219 104,471
---------- ----------
Gross profit...................................................................... 46,482 21,275
Selling, general and administrative expenses.............................................. 16,897 9,160
Amortization expense...................................................................... 3,685 1,251
---------- ----------
Operating income.................................................................. 25,900 10,864
Interest expense, net..................................................................... 6,895 2,938
---------- ----------
Income before provision for income taxes, equity in losses of affiliate and
minority interests.............................................................. 19,005 7,926
Provision for income taxes................................................................ 7,711 3,274
Equity in losses of affiliate and minority interests...................................... 1,342 --
Minority interest--dividends on trust preferred securities, net........................... 611 76
---------- ----------
Income before extraordinary item and accounting change.......................... 9,341 4,576
Extraordinary item--loss on early extinguishment of debt, net............................. (2,702) --
Cumulative effect of change in accounting, net............................................ (3,147) --
---------- ----------
Net income........................................................................ $ 3,492 $ 4,576
---------- ----------
---------- ----------
Basic earnings per common share:
Income before extraordinary item and accounting change.................................. $ 0.73 $ 0.52
Extraordinary item...................................................................... (0.21) --
Cumulative effect of change in accounting............................................... (0.25) --
---------- ----------
---------- ----------
Net income........................................................................ $ 0.27 $ 0.52
---------- ----------
---------- ----------
Basic shares outstanding................................................................ 12,877 8,826
---------- ----------
---------- ----------
Diluted earnings per common share:
Income before extraordinary item and accounting change.................................. $ 0.70 $ 0.52
Extraordinary item...................................................................... (0.19) --
Cumulative effect of change in accounting............................................... (0.22) --
---------- ----------
Net income.......................................................................... $ 0.29 $ 0.52
---------- ----------
---------- ----------
Diluted shares outstanding................................................................ 14,253 9,012
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-37
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS--UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
----------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................................................... $ 3,492 $ 4,576
Adjustments to reconcile net income to net cash provided by (used in) operating
activities--
Depreciation and amortization..................................................... 10,507 3,067
Deferred income taxes............................................................. (3,057) --
Equity in losses of affiliates and minority interest.............................. 1,342 --
Extraordinary loss on extinguishment of debt...................................... 2,702 --
Cumulative effect of change in accounting, net.................................... 3,147 --
Changes in other operating items.................................................. (17,746) (9,785)
----------- ---------
Net cash provided by (used in) operating activities............................... 387 (2,142)
----------- ---------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired.................................................. (540,133) (18,578)
Capital expenditures, net........................................................... (5,994) (3,733)
Other............................................................................... 2,227 --
----------- ---------
Net cash used in investing activities............................................. (543,900) (22,311)
----------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings............................................................ 904,680 67,903
Repayment of debt................................................................... (321,761) (53,403)
Debt issuance costs................................................................. (19,537) --
Proceeds from issuance of common stock and exercise of stock options................ 770 256
Proceeds from issuance of preferred securities...................................... -- 52,566
----------- ---------
Net cash provided by financing activities......................................... 564,152 67,322
----------- ---------
EFFECT OF EXCHANGE RATE ON CASH........................................................... (1,916) (79)
----------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS................................................. 18,723 42,790
CASH AND CASH EQUIVALENTS:
Beginning of period................................................................. 20,544 4,148
----------- ---------
End of period....................................................................... $ 39,267 $ 46,938
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-38
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
The accompanying condensed consolidated financial statements have been
prepared by Dura Automotive Systems, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of such financial statements. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed consolidated financial
statements be read in conjunction with the audited financial statements and
the notes thereto included in the Company's 1998 Annual Report to
Stockholders.
Revenues and operating results for the three months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the full year.
2.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
MAR. 31, DEC. 31,
1999 1998
------------ ------------
<S> <C> <C>
Raw materials.................................................... $ 73,375 $ 23,067
Work-in-process.................................................. 41,087 11,155
Finished goods................................................... 36,009 16,276
------------ ------------
$ 150,471 $ 50,498
------------ ------------
------------ ------------
</TABLE>
F-39
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3.
Basic earnings per share were computed by dividing net income by the
weighted average number of Class A and Class B common shares outstanding
during the quarter. Diluted earnings per share include (i) the effects of
outstanding stock options using the treasury stock method and (ii) the
conversion of the Preferred Securities from their date of issuance on March
20, 1998 as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Net income............................................................... $ 3,492 $ 4,576
Interest expense on mandatorily redeemable convertible preferred
securities, net of tax................................................. 611 76
--------- ---------
Net income applicable to common stockholders--diluted.................... $ 4,103 $ 4,652
--------- ---------
--------- ---------
Weighted average number of Class A common shares outstanding............. 9,552 4,172
Weighted average number of Class B common shares outstanding............. 3,325 4,654
--------- ---------
12,877 8,826
Dilutive effect of outstanding stock options after application of the
treasury stock method.................................................. 87 28
Dilutive effect of mandatorily redeemable convertible preferred
securities, assuming conversion........................................ 1,289 158
--------- ---------
Diluted shares outstanding............................................... 14,253 9,012
--------- ---------
--------- ---------
Basic earnings per share................................................. $ 0.27 $ 0.52
--------- ---------
--------- ---------
Diluted earnings per share............................................... $ 0.29 $ 0.52
--------- ---------
--------- ---------
</TABLE>
4.
In March 1998, the Company acquired Universal Tool & Stamping Co., Inc.
("Universal"), a manufacturer of jacks for the North American automotive
industry, for approximately $18.0 million. The acquisition provided the
Company with a market presence for jacks in North America and added Honda as
a significant new customer.
In April 1998, the Company acquired all of the outstanding equity interests
of Trident Automotive plc ("Trident"). Trident had revenues of approximately
$300 million in 1997, of which 69 percent was derived from sales of cable
assemblies, principally to the automotive OEM market, and the balance from
door handle assemblies, lighting and other products. Approximately 68
percent of Trident's revenues were generated in North America, 27 percent in
Europe and the remainder in Latin America. Trident's operations are
headquartered in Michigan with manufacturing and technical facilities in
Michigan, Tennessee, Arkansas, Canada, the United Kingdom, Germany, France
and Brazil. Pursuant to the terms of the agreement, the Company acquired all
of the outstanding equity interests of Trident for total consideration of
$87.5 million in cash. In addition, the Company assumed $75.0 million of
Trident's outstanding 10% Senior Subordinated Notes due 2005. The Company
also repaid Trident's outstanding senior indebtedness of approximately $53.0
million. The acquisition of Trident was financed with borrowings under the
Company's credit facility.
F-40
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. (CONTINUED)
In August 1998, the Company acquired the hinge business ("Hinge") of Tower
Automotive, Inc. for approximately $37.0 million. Hinge, which has annual
revenues of approximately $50.0 million, manufactures automotive hood and
deck lid hinges.
On March 15, 1999, Dura acquired through a cash tender offer approximately
95% of the outstanding ordinary shares of Adwest Automotive plc ("Adwest").
Adwest has annual revenues of approximately $400 million and is a supplier
of driver control products primarily for European OEMs. The Company paid
approximately $320 million to acquire all of the outstanding shares of
Adwest, including the assumption of approximately $106.1 million in
indebtedness in connection with the acquisition of Adwest.
On March 23, 1999, the Company completed its merger with Excel Industries,
Inc. ("Excel"). Excel has annual revenues of approximately $1.1 billion of
which 75 percent is derived from the automotive/light truck market and the
remainder from the recreational vehicle, mass transit and heavy truck
markets. Approximately 78 percent of Excel's revenues is generated in North
America with the remainder in Europe. The Company issued an aggregate of
approximately 5.1 million shares of its Class A Common Stock and paid $155.5
million in cash to Excel's former shareholders. The Company also assumed
approximately $100.0 million of indebtedness in connection with the merger
with Excel.
The cash consideration related to the acquisitions of Adwest and Excel was
financed with Borrowings under a new credit facility which is further
described in Note 5.
The acquisitions of Universal, Trident, Hinge, Excel and Adwest have been
accounted for using the purchase method of accounting and, accordingly, the
assets acquired and liabilities assumed have been recorded at fair value as
of the dates of acquisition, with the excess purchase price recorded as
goodwill. With respect to the acquisitions of Trident, Hinge, Excel and
Adwest, the assets and liabilities have been recorded based upon preliminary
estimates of fair value. At March 31, 1999, liabilities for approximately
$44.5 million for costs associated with the shutdown and consolidation of
certain acquired facilities and $30.9 million in severance costs are
recorded on the condensed consolidated balance sheet. No additional reserves
were recorded during the first quarter of 1999. The Company is further
evaluating the fair value of certain assets acquired and liabilities
assumed. As a result, the final evaluation will likely result in adjustments
to the preliminary allocations which may result in changes to goodwill.
The accompanying unaudited pro forma condensed results of operations for the
three months ended March 31, 1999 give effect to the acquisitions of Adwest
and Excel and the offering of the Senior Subordinated Notes, which is
further described in Note 5, as if such transactions had occurred at the
beginning of the period and exclude the effects of the extraordinary loss.
The accompanying unaudited pro forma condensed results of operations for the
three months ended March 31, 1998 give effect to the transactions described
above, the acquisitions of Universal, Trident and Hinge, the offering of
Class A common stock, which is further described in Note 7, and the offering
of the Convertible Trust Preferred Securities, which is further described in
Note 6, as if such transactions had occurred at the beginning of the period
and exclude the effects of the extraordinary loss. The 1998 results of
operations of Trident for the period prior to its acquisition date, which
are included in the unaudited pro forma financial information, reflect
pretax charges
F-41
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. (CONTINUED)
of approximately $3.6 million relating to the recognition of obligations to
certain Trident customers. The unaudited pro forma information does not
purport to represent what the Company's results of operations would actually
have been if such transactions in fact had occurred at such date or to
project the Company' results of future operations (in thousands, except per
share data):
<TABLE>
<CAPTION>
PRO FORMA FOR THE
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues............................................................ $ 653,752 $ 627,033
Operating income.................................................... 49,285 40,028
Net income.......................................................... 13,540 10,921
Basic earnings per share............................................ $ 0.77 $ 0.63
Diluted earnings per share.......................................... 0.75 0.62
</TABLE>
5.
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Bank Credit Facility:
Tranche A and B term loans..................................... $ 525,740 $ --
Interim term loan.............................................. 200,000 --
Revolving credit facility...................................... 100,086 --
Trident 10% senior subordinated notes, due 2005.................. 80,934 81,150
Old Bank Credit Agreement........................................ -- 243,510
Other............................................................ 165,331 7,246
------------ ------------
1,072,091 331,906
Less--current maturities......................................... (14,945) (15,489)
------------ ------------
Total long-term debt............................................. $ 1,057,146 $ 316,417
------------ ------------
------------ ------------
</TABLE>
In connection with the acquisitions of Adwest and Excel, the Company entered
into an amended and restated $1.15 billion credit agreement ("Credit
Agreement"). The Credit Agreement provides for revolving credit facilities
of $400.0 million, a $275.0 million tranche A term loan, a $275.0 million
tranche B term loan and a $200.0 million interim term loan facility. As of
March 31, 1999, rates on borrowings under the Credit Agreement ranged from
5.28% to 10.0%. Borrowings under the tranche A term loan are due and payable
in March 2005 and borrowings under the tranche B term loan are due and
payable in March 2006. The revolving credit facility is available until
March 2005. Borrowings under the interim loan were due and payable in
September 2000, and, as further discussed below, were repaid in April 1999.
The Credit Agreement contains various restrictive covenants which limit
indebtedness, investments, rental obligations and cash dividends. The Credit
Agreement also requires the Company to maintain certain financial ratios
including minimum liquidity and interest coverage. The Company was in
compliance with the covenants as of
F-42
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. (CONTINUED)
March 31, 1999. Borrowings under the Credit Agreement are collateralized by
the assets of the Company.
The Credit Agreement provides the Company with the ability to denominate a
portion of its revolving credit borrowings in foreign currencies up to an
amount equal to $100.0 million. As of March 31, 1999, $84.0 million of
borrowings were denominated in US dollars, $3.4 million of borrowings were
denominated in Canadian dollars, $2.5 million of borrowings were denominated
in Australian dollars, $4.5 million of borrowings were denominated in Euros,
and $5.7 million in British pound sterling.
In connection with the termination of the Company's former credit facility,
the Company wrote-off deferred financing costs of approximately $2.7
million, net of income taxes. This charge is reflected as an extraordinary
item in the accompanying statement of operations for the three months ended
March 31, 1999.
On April 23, 1999, the Company completed the offering of $300 million and
Euro 100 million of senior subordinated notes ("Subordinated Notes"). The
Subordinated Notes mature in May 2009 and bear interest at 9% per year,
which is payable semi-annually. Net proceeds from this offering of
approximately $397.0 million were used to repay the $200.0 million interim
term loan, approximately $100.1 million to retire other indebtedness and
approximately $96.9 million will be used for general corporate purposes.
In December 1997, Trident issued senior subordinated notes with a face value
of $75 million. The notes bear interest at 10%, payable semiannually, and
are due in December 2005. The notes were recorded at their fair value of
$81.2 million. The premium in excess of face value will be amortized over
the life of the notes using the effective interest method.
6.
On March 20, 1998, Dura Automotive Systems Capital Trust (the "Issuer"), a
wholly owned statutory business trust of the Company, completed the offering of
$55.3 million of its 7 1/2% Convertible Trust Preferred Securities ("Preferred
Securities"), resulting in net proceeds to the Company of approximately $52.6
million. The Preferred Securities are redeemable, in whole or part, on or after
March 31, 2001 and all Preferred Securities must be redeemed no later than March
31, 2028. The Preferred Securities are convertible, at the option of the holder,
into Class A common stock of the Company at a rate of 0.5831 shares of Class A
common stock for each Preferred Security, which is equivalent to a conversion
price of $42 7/8 per share. The net proceeds of the offering were used to repay
outstanding indebtedness. Dividends on the Preferred Securities, net of the
related income tax benefit, are reflected as minority interest in the
accompanying condensed consolidated statements of operation.
No separate financial statements of the Issuer have been included herein.
The Company does not consider that such financial statements would be
material to holders of Preferred Securities because (i) all of the voting
securities of the Issuer will be owned, directly or indirectly, by the
Company, a reporting company under the Exchange Act, (ii) the Issuer has no
independent operations and exists for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of the Issuer and
investing the proceeds thereof in 7 1/2% Convertible
F-43
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. (CONTINUED)
Subordinated Debentures due March 31, 2028 issued by the Company and (iii)
the obligations of the Issuer under the Preferred Securities are fully and
unconditionally guaranteed by the Company.
7.
On June 17, 1998, the Company completed a public offering of 3,100,000
shares of its Class A common stock at an offering price of $32.75 per share
("Offering"). Net proceeds to the Company, after underwriting discounts and
offering expenses, were approximately $95.0 million. Proceeds from the
Offering were used to retire outstanding indebtedness. Certain stockholders
of the Company converted 1,308,000 shares of Class B common stock of the
Company into Class A stock and sold such Class A stock concurrent with the
Offering. In addition, an employee of the Company exercised an option to
acquire 5,000 shares of Class A common stock at an exercise price of $14.50
per share, and sold such Class A shares concurrent with the Offering. On
July 1, 1998 the underwriters, pursuant to their over-allotment option,
purchased an additional 400,000 Class A shares resulting in additional net
proceeds of approximately $12.4 million to the Company.
8.
Comprehensive income reflects the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources. For the Company, comprehensive income represents net
income adjusted for foreign currency translation adjustments. The Company
had a comprehensive loss of approximately $9.1 million for the three months
ended March 31, 1999 and comprehensive income of approximately $3.7 million
for the three months ended March 31, 1998.
9.
Effective January 1, 1999, the Company adopted the provisions of the
Financial Accounting Standards Board Statement of Position ("SOP") No. 98-5,
"Reporting on the Costs of Start-Up Activities." SOP 98-5 requires costs
associated with certain start-up activities be expensed as incurred versus
capitalizing and expensing them over a period of time. Previously, the
Company capitalized certain design and engineering costs which related to
future programs and amortized these costs over the life of the program once
production began. Pursuant to the provisions of SOP 98-5, the Company wrote
off the unamortized balance of such capitalized costs, net of income tax
benefits, of approximately $3.1 million. The write-off is reflected as a
cumulative effect of change in accounting in the accompanying condensed
consolidated statement of operations for the three months ended March 31,
1999.
In June 1998 the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" effective for years beginning after June
15, 1999. SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge criteria are met. Special accounting for
qualifying hedges allow a derivative's gains or losses to offset related
results on the hedged item in the income statement and requires that a
company must formally document, designate and assess
F-44
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
9. (CONTINUED)
the effectiveness of transactions that receive hedge accounting. The Company
has not yet quantified the impacts of adopting SFAS No. 133.
10.
Supplemental cash flow information (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash paid for--
Interest............................................................... $ 7,637 $ 3,032
Income taxes........................................................... 3,731 2,410
</TABLE>
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
The following consolidating financial information presents balance sheet,
statement of operations and cash flow information related to the Company's
businesses. Each Guarantor is a direct or indirect wholly owned subsidiary
of the Company and has fully and unconditionally guaranteed the 9% senior
subordinated notes issued by Dura Operating Corp., on a joint and several
basis. Separate financial statements and other disclosures concerning the
Guarantors have not been presented because management believes that such
information is not material.
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 84,006 $ 14,584 $ 27,451 $ (295) $ 125,746
Cost of sales.................................... 70,985 11,428 22,353 (295) 104,471
----------- ----------- ----------- ------------ ------------
Gross profit................................... 13,021 3,156 5,098 -- 21,275
Selling, general and administrative expenses..... 5,685 613 2,862 -- 9,160
Amortization expense............................. 846 240 165 -- 1,251
----------- ----------- ----------- ------------ ------------
Operating income............................... 6,490 2,303 2,071 -- 10,864
Interest expense, net............................ 2,589 139 210 -- 2,938
----------- ----------- ----------- ------------ ------------
Income before provision for income taxes,
equity in earnings (losses) of subsidiaries
and minority interest........................ 3,901 2,164 1,861 -- 7,926
Provision for income taxes....................... 1,527 847 900 -- 3,274
Equity in earnings (losses) of subsidiaries...... 2,278 -- -- (2,278) --
Minority interest--dividend on trust preferred
securities, net................................ 76 -- -- -- 76
----------- ----------- ----------- ------------ ------------
Net income (loss).............................. $ 4,576 $ 1,317 $ 961 $ (2,278) $ 4,576
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-45
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income....................................... $ 4,576 $ 1,317 $ 961 $ (2,278) $ 4,576
Adjustments to reconcile net income to net cash
provided by (used for) operating activities--
Depreciation and amortization.................. 1,666 538 863 -- 3,067
(Income)/loss from investment in
subsidiaries................................. (2,278) -- -- 2,278 --
Due (to)/from affiliates....................... (8,828) 9,533 (705) -- --
Changes in other operating items............... (192) (9,216) (377) -- (9,785)
----------- ------ ----------- ------------- -------------
Net cash provided by (used for) operating
activities................................. (5,056) 2,172 742 -- (2,142)
----------- ------ ----------- ------------- -------------
INVESTING ACTIVITIES:
Capital expenditures, net........................ (1,821) (634) (1,278) -- (3,733)
Acquisitions, net................................ (18,578) -- -- -- (18,578)
----------- ------ ----------- ------------- -------------
Net cash used in investing activities........ (20,399) (634) (1,278) -- (22,311)
----------- ------ ----------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from borrowings......................... 65,750 -- 2,153 -- 67,903
Repayments of debt............................... (52,500) -- (903) -- (53,403)
Debt financing (to)/from affiliates.............. (18) -- 18 -- --
Proceeds from issuance of common stock and
exercise of stock options...................... 256 -- -- -- 256
Proceeds from issuance of preferred securities... 52,566 -- -- -- 52,566
----------- ------ ----------- ------------- -------------
Net cash provided by financing activities.... 66,054 -- 1,268 -- 67,322
----------- ------ ----------- ------------- -------------
EFFECT OF EXCHANGE RATES ON CASH................. -- -- (79) -- (79)
----------- ------ ----------- ------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS.......... 40,599 1,538 653 -- 42,790
CASH AND CASH EQUIVALENTS, beginning of period... 1,292 134 2,722 -- 4,148
----------- ------ ----------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period......... $ 41,891 $ 1,672 $ 3,375 $ -- $ 46,938
----------- ------ ----------- ------------- -------------
----------- ------ ----------- ------------- -------------
</TABLE>
F-46
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF MARCH 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------ ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................ $ 7,104 $ (13) $ 32,176 $ -- $ 39,267
Accounts receivable, net................. 187,667 96,506 187,109 -- 471,282
Inventories.............................. 41,600 35,621 73,250 -- 150,471
Other current assets..................... 38,788 28,715 61,579 -- 129,082
Due from affiliates...................... 21,537 41,416 505 (63,458) --
------------ ----------- ------------ ------------- ------------
Total current assets................... 296,696 202,245 354,619 (63,458) 790,102
------------ ----------- ------------ ------------- ------------
Property, Plant & Equipment, net........... 138,646 130,950 253,691 -- 523,287
Investment in Subsidiaries................. 476,194 48,177 382,652 (903,865) 3,158
Notes Receivable from Affiliates........... 198,009 -- 27,689 (225,698) --
Goodwill, net.............................. 292,066 175,908 430,368 -- 898,342
Other Assets, net.......................... 27,716 3,494 14,468 -- 45,678
------------ ----------- ------------ ------------- ------------
$ 1,429,327 $ 560,774 $ 1,463,487 $ (1,193,021) $2,260,567
------------ ----------- ------------ ------------- ------------
------------ ----------- ------------ ------------- ------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable......................... $ 106,491 $ 46,655 $ 129,979 $ -- $ 283,125
Due to affiliates........................ 25,146 21,481 16,831 (63,458) --
Accrued liabilities...................... 64,183 65,319 96,640 -- 226,142
Current maturities of long-term debt..... 397 1,347 13,201 -- 14,945
------------ ----------- ------------ ------------- ------------
Total current liabilities.............. 196,217 134,802 256,651 (63,458) 524,212
------------ ----------- ------------ ------------- ------------
Long-Term Debt, net of current
maturities............................... 701,391 11,597 344,158 -- 1,057,146
Other Noncurrent Liabilities............... 45,411 71,184 113,902 -- 230,497
Notes Payable to Affiliates................ 24,457 27,523 173,718 (225,698) --
------------ ----------- ------------ ------------- ------------
Total liabilities...................... 967,476 245,106 888,429 (289,156) 1,811,855
------------ ----------- ------------ ------------- ------------
Mandatorily Redeemable Convertible Trust
Preferred Securities..................... 55,250 -- -- -- 55,250
Stockholders' Investment................... 406,601 315,668 575,058 (903,865) 393,462
------------ ----------- ------------ ------------- ------------
$ 1,429,327 $ 560,774 $ 1,463,487 $ (1,193,021) $2,260,567
------------ ----------- ------------ ------------- ------------
------------ ----------- ------------ ------------- ------------
</TABLE>
F-47
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues........................................ $ 108,955 $ 69,448 $ 90,848 $ (4,550) $ 264,701
Cost of sales................................... 88,609 57,634 76,526 (4,550) 218,219
---------- ----------- ----------- ------------ ------------
Gross profit.................................. 20,346 11,814 14,322 -- 46,482
Selling, general and administrative expenses.... 8,034 1,929 6,934 -- 16,897
Amortization expense............................ 1,125 1,111 1,449 -- 3,685
---------- ----------- ----------- ------------ ------------
Operating income.............................. 11,187 8,774 5,939 -- 25,900
Interest expense, net........................... 2,540 711 3,644 -- 6,895
---------- ----------- ----------- ------------ ------------
Income before provision for income taxes,
equity in earnings (losses) of subsidiaries
and minority interest....................... 8,647 8,063 2,295 -- 19,005
Provision for income taxes...................... 3,079 2,872 1,760 -- 7,711
Equity in earnings (losses) of subsidiaries..... 3,693 -- 1,633 (6,668) (1,342)
Minority interest--dividend on trust preferred
securities, net............................... 611 -- -- -- 611
---------- ----------- ----------- ------------ ------------
Income (loss) before extraordinary item....... 8,650 5,191 2,168 (6,668) 9,341
Extraordinary item--loss on early extinguishment
of debt, net.................................. 2,011 -- 691 -- 2,702
Cumulative effect of change in accounting,
net........................................... (3,147) -- -- -- (3,147)
---------- ----------- ----------- ------------ ------------
Net income (loss)............................. $ 3,492 $ 5,191 $ 1,477 $ (6,668) $ 3,492
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-48
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................................... $ 3,492 $ 5,191 $ 1,477 $ (6,668) $ 3,492
Adjustments required to reconcile net income to
net cash provided by (used for) operating
activities--
Depreciation and amortization................ 3,364 2,669 4,474 -- 10,507
Deferred income tax provision................ (2,187) (82) (788) -- (3,057)
Extraordinary loss on extinguishment of
debt....................................... 2,011 -- 691 -- 2,702
Cumulative effect of change in accounting,
net........................................ 3,147 -- -- -- 3,147
(Income)/loss from investment in
subsidiaries............................... (4,854) -- (1,814) 6,668 --
Due (to)/from affiliates..................... 12,522 (20,452) 7,930 -- --
Equity in losses of affiliates............... 1,161 -- 181 -- 1,342
Changes in other operating items............. 36,934 9,588 (64,268) -- (17,746)
----------- ----------- ----------- ------------- -------------
Net cash provided by (used for) operating
activities............................... 55,590 (3,086) (52,117) -- 387
----------- ----------- ----------- ------------- -------------
INVESTING ACTIVITIES:
Capital expenditures, net...................... (1,215) (2,202) (2,577) -- (5,994)
Acquisitions, net.............................. (442,501) -- (97,632) -- (540,133)
Other.......................................... -- 2,227 -- -- 2,227
----------- ----------- ----------- ------------- -------------
Net cash provided by (used for) investing
activities................................. (443,716) 25 (100,209) -- (543,900)
----------- ----------- ----------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from borrowings....................... 772,550 21,522 110,608 -- 904,680
Repayments of debt............................. (233,577) (17,772) (70,412) -- (321,761)
Debt financing (to)/from affiliates............ (126,223) (145) 126,368 -- --
Debt issuance costs............................ (19,537) -- -- -- (19,537)
Proceeds from issuance of common stock and
exercise of stock options.................... 770 -- -- -- 770
----------- ----------- ----------- ------------- -------------
Net cash provided by financing activities.... 393,983 3,605 166,564 -- 564,152
----------- ----------- ----------- ------------- -------------
EFFECT OF EXCHANGE RATES ON CASH................. -- -- (1,916) -- (1,916)
----------- ----------- ----------- ------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS.......... 5,857 544 12,322 -- 18,723
CASH AND CASH EQUIVALENTS, beginning of period... 1,247 (557) 19,854 -- 20,544
----------- ----------- ----------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period......... $ 7,104 $ (13) $ 32,176 $ -- $ 39,267
----------- ----------- ----------- ------------- -------------
----------- ----------- ----------- ------------- -------------
</TABLE>
F-49
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trident Automotive plc:
We have audited the accompanying consolidated balance sheets of Trident
Automotive plc (a company registered under the laws of England) and subsidiaries
as of December 31, 1998 and March 31, 1998, and the related consolidated
statements of operations, stockholders' investment and cash flows for the period
from inception (September 19, 1997) to March 31, 1998, the one month period
ended April 30, 1998 and the eight month period ended December 31, 1998. These
consolidated 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 Trident Automotive plc and
subsidiaries as of December 31, 1998 and March 31, 1998, and the results of
their operations and their cash flows for the period from inception (September
19, 1997) to March 31, 1998, the one month period ended April 30, 1998 and the
eight month period ended December 31, 1998 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
March 26, 1999
F-50
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
DECEMBER 31, MARCH 31,
1998 1998
------------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................................... $ 8,368 $ 11,415
Accounts receivable, net of allowance for doubtful
accounts of $2,238 and $1,745..................................................... 55,735 48,875
Inventories......................................................................... 15,758 18,798
Other current assets................................................................ 21,281 10,526
------------- -----------
Total current assets.............................................................. 101,142 89,614
Property, Plant and Equipment, net.................................................... 57,332 64,873
Goodwill, net of accumulated amortization of $3,908 and $679.......................... 215,425 88,945
Other Assets, net of accumulated amortization of $1,010 and $564...................... 9,074 15,398
------------- -----------
$ 382,973 $ 258,830
------------- -----------
------------- -----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt................................................... $ 7,059 $ 1,500
Accounts payable.................................................................... 33,796 37,018
Accrued expenses.................................................................... 54,068 28,570
------------- -----------
Total current liabilities......................................................... 94,923 67,088
Noncurrent Liabilities:
Long-term debt, less current portion................................................ 136,799 126,300
Accrued pension and other postretirement liabilities................................ 12,957 12,891
Other noncurrent liabilities........................................................ 37,200 11,536
------------- -----------
Total liabilities................................................................. 281,879 217,815
------------- -----------
------------- -----------
Minority Interest..................................................................... 786 1,170
Redeemable U.S. Dollar Ordinary Shares................................................ -- 740
Stockholders' Investment:
Common stock--Sterling ordinary shares; $1.70 par value; 50,000 shares issued and
outstanding....................................................................... 85 85
Common stock--U.S. dollar ordinary shares; $1.00 par Value; 25,000,000 shares
authorized; 17,000,000 and 16,704,000 shares issued and outstanding............... 17,000 16,704
Additional paid-in capital.......................................................... 78,157 23,556
Retained earnings................................................................... 5,876 123
Accumulated other comprehensive income (loss)--cumulative translation adjustment.... (810) (1,363)
------------- -----------
Total stockholders' investment.................................................... 100,308 39,105
------------- -----------
$ 382,973 $ 258,830
------------- -----------
------------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-51
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FKI
TRIDENT PREDECESSOR
PREDECESSOR -------------------
COMPANY ------------- PERIOD FROM
----------------- ONE MONTH INCEPTION
EIGHT MONTH PERIOD ENDED (SEPTEMBER 19,
PERIOD ENDED APRIL 30, 1997) TO MARCH 31,
DECEMBER 31, 1998 1998 1998
----------------- ------------- -------------------
<S> <C> <C> <C>
Revenues.................................................. $ 187,526 $ 26,475 $ 86,342
Cost of sales............................................. 151,302 26,184 71,295
-------- ------------- -------
Gross profit............................................ 36,224 291 15,047
Selling, general and administrative expenses.............. 14,314 4,009 9,634
Amortization expense...................................... 4,236 389 --
-------- ------------- -------
Operating income (loss)................................. 17,674 (4,107) 5,413
Interest expense, net..................................... (7,703) (952) (3,887)
Exchange gain (loss)...................................... -- 341 (922)
Other income (expense).................................... (82) 62 24
-------- ------------- -------
Income (loss) before provision (benefit) for income
taxes and minority interest........................... 9,889 (4,656) 628
Provision (benefit) for income taxes...................... 4,084 (1,656) 505
Minority interest in profit of subsidiary................. (71) (69) --
-------- ------------- -------
Net income (loss)....................................... $ 5,876 $ (2,931) $ 123
-------- ------------- -------
-------- ------------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-52
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------
U.S. ACCUMULATED
STERLING DOLLARS ADDITIONAL OTHER
ORDINARY ORDINARY PAID-IN- RETAINED COMPREHENSIVE
SHARES DOLLARS SHARES DOLLARS CAPITAL EARNINGS INCOME (LOSS)
----------- ----------- ----------- --------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial capitalization of
Trident Automotive plc..... 50,000 $ 85 -- $ -- $ -- $ -- $ --
Issuance of U.S. Dollar
ordinary shares............ -- -- 16,704,000 16,704 23,556 -- --
Net income................... -- -- -- -- -- 123 --
Other comprehensive income--
translation adjustment -- -- -- -- -- -- (1,363)
Total comprehensive income...
----------- --- ----------- --------- ----------- ----------- ------
Balance, March 31, 1998...... 50,000 85 16,704,000 16,704 23,556 123 (1,363)
Net income................... -- -- -- -- -- (2,931) --
Other comprehensive income--
translation adjustment -- -- -- -- -- -- (1,895)
Total comprehensive income...
----------- --- ----------- --------- ----------- ----------- ------
Balance, April 30, 1998...... 50,000 85 16,704,000 16,704 23,556 (2,808) (3,258)
Purchase by Dura............. -- -- 296,000 296 54,601 2,808 3,258
Net income................... -- -- -- -- -- 5,876 --
Other comprehensive income--
translation adjustment -- -- -- -- -- -- (810)
Total comprehensive income...
----------- --- ----------- --------- ----------- ----------- ------
Balance, December 31, 1998... 50,000 $ 85 17,000,000 $ 17,000 $ 78,157 $ 5,876 $ (810)
----------- --- ----------- --------- ----------- ----------- ------
----------- --- ----------- --------- ----------- ----------- ------
<CAPTION>
TOTAL
STOCKHOLDERS'
INVESTMENT
-------------
<S> <C>
Initial capitalization of
Trident Automotive plc..... $ 85
Issuance of U.S. Dollar
ordinary shares............ 40,260
Net income...................
Other comprehensive income--
translation adjustment
Total comprehensive income... (1,240)
-------------
Balance, March 31, 1998...... 39,105
Net income...................
Other comprehensive income--
translation adjustment
Total comprehensive income... (4,826)
-------------
Balance, April 30, 1998...... 34,279
Purchase by Dura............. 60,963
Net income...................
Other comprehensive income--
translation adjustment
Total comprehensive income... 5,066
-------------
Balance, December 31, 1998... $ 100,308
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FKI
TRIDENT PREDECESSOR
COMPANY PREDECESSOR -----------------
------------ ------------- PERIOD FROM
EIGHT MONTH ONE MONTH INCEPTION
PERIOD ENDED PERIOD ENDED (SEPTEMBER 19,
DECEMBER 31, APRIL 30, 1997) TO
1998 1998 MARCH 31, 1998
------------ ------------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).............................................. $ 5,876 $ (2,931) $ 123
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities--
Depreciation and amortization................................ 9,582 1,456 3,547
Deferred tax................................................. 5,200 (1,681) (2,865)
Exchange (gain) loss......................................... -- (341) 922
Minority interest............................................ (71) (69) (24)
Changes in other operating items............................. (32,263) 6,896 4,511
------------ ------------- --------
Net cash provided by (used in) operating activities........ (11,676) 3,330 6,214
------------ ------------- --------
INVESTING ACTIVITIES:
Capital expenditures, net...................................... (8,939) (2,454) (7,786)
Purchase of Predecessor, net................................... -- -- (155,490)
Acquisition and sale of subsidiaries........................... 8,446 -- --
------------ ------------- --------
Net cash provided by (used in) investing activities........ (493) (2,454) (163,276)
------------ ------------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt....................... 50,000 -- 125,000
Proceeds from borrowings on revolving credit facility.......... 11,706 2,000 7,763
Repayment of debt.............................................. (52,800) (1,300) (4,963)
Receipt of capital from Investor Group......................... -- -- 42,585
Equity fees paid to affiliates of Investor Group............... -- -- (1,500)
------------ ------------- --------
Net cash provided by financing activities.................. 8,906 700 168,885
------------ ------------- --------
EFFECT OF EXCHANGE RATES ON CASH................................. (810) (550) (408)
------------ ------------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS.......................... (4,073) 1,026 11,415
CASH AND CASH EQUIVALENTS, beginning of period................... 12,441 11,415 --
------------ ------------- --------
CASH AND CASH EQUIVALENTS, end of period......................... $ 8,368 $ 12,441 $ 11,415
------------ ------------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for -
Interest..................................................... $ 9,388 $ 361 $ 1,546
Income taxes................................................. 3,490 -- 510
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
Trident Automotive PLC (the "Company") incorporated in the UK, and its
subsidiaries were formed on September 19, 1997 to acquire the net assets of the
FKI Automotive Group (the "FKI Acquisition") from FKI plc ("FKI"). The FKI
Acquisition occurred on December 12, 1997. The aggregate purchase price,
including transaction costs, was approximately $170 million. The FKI Acquisition
was financed with $42.5 million in equity contributions, $75 million in proceeds
from a private placement of the Company's 10% Senior Subordinated Notes due 2005
(the "Notes") and borrowings under a $105 million secured credit facility.
On April 30, 1998, DURA UK, LTD. ("Dura Ltd.") acquired the Company. Dura
Ltd. is a wholly owned subsidiary of Dura Automotive Systems, Inc., a Delaware
corporation, which is a leading designer and manufacturer of driver control
systems, engineered mechanical components and cable-related systems for the
global automotive industry.
The FKI and Dura Acquisitions were 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 and is being amortized over 40
years. The assets acquired and liabilities 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 in conjunction with these acquisitions included approximately $44
million for costs associated with the shutdown and consolidation of certain
acquired facilities and $15 million for associated severance and other related
costs. At December 31, 1998, liabilities for approximately $32 million for costs
associated with the shutdown and consolidation of certain acquired facilities
and $13 million in severance costs are recorded on the consolidated balance
sheet. Results of operations for these acquisitions have been included in the
accompanying consolidated financial statements since the dates of acquisition.
Included in these reserves are amounts associated with businesses to be
exited in conjunction with the acquisition by Dura. The accompanying
consolidated statements of operations include revenues and operating losses from
these businesses as follows (in thousands):
<TABLE>
<CAPTION>
PERIOD ENDED
------------------------------------------------
APRIL 30,
MARCH 31, 1998 1998 DECEMBER 31, 1998
-------------- ------------- -----------------
<S> <C> <C> <C>
Revenues................................... $ 23,912 $ 7,179 $ 50,222
Operating income (loss).................... $ 1,164 $ (954) $ 3,650
</TABLE>
These dispositions are anticipated to be completed by the end of the second
quarter of 1999.
The following unaudited consolidated pro forma results of operations for the
year ended March 31, 1998 give effect to the FKI Acquisition as if such
transactions had occurred at the beginning of the period (in thousands):
<TABLE>
<CAPTION>
1998
----------
<S> <C>
Revenues.......................................................................... $ 297,500
Operating income.................................................................. 14,526
Net loss.......................................................................... (442)
</TABLE>
F-55
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BASIS OF PRESENTATION: (CONTINUED)
The unaudited pro forma consolidated financial information does not purport
to represent what the respective entity'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.
2. SIGNIFCANT 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:
Effective December 31, 1998, the Company changed its fiscal year end from
March 31 to December 31. 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>
COMPANY FKI
------------ PREDECESSOR
DEC. 31, --------------
1998 MARCH 31, 1998
------------ --------------
<S> <C> <C>
Finished products.............................................. $ 5,797 $ 4,158
Work-in-process................................................ 3,470 6,755
Raw materials.................................................. 6,491 7,885
------------ -------
Total.......................................................... $ 15,758 $ 18,798
------------ -------
------------ -------
</TABLE>
F-56
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFCANT ACCOUNTING POLICIES: (CONTINUED)
OTHER CURRENT ASSETS:
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
COMPANY FKI
------------ PREDECESSOR
DEC. 31, --------------
1998 MARCH 31, 1998
------------ --------------
<S> <C> <C>
Deferred income taxes.......................................... $ 15,639 $ 4,885
Prepaid expenses............................................... 2,600 2,856
Excess of cost over billings on uncompleted tooling projects... 2,300 651
Taxes receivable............................................... 742 2,134
------------ -------
$ 21,281 $ 10,526
------------ -------
------------ -------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. For financial reporting
purposes, depreciation is provided on the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
10 to 15
Land and Improvements........................................ years
Buildings.................................................... 30 years
Machinery and equipment...................................... 5 to 15 years
</TABLE>
Accelerated depreciation methods are used for tax reporting purposes.
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements which extend the useful life of the item are
capitalized and depreciated. The cost and accumulated depreciation of property,
plant and equipment retired or otherwise disposed of are removed from the
related accounts, and any residual values are charged or credited to income.
GOODWILL AND 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 debt financing costs which are being
amortized over the term of the applicable agreement.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of the
remaining balance of its goodwill and other long-lived assets. If such events or
circumstances were to indicate that the carrying amount of these assets would
not be recoverable, the Company would estimate the future cash flows expected to
result from the use of the assets and their eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) were
less than the carrying amount of goodwill and other long-lived assets, the
Company would recognize an impairment loss.
F-57
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFCANT ACCOUNTING POLICIES: (CONTINUED)
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
COMPANY FKI
------------ PREDECESSOR
DEC. 31, --------------
1998 MARCH 31, 1998
------------ --------------
<S> <C> <C>
Income taxes................................................... $ 5,385 $ 3,695
Plant closure and consolidation costs.......................... 29,635 4,363
Compensation and benefits...................................... 6,589 9,737
Medical insurance.............................................. 557 --
Legal and environmental........................................ 1,873 3,332
Interest....................................................... 1,764 2,271
Other.......................................................... 8,265 5,172
------------ -------
$ 54,068 $ 28,570
------------ -------
------------ -------
</TABLE>
OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
COMPANY FKI
------------ PREDECESSOR
DEC. 31, --------------
1998 MARCH 31, 1998
------------ --------------
<S> <C> <C>
Plant closure and consolidation costs.......................... $ 15,840 $ 4,858
Loss contracts................................................. 5,657 4,202
Legal and environmental........................................ 2,210 --
Deferred income taxes.......................................... 13,493 --
Other.......................................................... -- 2,476
------------ -------
$ 37,200 $ 11,536
------------ -------
------------ -------
</TABLE>
REVENUE RECOGNITION AND SALES COMMITMENTS:
The Company recognizes revenue as its products are shipped to its customers.
The Company enters into agreements with its customers at the beginning of a
given vehicle's life to produce products. Once such agreements are entered into
by the Company, fulfillment of the customers' purchasing requirements is the
obligation of the Company for the entire production life of the vehicle, with
terms of up to seven years, and the Company has no provisions to terminate such
contracts. 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 and is recorded at the minimum amount necessary to fulfill the
Company's obligations to its customers.
INCOME TAXES:
The Company accounts for income taxes following the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, which requires recognition
of deferred tax assets and
F-58
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFCANT ACCOUNTING POLICIES: (CONTINUED)
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.
COMPREHENSIVE INCOME:
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." This statement established standards for
reporting and display of comprehensive income and its components. Comprehensive
income reflects the change in equity of a business enterprise during a period
from transactions and other events and circumstances from non-owner sources. For
the Company, comprehensive income represents net income adjusted for foreign
currency translation adjustments. In accordance with SFAS No. 130, the Company
has chosen to disclose comprehensive income in the consolidated statements of
stockholders' investment. Prior years have been restated to conform to the SFAS
No. 130 requirements.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and revolving credit facilities approximates fair value because
of the short maturity of these instruments. The carrying amount of the Company's
long-term debt approximates fair value because of the variability of the
interest cost associated with these instruments. The Notes were recorded at fair
value in connection with the Dura acquisition in April 1998, and the Company
believes there has been no material change in the estimated fair value since
such date.
SEGMENT REPORTING:
In 1998, the Company adopted SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 supersedes SFAS No. 14,
replacing the "industry segment" approach with the "management" approach. The
management approach designates the internal organization that is used by
management for making operating decisions and assessing performance as the
source of the Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas and major customers.
The adoption of SFAS No. 131 did not affect results of operations or financial
position but did affect the disclosure of segment information (see Note 5).
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. Ultimate results could differ from those estimates.
F-59
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFCANT ACCOUNTING POLICIES: (CONTINUED)
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 in the prior period financial statements have been
reclassified to conform to the current presentation. These reclassifications
were not material to the Company's financial position or results of operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective for
years beginning after June 15, 1999. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge criteria are met. Special accounting
for qualifying hedges allow a derivative's gains or losses to offset related
results on the hedged item in the income statement and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. The Company has not yet quantified the impacts of
adopting SFAS No. 133 and has not yet determined the timing of adoption.
In April 1998, the Financial Accounting Standards Board issued Statement of
Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities,"
effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires
the expensing of start-up activities as incurred, versus capitalizing and
expensing them over a period of time. The Company will adopt this new
pronouncement in the first quarter of 1999 and does not estimate a material
impact upon adoption.
3. DEBT:
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
COMPANY FKI
------------ PREDECESSOR
DECEMBER 31, --------------
1998 MARCH 31, 1998
------------ --------------
<S> <C> <C>
Bank Credit Agreement:
Term loan...................................................... $ 43,500 $ 50,000
Revolving credit facility...................................... 18,894 2,800
Capital leases................................................. 314 --
Notes.......................................................... 81,150 75,000
------------ --------------
143,858 127,800
Less--current portion.......................................... (7,059) (1,500)
------------ --------------
Total long-term debt........................................... $ 136,799 $ 126,300
------------ --------------
------------ --------------
</TABLE>
F-60
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. DEBT: (CONTINUED)
Future maturities of long-term debt as of December 31, 1998 are as follows
(in thousands):
<TABLE>
<S> <C>
1999.............................................................. $ 7,059
2000.............................................................. 7,525
2001.............................................................. 11,529
2002.............................................................. 12,529
Thereafter........................................................ 81,293
---------
$ 143,858
---------
---------
</TABLE>
On April 30, 1998, in connection with the Dura Acquisition, Dura and the
Company entered into a new $402.5 million credit agreement (the "Credit
Agreement"). This Credit Agreement was used to replace the Company's credit
facility. The Credit Agreement provided Dura with total revolving credit
facilities of $225 million, term loans of $100 million, an acquisition facility
of $30 million and a twelve-month interim loan of $47.5 million. The Credit
Agreement made available to the Company, as a sub-facility, a $50 million term
loan, a $25 million revolving credit and letter-of-credit facility and a $30
million acquisition facility (the "Trident Sub-Facility"). The Credit Agreement
has a term of five years and borrowings bear interest at the lender's reference
rate or the Eurocurrency rate. The interest rate on borrowings outstanding under
the Trident Sub Facility ranged from 5.775% to 7.9625% as of December 31, 1998.
The Credit Agreement requires the Company to maintain certain financial ratios
including minimum liquidity and interest coverage. Pursuant to the terms of the
Credit Agreement, Dura and certain of its subsidiaries will provide guarantees
and collateral to support obligations owing under the Trident Sub-Facility; but,
so long as the Notes remain outstanding, neither the Company nor any of its
subsidiaries have guaranteed any obligations that are not borrowed pursuant to
the Trident Sub-Facility. Under the terms of the Credit Agreement, an event of
default by Dura also causes an event of default under the Trident Sub-Facility.
The Company and Dura were in compliance with the covenants as of December 31,
1998. The assets of the Company have been pledged as collateral to secure
borrowings under the Trident Sub-Facility.
The Trident Sub-Facility provides the Company with the ability to denominate
its revolving credit borrowings in foreign currencies. As of December 31, 1998,
$51.6 million of borrowings were denominated in U.S. dollars, $4.7 million were
denominated in British pound sterling, $1.4 million were denominated in Canadian
dollars and $4.7 million were denomination in French francs.
The Notes, with a face value of $75 million, were issued on December 12,
1997, concurrent with the FKI Acquisition, and are due in December 2005.
Interest is payable semi-annually on June 15 and December 15 of each year. As
further discussed in Note 9, the Notes are guaranteed by certain subsidiaries of
the Company. The Notes were recorded at their fair value of $81.150 million as
part of the Dura Acquisition. The premium in excess of face value will be
amortized over the life of the Notes using the effective interest method. The
Notes contain various restrictive covenants which the Company was in compliance
with as of December 31, 1998.
The Dura Acquisition constituted a change of control as defined by the
Company's Notes Indenture (the "Indenture"). Upon the occurrence of a change of
control, each holder of the Notes may require the Company to repurchase all or
any part of the Notes held by such holder at an offer price in cash equal to
101% of the aggregate principal amount thereof, plus accrued interest and other
F-61
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. DEBT: (CONTINUED)
specified costs to the date of repurchase. Pursuant to the terms of the
Indenture, Dura initiated a change of control offer to the holders of the Notes
on May 8, 1998. No holders tended their Notes.
Subsequent to year-end, Dura and the Company entered into a new credit
facility (the "New Credit Facility"). The New Credit Facility provides for
borrowings aggregating up to approximately $1.15 billion, including a $275
million term loan A, a $275 million term loan B, a $400 million revolving credit
facility and a $200 million interim term loan. The New Credit Facility contains
the same sub-facilities for Trident as the Credit Agreement.
4. INCOME TAXES:
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
FKI
PREDECESSOR
TRIDENT ---------------
PREDECESSOR PERIOD FROM
COMPANY ------------- INCEPTION
------------- ONE MONTH (SEPT. 19,
EIGHT MONTH PERIOD ENDED 1997)
PERIOD ENDED APRIL 30, TO MAR. 31,
DEC. 31, 1998 1998 1998
------------- ------------- ---------------
<S> <C> <C> <C>
Current............................................................ $ (1,116) $ 25 $ 3,370
Deferred........................................................... 5,200 (1,681) (2,865)
------------- ------------- ------
Total............................................................ $ 4,084 $ (1,656) $ 505
------------- ------------- ------
------------- ------------- ------
</TABLE>
A reconciliation of the provision for income taxes at the U.S. statutory
rates of 35% to the reported income tax provision is as follows (in thousands):
<TABLE>
<CAPTION>
TRIDENT FKI
PREDECESSOR PREDECESSOR
COMPANY ------------- -----------------
------------- ONE MONTH PERIOD FROM
EIGHT MONTH PERIOD ENDED INCEPTION
PERIOD ENDED APRIL 30, (SEPT. 19, 1997)
DEC. 31, 1998 1998 TO MAR. 31, 1998
------------- ------------- -----------------
<S> <C> <C> <C>
Federal provision at statutory rates............................... $ 3,461 $ (1,630) $ 220
State taxes, net of federal benefit................................ -- -- 15
Foreign provision in excess of U.S. tax rate....................... 29 (164) 155
Unbenefitted foreign losses........................................ 793 79 --
Other.............................................................. (199) 59 115
------------- ------------- -----
Total............................................................ $ 4,084 $ (1,656) $ 505
------------- ------------- -----
------------- ------------- -----
</TABLE>
F-62
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES: (CONTINUED)
A summary of deferred tax assets (liabilities) is as follows (in thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
------------ -----------
DECEMBER 31, MARCH 31,
1998 1998
------------ -----------
<S> <C> <C>
Net operating loss carryforwards...................................................... $ 3,705 $ --
Accrued plant closure and consolidation costs......................................... 11,120 3,281
Inventory valuation adjustments....................................................... -- 1,503
Capitalized reserves and accruals..................................................... 814 2,894
Long-term basis differences, including goodwill....................................... (13,493) --
Other................................................................................. -- 439
------------ -----------
$ 2,146 $ 8,117
------------ -----------
------------ -----------
</TABLE>
5. GEOGRAPHIC AND PRODUCT LINE INFORMATION:
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company manufactures engineered
mechanisms for the global automotive industry and operates in a single
reportable business segment, automotive products. The Company internally
evaluates its business principally by product category; however, because of the
similar economic characteristics of the operations, including the nature of
products, production processes and customers, those operations have been
aggregated following the provisions of SFAS No. 131 for segment reporting
purposes.
The following is a summary of revenues and long-lived assets by geographic
location (in thousands):
<TABLE>
<CAPTION>
EIGHT MONTH PERIOD ONE MONTH PERIOD ENDED PERIOD FROM INCEPTION
ENDED (SEPTEMBER 19, 1997)
DECEMBER 31, 1998 APRIL 30, 1998 TO MARCH 31, 1998
---------------------- ---------------------- ----------------------
LONG-LIVED LONG-LIVED LONG-LIVED
REVENUES ASSETS REVENUES ASSETS REVENUES ASSETS
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
North America........................... $ 122,472 $ 32,643 $ 18,150 $ 37,987 $ 58,513 $ 38,499
Europe.................................. 58,574 22,041 7,384 23,305 24,717 23,386
Other foreign countries................. $ 6,480 $ 2,648 $ 941 $ 2,601 3,112 2,988
--------- ----------- --------- ----------- --------- -----------
$ 187,526 $ 57,332 $ 26,475 $ 63,893 $ 86,342 $ 64,873
--------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- -----------
</TABLE>
Revenues are attributed to geographic locations based on the location of
product production.
F-63
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. GEOGRAPHIC AND PRODUCT LINE INFORMATION: (CONTINUED)
The following is a summary of the approximate composition by product
category of the Company's revenues (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
EIGHT-MONTH ONE-MONTH INCEPTION
PERIOD ENDED PERIOD ENDED (SEPTEMBER 19,
DEC. 31, APRIL 30, 1997)
1998 1998 TO MARCH 31, 1998
------------ ------------- -------------------
<S> <C> <C> <C>
Automotive fixtures............................................ $ 50,222 $ 7,179 $ 23,912
Automotive cables.............................................. 137,304 19,296 62,430
------------ ------------- -------
$ 187,526 $ 26,475 $ 86,342
------------ ------------- -------
------------ ------------- -------
</TABLE>
The Company sells its products directly to automobile manufacturers.
Customers that accounted for a significant portion of consolidated revenues in
the eight month period ended December 31, 1998, the one month period ended April
30, 1998 and the period from inception (September 19, 1997) to March 31, 1998
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 APRIL 30, 1998 MARCH 31, 1998
----------------------- ----------------- -------------------
<S> <C> <C> <C>
Ford........................................................... 16% 16% 16%
GM............................................................. 17 17 17
DaimlerChrysler................................................ 19 19 19
</TABLE>
As of December 31, 1998 and March 31, 1998, receivables from these customers
represented 42% and 45% of total accounts receivable.
6. EMPLOYEE BENEFIT PLANS:
PENSION PLANS AND POSTRETIREMENT BENEFITS:
The Company sponsors six 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. In addition, the Company has various
postretirement medical benefit plans for certain employee groups and has
recorded a liability for its estimated obligation under these plans.
F-64
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The change in benefit obligation and plan assets consisted of the following
(in thousands):
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
------------------------- -------------------------
DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
1998 1998 1998 1998
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of the period................ $ 23,926 $ 22,911 $ 9,473 $ 9,374
Service cost................................................. 1,287 526 166 69
Interest cost................................................ 1,264 519 506 209
Plan participants' contributions............................. -- 29 -- --
Actuarial gain............................................... 4,672 -- 1,994 --
Acquisition of Trident....................................... -- -- -- --
Benefits paid................................................ -- (59) (616) (179)
------------ ----------- ------------ -----------
Benefit obligation at end of the period...................... $ 31,149 $ 23,926 $ 11,523 $ 9,473
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
CHANGE IN PLAN ASSETS:
Fair value at plan assets at beginning of the period......... 21,258 20,625 -- --
Actual return on plan assets................................. 1,312 604 -- --
Acquisition of Trident....................................... -- -- -- --
Employer contributions....................................... 344 59 -- --
Plan participants contributions.............................. -- 29 -- --
Benefits paid................................................ -- (59) -- --
------------ ----------- ------------ -----------
Fair value of plan assets at end of the period............... $ 22,914 $ 21,258 $ -- $ --
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
All of the Company's plans have benefit obligations in excess of their
respective plan assets. The funded status of the Company's plans is as follows
(in thousands):
<TABLE>
<CAPTION>
POSTRETIREMENT
BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
------------------------ ----------------------
DEC. 31, MARCH 31, DEC. 31, MARCH 31,
1998 1998 1998 1998
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Funded status
Unrecognized actuarial gain.......................................... $ 8,235 $ 2,668 $ 11,523 $ 9,473
Unrecognized prior service cost...................................... -- -- (1,995) --
Adjustment to recognize minimum liability............................ -- -- -- --
----------- ----------- --------- -----------
Accrued benefit cost................................................. $ 8,235 $ 2,668 $ 9,528 $ 9,473
----------- ----------- --------- -----------
----------- ----------- --------- -----------
</TABLE>
F-65
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The following weighted average assumptions were used to account for the
plans:
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
-------------------------- ------------------------
DEC. 31, MARCH 31, DEC. 31, MARCH 31,
1998 1998 1998 1998
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Discount rate.......................................... 5.750-7.375% 6.00-6.375% 6.75-7.375% 7.375%
Expected return on plan assets......................... 9-9.5% 9-9.5% N/A N/A
Rate of compensation increase.......................... 4-6% 4.5-6% N/A N/A
</TABLE>
For measurement purposes, a 7% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1998. The rate was assumed
to decrease .5% per year in 1999 to 5% in 2003.
The components of net periodic benefit costs are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
-------------------------------- ------------------------------------
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(SEPT. 19, (SEPT. 19,
NINE MONTH PERIOD 1997) 1997)
ENDED DEC. 31, TO MARCH 31, NINE MONTH PERIOD TO MARCH 31,
1998 1998 ENDED DEC. 31, 1998 1998
----------------- ------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Service cost..................... $ 1,287 $ 526 166 $ 69
Interest cost.................... 1,264 519 506 209
Expected return on plan assets... (1,464) (603) -- --
Amortization of prior service
cost........................... -- -- -- --
Recognized actuarial (gain)
loss........................... -- -- -- --
------- ----- ----- -----
Net periodic benefit cost........ $ 1,087 $ 442 $ 672 $ 278
------- ----- ----- -----
------- ----- ----- -----
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the post retirement medical benefit plans. A one
percentage-point change in assumed health care cost trend rates would have the
following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------- -------------------
<S> <C> <C>
Effect on total of service and interest cost
components............................................ $ 13 $ (12)
----- -----
----- -----
Effect on the post retirement benefit obligation........ $ 182 $ (164)
----- -----
----- -----
</TABLE>
F-66
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES:
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, 1998 under these operating leases are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- --------------------------------------- ---------
<S> <C>
1999................................... $ 2,153
2000................................... 2,099
2001................................... 1,998
2002................................... 1,779
2003................................... 1,642
Thereafter............................. 1,425
</TABLE>
LITIGATION:
The Company is from time to time subject to various legal actions and claims
incidental to its business, including those arising out of alleged defects,
product warranties, employment-related matters and environmental matters.
Litigation is subject to many uncertainties, and the outcome of individual
litigated matters is not predictable with assurance. After discussions with
counsel, it is the opinion of management that the Company has provided adequate
reserves to cover these matters, and the ultimate outcome of such matters will
not have a material adverse impact on the consolidated financial position,
results of operations or cash flows of the Company.
8. COMBINED HISTORICAL FINANCIAL RESULTS (UNAUDITED):
The results of operations for the nine months ended December 31, 1997 were
as follows:
<TABLE>
<S> <C>
Revenues.......................................... $ 219,465
Gross profit...................................... 35,740
Net income........................................ 5,339
</TABLE>
These represent the results of operations for the historical period under
FKI ownership from April 1, 1997 to December 12, 1997, combined with the results
of the Company for the period from December 13, 1997 to December 31, 1997.
9. RELATED PARTY TRANSACTIONS:
In December 1998, the Company sold its investment in its German subsidiary
to Dura for approximately $4 million. The selling price was based on book value
and, therefore, no gain or loss resulted from the sale.
In December 1998, the Company purchased 100% of the common stock of the
French brake subsidiary of Dura at book value. The Company paid approximately
$45,000 in cash and assumed $4.9 million in debt.
F-67
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. RELATED PARTY TRANSACTIONS: (CONTINUED)
Dura provides certain services on behalf of the Company. These services
include accounting and treasury functions, maintenance of management information
systems, legal services and assistance with other legal matters. Dura does not
charge Trident for any of these services.
10. SUBSEQUENT EVENT (UNAUDITED):
On June 24, 1999, the Company completed a cash tender offer related to the
Notes. The total consideration paid was approximately $84 million in Note
principal and premium and was funded through borrowings under the Dura Credit
Agreement. The Company will record an extraordinary loss on the early
extinguishment of debt, net of income tax benefit, of $2.7 million in the second
quarter of 1999.
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
The following consolidating financial information presents balance sheet,
statement of operations and cash flow information related to the Company's
businesses. Each Guarantor is a direct or indirect wholly owned subsidiary of
Trident Automotive plc and has fully and unconditionally guaranteed the Notes,
on a joint and several basis. The Company has not presented separate financial
statements and other disclosures concerning the Guarantors because management
believes that such information is not material.
F-68
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................. $ 272 $ 1,719 $ 6,377 $ -- $ 8,368
Accounts receivable, net................... -- 40,217 15,518 -- 55,735
Inventories................................ -- 12,265 3,493 -- 15,758
Due from affiliates........................ 649 18,708 707 (20,064) --
Other current assets....................... -- 16,995 4,286 -- 21,281
-------------- ----------- ----------- ------------ ------------
Total current assets................... 921 89,904 30,381 (20,064) 101,142
Property, Plant and Equipment, net........... -- 48,223 9,109 -- 57,332
Note Receivable From Subsidiaries............ -- 27,032 -- (27,032) --
Deferred Financing Costs..................... -- -- -- -- --
Investment in Subsidiaries................... 163,815 12,145 -- (175,960) --
Goodwill, net................................ 74,896 119,542 25,763 (4,776) 215,425
Other Assets, net............................ 4,236 3,368 1,470 -- 9,074
-------------- ----------- ----------- ------------ ------------
$ 243,868 $ 300,214 $ 66,723 $ (227,832) $ 382,973
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt.......... $ 7,059 $ -- $ -- $ -- $ 7,059
Accounts payable........................... -- 22,878 10,918 -- 33,796
Accrued expenses........................... 1,903 44,859 7,316 (10) 54,068
Due to affiliates.......................... 18,344 351 1,359 (20,054) --
-------------- ----------- ----------- ------------ ------------
Total current liabilities.............. 27,306 68,088 19,593 (20,064) 94,923
-------------- ----------- ----------- ------------ ------------
Non-Current Liabilities:
Long-term debt, less current portion....... 121,650 15,123 226 -- 136,799
Note payable to Parent..................... (3,476) 649 31,495 (28,668) --
Accrued pension and other postretirement
liabilities.............................. -- 11,891 1,066 -- 12,957
Other noncurrent liabilities............... -- 34,767 2,433 -- 37,200
-------------- ----------- ----------- ------------ ------------
Total liabilities...................... 145,480 130,318 54,813 (48,732) 281,879
-------------- ----------- ----------- ------------ ------------
Minority Interest in Subsidiary Company...... -- -- 786 -- 786
Stockholders' Investment..................... 98,388 169,896 11,124 (179,100) 100,308
-------------- ----------- ----------- ------------ ------------
$ 243,868 $ 300,214 $ 66,723 $ (227,832) $ 382,973
-------------- ----------- ----------- ------------ ------------
</TABLE>
F-69
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE EIGHT-MONTH PERIOD ENDED
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues..................................... $ -- $ 151,568 $ 42,232 $ (6,274) $ 187,526
Cost of sales................................ -- 123,499 34,077 (6,274) 151,302
------ ----------- ----------- ------------ ------------
Gross profit............................... -- 28,069 8,155 -- 36,224
Selling, general and administrative
expenses................................... 31 9,953 4,332 (2) 14,314
Amortization expense......................... 1,451 2,349 517 (81) 4,236
------ ----------- ----------- ------------ ------------
Operating income (loss).................... (1,482) 15,767 3,306 83 17,674
Interest expense............................. (7,389) (309) (249) -- (7,947)
Interest expense-intercompany................ -- (5,746) (1,088) 6,834 --
Interest income.............................. -- 112 132 -- 244
Interest income--intercompany................ 1 6,753 -- (6,754) --
Exchange gain (loss)......................... -- -- -- -- --
Equity in net income of subsidiary........... 10,596 1,083 -- (11,679) --
Other income (expense)....................... -- -- -- (82) (82)
------ ----------- ----------- ------------ ------------
Net income (loss) before provision for
income taxes and minority interest....... 1,726 17,660 2,101 (11,598) 9,889
Provision (benefit) for income taxes......... (2,230) 5,145 1,169 -- 4,084
Minority interest in profit of subsidiary.... -- -- (71) -- (71)
------ ----------- ----------- ------------ ------------
Net income (loss).......................... $ 3,956 $ 12,515 $ 1,003 $ (11,598) $ 5,876
------ ----------- ----------- ------------ ------------
------ ----------- ----------- ------------ ------------
</TABLE>
F-70
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE EIGHT-MONTH PERIOD ENDED
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).......................... $ 3,956 $ 12,515 $ 1,003 $ (11,598) $ 5,876
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities
Depreciation and amortization.......... 1,451 6,344 1,787 -- 9,582
Loss (income) from investment in
subsidiaries......................... (10,596) (1,083) -- 11,679 --
Exchange gain (loss)................... -- -- -- -- --
Minority interest...................... -- -- (71) -- (71)
Deferred taxes......................... (3,254) 9,143 (689) -- 5,200
Due to/from affiliates................. 17,277 (22,331) 3,965 1,089 --
Changes in other operating items....... (1,800) (27,185) (4,238) 960 (32,263)
------- ----------- ----------- ------------ ------------
Net cash provided by (used in)
operating activities............... 7,034 (22,597) 1,757 2,130 (11,676)
------- ----------- ----------- ------------ ------------
INVESTING ACTIVITIES:
Capital expenditures, net................ -- (6,913) (1,945) (81) (8,939)
Acquisition and sale of subsidiaries..... -- 8,454 (8) -- 8,446
------- ----------- ----------- ------------ ------------
Net cash provided by (used in) investing
activities............................. -- 1,541 (1,953) (81) (493)
------- ----------- ----------- ------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt................................... 50,000 -- -- -- 50,000
Proceeds from borrowings under revolving
credit facility........................ (3,200) 14,906 -- -- 11,706
Repayment of debt........................ (52,800) -- -- -- (52,800)
------- ----------- ----------- ------------ ------------
Net cash provided by (used in)
financing activities................. (6,000) 14,906 -- -- 8,906
------- ----------- ----------- ------------ ------------
EFFECT OF EXCHANGE RATES ON CASH........... (810) 928 1,121 (2,049) (810)
------- ----------- ----------- ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS.... 224 (5,222) 925 -- (4,073)
CASH AND CASH EQUIVALENTS, beginning of
period................................... 48 6,941 5,452 -- 12,441
------- ----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of period... $ 272 $ 1,719 $ 6,377 $ -- $ 8,368
------- ----------- ----------- ------------ ------------
------- ----------- ----------- ------------ ------------
</TABLE>
F-71
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF APRIL 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................. $ 48 $ 6,941 $ 5,452 $ -- $ 12,441
Accounts receivable, net.................. -- 35,046 15,337 -- 50,383
Inventories............................... -- 14,410 3,813 -- 18,223
Due from affiliates....................... 2,292 7,303 480 (10,075) --
Other current assets...................... 997 2,703 3,204 -- 6,904
-------------- ----------- ----------- ------------ ------------
Total current assets.................... 3,337 66,403 28,286 (10,075) 87,951
Property, Plant and Equipment, net.......... -- 52,562 11,331 63,893
Note Receivable from Subsidiaries........... -- 22,281 -- (22,281) --
Deferred Financing Costs.................... 6,527 -- -- -- 6,527
Investment in Subsidiaries.................. 154,041 14,301 -- (168,342) --
Goodwill, net............................... 3,789 65,105 22,640 -- 91,534
Other Assets, net........................... -- 13,585 666 -- 14,251
-------------- ----------- ----------- ------------ ------------
$ 167,694 $ 234,237 $ 62,923 $ (200,698) $ 264,156
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt......... $ 1,500 $ -- $ -- $ -- $ 1,500
Accounts payable.......................... -- 28,988 9,128 -- 38,116
Accrued expenses.......................... 4,119 23,253 9,133 503 37,008
Due to affiliates......................... 3,532 2,121 884 (6,537) --
-------------- ----------- ----------- ------------ ------------
Total current liabilities............... 9,151 54,362 19,145 (6,034) 76,624
Non-Current Liabilities:
Long-term debt, less current portion...... 127,000 -- -- -- 127,000
Note payable to Parent.................... (3,476) 3,276 24,152 (23,952) --
Accrued pension and other postretirement
liabilities............................. -- 13,271 992 -- 14,263
Other noncurrent liabilities.............. -- 6,918 3,230 -- 10,148
Total liabilities....................... 132,675 77,827 47,519 (29,986) 228,035
-------------- ----------- ----------- ------------ ------------
Minority Interest in Subsidiary Company..... -- -- 1,101 -- 1,101
Stockholders' Investment.................... 35,019 156,410 14,303 (170,712) 35,020
-------------- ----------- ----------- ------------ ------------
$ 167,694 $ 234,237 $ 62,923 $ (200,698) $ 264,156
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
</TABLE>
F-72
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE ONE-MONTH PERIOD
ENDED APRIL 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRIDENT NON-
AUTOMOTIVE GUARANTOR GUARANTOR
PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $ -- $ 20,931 $ 5,544 $ -- $ 26,475
Cost of sales......................... -- 21,474 4,710 -- 26,184
----------- ----------- ----------- ----------- -----------
Gross profit........................ -- (543) 834 -- 291
Selling, general and administrative
expenses............................ 16 3,228 765 -- 4,009
Amortization.......................... 47 266 76 -- 389
----------- ----------- ----------- ----------- -----------
Operating income.................... (63) (4,037) (7) -- (4,107)
Interest expense...................... (955) (1,188) (198) 1,365 (976)
Interest income....................... -- 1,376 8 (1,360) 24
Exchange (loss) gain.................. -- (267) 613 (5) 341
Equity in net earnings of
subsidiaries........................ (2,307) 385 -- 1,922 --
Other income.......................... -- 51 11 -- 62
----------- ----------- ----------- ----------- -----------
Income before provision for income
taxes............................. (3,325) (3,680) 427 1,922 (4,656)
Provision (benefit) for income
taxes............................... (394) (1,373) 111 -- (1,656)
Minority interest in profit of
subsidiary.......................... -- -- (69) -- (69)
----------- ----------- ----------- ----------- -----------
Net income.......................... $ (2,931) $ (2,307) $ 385 $ 1,922 $ (2,931)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
F-73
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE ONE-MONTH PERIOD ENDED
APRIL 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRIDENT NON-
AUTOMOTIVE GUARANTOR GUARANTOR
PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................... $ (2,931) $ (2,307) $ 385 $ 1,922 $ (2,931)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities--
Depreciation and amortization..... 47 1,183 226 -- 1,456
Loss (income) from investment in
subsidiaries.................... 2,307 (385) -- (1,922) --
Deferred income taxes............. -- (1,679) (2) -- (1,681)
Unrealized exchange gain (loss)... -- 267 (608) -- (341)
Minority interest................. -- -- (69) -- (69)
Changes in other operating
items........................... 52 5,639 843 362 6,896
------------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities.......... (525) 2,718 775 362 3,330
------------- ----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Capital expenditures, net......... -- (2,293) (161) -- (2,454)
------------- ----------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of
long-term debt.................. -- -- -- -- --
Proceeds from borrowings under
revolving credit facility....... 2,000 -- -- -- 2,000
Repayment of debt................. (1,300) -- -- -- (1,300)
------------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities.................... 700 -- -- -- 700
------------- ----------- ----------- ----------- -----------
EFFECT OF EXCHANGE RATES ON CASH.... (422) 216 18 (362) (550)
------------- ----------- ----------- ----------- -----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS....................... (247) 641 632 -- 1,026
CASH AND CASH EQUIVALENTS, beginning
of period......................... 295 6,300 4,820 -- 11,415
------------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of
period............................ $ 48 $ 6,941 $ 5,452 $ -- $ 12,441
------------- ----------- ----------- ----------- -----------
------------- ----------- ----------- ----------- -----------
</TABLE>
F-74
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRIDENT NON-
AUTOMOTIVE GUARANTOR GUARANTOR
PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............. $ 295 $ 6,300 $ 4,820 $ -- $ 11,415
Accounts receivable, net.............. -- 34,330 14,545 -- 48,875
Inventories........................... -- 15,020 3,778 -- 18,798
Due from affiliates................... 4,592 5,207 1,394 (11,193) --
Other current assets.................. 603 6,589 3,334 -- 10,526
------------ ----------- ----------- ----------- -----------
Total current assets................ 5,490 67,446 27,871 (11,193) 89,614
------------ ----------- ----------- ----------- -----------
Property, Plant and Equipment, net...... -- 53,804 11,069 -- 64,873
Note Receivable from Subsidiaries....... -- 22,281 -- (22,281) --
Goodwill, net........................... 3,796 62,996 22,153 -- 88,945
Deferred financing lists................ 6,426 -- -- -- 6,426
Investment in subsidiaries.............. 158,232 13,984 -- (172,216) --
Other Assets, net....................... 11 7,571 1,390 -- 8,972
------------ ----------- ----------- ----------- -----------
$ 173,955 $ 228,082 $ 62,483 $(205,690) $ 258,830
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt..... $ 1,500 $ -- $ -- $ -- $ 1,500
Accounts payable...................... -- 28,546 8,472 -- 37,018
Accrued expenses...................... 3,539 15,748 9,283 -- 28,570
Due to affiliates..................... 2,771 5,003 3,366 (11,140) --
------------ ----------- ----------- ----------- -----------
Total current liabilities........... 7,810 49,297 21,121 (11,140) $ 67,088
------------ ----------- ----------- ----------- -----------
Non-Current Liabilities:
Long-term debt, less current
portion............................. 126,300 -- -- -- 126,300
Note payable to Parent................ -- -- 22,278 (22,278) --
Accrued pension and other
postretirement liabilities.......... -- 11,920 971 -- 12,891
Other noncurrent liabilities.......... -- 8,300 3,236 -- 11,536
------------ ----------- ----------- ----------- -----------
Total liabilities................... 134,110 69,517 47,606 (33,418) 217,815
------------ ----------- ----------- ----------- -----------
Minority Interest in Subsidiary
Company............................... -- -- 1,170 -- 1,170
Redeemable U.S. Dollar Ordinary Shares.. 740 -- -- -- 740
Stockholders' Investment................ 39,105 158,565 13,707 (172,272) 39,105
------------ ----------- ----------- ----------- -----------
$ 173,955 $ 228,082 $ 62,483 $(205,690) $ 258,830
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
</TABLE>
F-75
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 19, 1997) TO MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues....................................... $ -- $ 69,293 $ 17,755 $ (706) $ 86,342
Cost of sales.................................. -- 57,249 14,752 (706) 71,295
------- ----------- ----------- ------------ ------------
Gross profit................................. -- 12,044 3,003 -- 15,047
Selling, general and administrative expenses... 49 7,056 2,529 -- 9,634
------- ----------- ----------- ------------ ------------
Operating income............................. (49) 4,988 474 -- 5,413
Interest expense............................... 4,022 3,611 799 (4,340) 4,092
Interest income................................ (2,481) (1,932) (132) 4,340 (205)
Exchange loss.................................. -- 1 921 -- 922
Other income (expense)......................... (1,188) 792 (24) 396 (24)
------- ----------- ----------- ------------ ------------
Income before provision for income taxes..... (402) 2,516 (1,090) (396) 628
Provision (benefit) for income taxes........... (525) 1,328 (298) -- 505
Minority interest in profit of subsidiary...... -- -- -- -- --
------- ----------- ----------- ------------ ------------
Net income................................... $ 123 $ 1,188 $ (792) $ (396) $ 123
------- ----------- ----------- ------------ ------------
------- ----------- ----------- ------------ ------------
</TABLE>
F-76
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION: (CONTINUED)
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 19, 1997) TO MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)..................................... $ 123 $ 1,188 $ (792) $ (396) $ 123
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization..................... 301 2,364 882 -- 3,547
(Income) loss from investment subsidiaries........ (1,188) 792 -- 396 --
Exchange gain..................................... -- 1 921 -- 922
Minority interest................................. -- -- (24) -- (24)
Changes in other operating items.................. (6,304) 6,763 1,134 53 1,646
-------------- ----------- ----------- ------------ ------------
Net cash provided by (used in) operating
activities.................................... (7,068) 11,108 2,121 53 6,214
-------------- ----------- ----------- ------------ ------------
INVESTING ACTIVITIES:
Capital expenditures, net........................... -- (6,279) (1,507) -- (7,786)
Purchase of Predecessor, net of cash acquired....... (3,315) (118,321) (33,854) -- (155,490)
Investment in subsidiaries.......................... (42,508) (15,897) -- 58,405 --
-------------- ----------- ----------- ------------ ------------
Net cash provided by (used in) investing
activities.................................... (45,823) (140,497) (35,361) 58,405 (163,276)
-------------- ----------- ----------- ------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt............ 125,000 -- -- -- 125,000
Proceeds from borrowings on revolving credit
facility.......................................... 7,263 500 -- -- 7,763
Payments on revolving credit facility............... (4,463) (500) -- -- (4,963)
Receipt of capital from Investor Group.............. 42,585 -- -- -- 42,585
Equity fees paid to affiliates of Investor Group.... (1,500) -- -- -- (1,500)
Notes (issued to subsidiary) received from parent... (115,699) 91,983 23,716 -- --
Payments received (made) on intercompany notes...... -- 1,435 (1,435) -- --
Equity contribution from parent..................... -- 42,500 15,905 (58,405) --
-------------- ----------- ----------- ------------ ------------
Net cash provided by (used in) financing
activities.................................... 53,186 135,918 38,186 (58,405) 168,885
-------------- ----------- ----------- ------------ ------------
EFFECT OF EXCHANGE RATES ON CASH...................... -- (229) (126) (53) (408)
-------------- ----------- ----------- ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS............... 295 6,300 4,820 -- 11,415
CASH AND CASH EQUIVALENTS, beginning of period........ -- -- --
----
-------------- ----------- ----------- ------------
------------
CASH AND CASH EQUIVALENTS, end of period.............. $ 295 $ 6,300 $ 4,820 $ -- $ 11,415
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
</TABLE>
F-77
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER
MARCH 31, 31,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 5,860 $ 8,368
Accounts receivable, net........................................... 47,479 55,735
Inventories........................................................ 14,380 15,758
Other current assets............................................... 23,393 21,281
----------- -----------
Total current assets............................................. 91,112 101,142
----------- -----------
Property, plant and equipment, net................................... 53,466 57,332
Goodwill, net........................................................ 213,617 215,425
Other assets, net.................................................... 11,240 9,074
----------- -----------
$ 369,435 $ 382,973
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S INVESTMENT
Current liabilities:
Current portion of long-term debt.................................. $ 59 $ 7,059
Accounts payable................................................... 29,597 33,796
Accrued expenses................................................... 49,781 54,068
----------- -----------
Total current liabilities........................................ 79,437 94,923
----------- -----------
Noncurrent liabilities:
Long-term debt, less current portion............................... 140,621 136,799
Accrued pension and other postretirement liabilities............... 12,654 12,957
Other noncurrent liabilities....................................... 38,240 37,200
----------- -----------
Total liabilities................................................ 270,952 281,879
----------- -----------
Minority interest in subsidiary company.............................. -- 786
Stockholder's investment:
Common stock--Sterling ordinary shares............................. 85 85
Common stock--U.S. dollar ordinary shares.......................... 17,000 17,000
Additional paid-in capital......................................... 78,157 78,157
Retained earnings.................................................. 7,420 5,876
Accumulated other comprehensive income--cumulative translation
adjustment (4,179) (810)
----------- -----------
Total stockholder's investment................................... 98,483 100,308
----------- -----------
$ 369,435 $ 382,973
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
F-78
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS--UNAUDITED)
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
------------------- -------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------- -------------------
<S> <C> <C>
Revenues................................................................ $ 56,691 $ 86,342
Cost of sales........................................................... 46,562 71,295
------- -------
Gross profit.......................................................... 10,129 15,047
Selling, general and administrative expenses............................ 3,767 8,737
Amortization expense.................................................... 1,621 1,171
------- -------
Operating income...................................................... 4,741 5,139
Interest expense, net................................................... (2,624) (3,613)
Exchange gain (loss).................................................... 321 (922)
Other income............................................................ 135 24
------- -------
Income before provision for income taxes.............................. 2,573 628
Provision for income taxes.............................................. 1,029 505
------- -------
Net income............................................................ $ 1,544 $ 123
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-79
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS--UNAUDITED)
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
---------------- ----------------
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1999 MARCH 31, 1998
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.................................................................. $ 1,544 $ 123
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization............................................. 3,731 3,547
Exchange (gain) loss...................................................... (321) 922
Minority interest......................................................... -- (24)
Changes in other operating items.......................................... (1,902) 1,646
-------- ----------------
Net cash provided by operating activities............................... 3,052 6,214
-------- ----------------
INVESTING ACTIVITIES:
Capital disposals (expenditures), net....................................... 467 (7,786)
Purchase of minority interest............................................... (1,508) --
Purchase of Predecessor, net................................................ -- (155,490)
-------- ----------------
Net cash used in investing activities................................... (1,041) (163,276)
-------- ----------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................................... -- 75,000
Proceeds from borrowings under credit facility.............................. 72,332 57,763
Repayment of debt........................................................... (75,518) (4,963)
Receipt of capital from Investor Group...................................... -- 42,585
Equity fees paid to affiliates of Investor Group............................ -- (1,500)
-------- ----------------
Net cash provided by (used in) financing activities..................... (3,186) 168,885
-------- ----------------
EFFECT OF EXCHANGE RATES ON CASH.............................................. (1,333) (408)
-------- ----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS....................................... (2,508) 11,415
CASH AND CASH EQUIVALENTS, beginning of period................................ 8,368 --
-------- ----------------
CASH AND CASH EQUIVALENTS, end of period...................................... $ 5,860 $ 11,415
-------- ----------------
-------- ----------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-80
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed consolidated financial statements have been
prepared by Trident Automotive plc (the "Company") without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. The
information furnished in the condensed consolidated financial statements
includes normal recurring adjustments and reflects all adjustments which
are, in the opinion of management, necessary for a fair presentation of such
financial statements. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. Although the Company believes that the
disclosures are adequate to make the information presented not misleading,
it is suggested that these condensed consolidated financial statements be
read in conjunction with the audited financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for its fiscal
year ended December 31, 1998.
Revenues and operating results for the three months ended March 31, 1999,
are not necessarily indicative of the results to be expected for the full
year.
2. The Company, incorporated in the United Kingdom, and its subsidiaries were
formed on September 19, 1997 to acquire the net assets of the FKI Automotive
Group from FKI plc (the "FKI Acquisition"). The FKI Acquisition occurred on
December 12, 1997. The aggregate purchase price, including transaction
costs, was approximately $170 million. The FKI Acquisition was financed with
$42.5 million in equity contributions, $75 million in proceeds from a
private placement of the Company's 10% Senior Subordinated Notes due 2005
(the "Notes") and borrowings under a $105 million secured credit facility.
On April 30, 1998, Dura UK, Ltd. ("Dura Ltd.") acquired the Company. Dura
Ltd. is a wholly owned subsidiary of Dura Automotive Systems, Inc., a
Delaware corporation, which is a leading designer and manufacturer of driver
control systems, engineered mechanical components and cable-related systems
for the global automotive industry.
The Dura Acquisition constituted a change of control as defined by the
Company's Notes Indenture ("Indenture"). Upon the occurrence of a change of
control, each holder of the Notes may require the Company to repurchase all
or any part of the Notes held by such holder at an offer price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued interest and
other specified costs to the date of repurchase. Pursuant to the terms of
the Indenture, Dura initiated a change of control offer to the holders of
the Notes on May 8, 1998. No holders tended their Notes.
The FKI and Dura Acquisitions were 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 and is being amortized
over 40 years. The assets acquired and liabilities 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 in conjunction with these
acquisitions included approximately $44 million for costs associated with
the shutdown and consolidation of certain acquired facilities and $15
million for associated severance and other related costs. At March 31, 1999,
liabilities for approximately $29.5 million for costs associated with the
shutdown and consolidation of certain acquired facilities
F-81
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
and $12.5 million in severance costs are recorded on the condensed
consolidated balance sheet. No additional reserves were recorded during the
first quarter of 1999. Results of operations for these acquisitions have
been included in the accompanying condensed consolidated financial
statements since the dates of acquisition.
Included in these reserves are amounts associated with businesses to be
exited in conjunction with the acquisition by Dura. The accompanying
consolidated statements of operations include revenues and operating income
from these businesses as follows (in thousands):
<TABLE>
<CAPTION>
PERIOD ENDED
-------------------------------
MARCH 31, 1999 MARCH 31, 1998
--------------- --------------
<S> <C> <C>
Revenues..................................................... $ 8,650 $ 23,912
Operating income............................................. $ 136 $ 1,164
</TABLE>
These dispositions are anticipated to be completed by the end of the second
quarter of 1999.
3. Inventories are valued at the lower of cost or market on a first-in,
first-out (FIFO) basis. Inventories consisted of the following (in
thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
<S> <C> <C>
Finished products................................................... $ 4,341 $ 5,797
Work-in-process..................................................... 2,267 3,470
Raw materials....................................................... 7,772 6,491
----------- ------------
Total............................................................. $ 14,380 $ 15,758
----------- ------------
----------- ------------
</TABLE>
4. Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Bank Credit Agreement:
Term loan........................................................ $ 38,264 $ 43,500
Revolving credit facility........................................ 21,203 18,894
Capital leases..................................................... 279 314
Notes, due 2005.................................................... 80,934 81,150
---------- ------------
140,680 143,858
Less--current portion.............................................. (59) (7,059)
---------- ------------
Total long-term debt............................................. $ 140,621 $ 136,799
---------- ------------
---------- ------------
</TABLE>
F-82
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On March 23, 1999, Dura and the Company entered into a an amended and
restated $1.15 billion credit agreement (the "Credit Agreement"). The Credit
Agreement provides Dura and the Company with a $275 million tranche A term
loan, a $275 million tranche B term loan, a $400 million revolving credit
facility and a $200 million interim term loan which was repaid on April 23,
1999. As it relates to the Company, the Credit Agreement provides the
Company with a term loan and a $55.0 million revolving credit facility, has
a term of five years and borrowings bear interest at the lenders reference
rate or the Eurocurrency rate. The interest rate on borrowings outstanding
under the Credit Agreement ranged from 5.25% to 8.28125% as of March 31,
1999. The Credit Agreement contains various restrictive covenants, which
limit indebtedness, investments, rental obligations and cash dividends. The
Credit Agreement also requires the Company to maintain certain financial
ratios including minimum liquidity and interest coverage. Pursuant to the
terms of the Credit Agreement, Dura and certain of its subsidiaries will
provide guarantees and collateral to support obligations owing by the
Company; but, so long as the Notes remain outstanding, neither the Company
nor any of its subsidiaries have guaranteed any obligations that are not
borrowed by the Company.
Under the terms of the Credit Agreement, an event of default by Dura also
causes an event of default for the Company. The Company and Dura were in
compliance with the covenants as of March 31, 1999. The assets of the
Company have been pledged as collateral to secure the borrowings of the
Company under the Credit Agreement.
The Credit Agreement provides the Company with the ability to denominate its
credit borrowings in foreign currencies. As of March 31, 1999, $11.0 million
of borrowings were denominated in US dollars, $5.7 million were denominated
in British pound sterling and $4.5 million were denominated in Euro.
The Notes, with a face value of $75 million, were issued on December 12,
1997, concurrent with the FKI Acquisition and are due in December 2005.
Interest is payable semi-annually on June 15 and December 15 of each year.
As further discussed in Note 7, the Notes are guaranteed by certain
subsidiaries of the Company. The Notes were recorded at their fair value of
$81.2 million as part of the Dura Acquisition. The premium in excess of face
value is being amortized over the life of the Notes using the effective
interest method.
5. Comprehensive income reflects the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
non-owner sources. For the Company, comprehensive income represents net
income adjusted for foreign currency translation adjustments. Comprehensive
loss was approximately $1.8 million and $1.2 million for the three months
ended March 31, 1999 and 1998, respectively.
6. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for years beginning after June
15, 1999. SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge criteria are met. Special accounting for
qualifying hedges allow a derivative's gains or losses to offset related
results on the hedged item in the income statement and requires that a
company must formally document, designate and assess
F-83
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
the effectiveness of transactions that receive hedge accounting. The Company
has not yet quantified the impacts of adopting SFAS No. 133.
During the first quarter of 1999, the Company adopted Financial Accounting
Standards Board Statement of Position (SOP) No. 98-5, "Reporting on the
Costs of Start-up Activities." SOP 98-5 requires that start-up activities be
expensed as incurred, versus capitalizing and expensing them over a period
of time. The adoption of SOP 98-5 did not affect the Company's consolidated
results of operations or the financial position of the Company.
7. Supplemental cash flow information (in thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
------------------- -------------------
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
------------------- -------------------
<S> <C> <C>
Income taxes....................................... $ 429 $ 510
Interest........................................... 2,362 1,546
</TABLE>
8. The following consolidating financial information presents balance sheet,
statement of operations and cash flow information related to the Company's
businesses. Each Guarantor is a direct or indirect wholly-owned subsidiary
of Trident Automotive plc and has fully and unconditionally guaranteed, on a
joint and several basis, the Notes. The Company has not presented separate
financial statements and other disclosures concerning the Guarantors because
management believes that such information is not material.
F-84
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 155 $ 1,304 $ 4,401 $ -- $ 5,860
Accounts receivable, net...................... -- 30,554 16,925 47,479
Inventories................................... -- 11,195 3,185 -- 14,380
Due from affiliates........................... 771 26,727 208 (27,706) --
Other current assets.......................... 105 18,865 4,423 -- 23,393
-------------- ----------- ----------- ------------ ------------
Total current assets.................... 1,031 88,645 29,142 (27,706) 91,112
-------------- ----------- ----------- ------------ ------------
Property, plant and equipment, net.............. -- 45,393 8,073 -- 53,466
Note receivable from subsidiaries............... -- 26,682 -- (26,682) --
Goodwill, net................................... 74,456 119,190 24,747 (4,776) 213,617
Other assets, net............................... 170,306 15,248 1,578 (175,892) 11,240
-------------- ----------- ----------- ------------ ------------
$ 245,793 $ 295,158 $ 63,540 $ (235,056) $ 369,435
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDER'S INVESTMENT
Current liabilities:
Current portion of long-term debt............. $ -- $ 16 $ 43 $ -- $ 59
Accounts payable.............................. -- 19,208 10,389 -- 29,597
Accrued expenses.............................. 2,659 39,928 7,227 (33) 49,781
Due to affiliates............................. 25,929 216 1,528 (27,673) --
-------------- ----------- ----------- ------------ ------------
Total current liabilities............... 28,588 59,368 19,187 (27,706) 79,437
-------------- ----------- ----------- ------------ ------------
Non-current liabilities:
Long-term debt, less current portion.......... 122,198 18,209 214 -- 140,621
Note payable to Parent........................ (3,476) 610 29,548 (26,682) --
Accrued pension and other postretirement
liabilities................................. -- 11,665 989 -- 12,654
Other noncurrent liabilities.................. -- 35,854 2,386 -- 38,240
-------------- ----------- ----------- ------------ ------------
Total liabilities....................... 147,310 125,706 52,324 (54,388) 270,952
-------------- ----------- ----------- ------------ ------------
Minority interest in subsidiary company......... -- -- -- -- --
Stockholder's investment........................ 98,483 169,452 11,216 (180,668) 98,483
-------------- ----------- ----------- ------------ ------------
$ 245,793 $ 295,158 $ 63,540 $ (235,056) $ 369,435
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
</TABLE>
F-85
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues..................................... $ -- $ 43,703 $ 13,103 $ (115) $ 56,691
Cost of sales................................ -- 35,836 10,841 (115) 46,562
------- ----------- ----------- ------------ ------------
Gross profit......................... -- 7,867 2,262 -- 10,129
Selling, general and administrative
expenses................................... 8 2,146 1,613 -- 3,767
Amortization expense......................... 440 946 235 -- 1,621
------- ----------- ----------- ------------ ------------
Operating income (loss).............. (448) 4,775 414 -- 4,741
Interest expense............................. (2,361) (278) (37) -- (2,676)
Interest expense--intercompany............... -- (2,545) (536) 3,081 --
Interest income.............................. -- 35 17 -- 52
Interest income--intercompany................ -- 3,032 49 (3,081) --
Exchange gain (loss)......................... 543 (60) 14 -- 497
Equity in net income (loss) of
subsidiaries............................... 2,917 (207) -- (2,710) --
Other income (expense)....................... -- (101) 60 -- (41)
------- ----------- ----------- ------------ ------------
Net income (loss) before provision
for income taxes................... 651 4,651 (19) (2,710) 2,573
Provision (benefit) for income taxes......... (893) 1,734 188 -- 1,029
------- ----------- ----------- ------------ ------------
Net income (loss).................... $ 1,544 $ 2,917 $ (207) $ (2,710) $ 1,544
------- ----------- ----------- ------------ ------------
------- ----------- ----------- ------------ ------------
</TABLE>
F-86
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................... $ 1,544 $ 2,917 $ (207) $ (2,710) $ 1,544
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities--
Depreciation and amortization........... 440 2,729 562 -- 3,731
Exchange (gain) loss.................... (543) 236 (14) -- (321)
Due to/from affiliates.................. 10,831 (8,759) 495 (2,567) --
Changes in other operating items........ (2,569) 140 (2,183) 2,710 (1,902)
-------------- ----------- ----------- ------------ ------------
Net cash provided by (used in)
operating activities................ 9,703 (2,737) (1,347) (2,567) 3,052
-------------- ----------- ----------- ------------ ------------
INVESTING ACTIVITIES:
Capital disposals (expenditures), net..... -- 871 (404) -- 467
Purchase of minority interest............. -- (2,000) 492 -- (1,508)
-------------- ----------- ----------- ------------ ------------
Net cash provided by (used in)
investing activities................ -- (1,129) 88 -- (1,041)
-------------- ----------- ----------- ------------ ------------
FINANCING ACTIVITIES:
Proceeds from borrowings under credit
facility................................ 44,807 27,525 -- -- 72,332
Repayment of debt......................... (51,259) (24,238) (21) -- (75,518)
-------------- ----------- ----------- ------------ ------------
Net cash provided by (used in)
financing activities................ (6,452) 3,287 (21) -- (3,186)
-------------- ----------- ----------- ------------ ------------
EFFECT OF EXCHANGE RATES ON CASH............ (3,368) 163 (695) 2,567 (1,333)
-------------- ----------- ----------- ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS..... (117) (416) (1,975) -- (2,508)
CASH AND CASH EQUIVALENTS, beginning of
period.................................... 272 1,719 6,377 -- 8,368
-------------- ----------- ----------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of period.... $ 155 $ 1,303 $ 4,402 $ -- $ 5,860
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
</TABLE>
F-87
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................. $ 272 $ 1,719 $ 6,377 $ -- $ 8,368
Accounts receivable, net.................. -- 40,217 15,518 -- 55,735
Inventories............................... -- 12,265 3,493 -- 15,758
Due from affiliates....................... 649 18,708 707 (20,064) --
Other current assets...................... -- 16,995 4,286 -- 21,281
-------------- ----------- ----------- ------------ ------------
Total current assets.................... 921 89,904 30,381 (20,064) 101,142
Property, Plant and Equipment, net.......... -- 48,223 9,109 -- 57,332
Note Receivable From Subsidiaries........... -- 27,032 -- (27,032) --
Deferred Financing Costs.................... -- -- -- -- --
Investment in Subsidiaries.................. 163,815 12,145 -- (175,960) --
Goodwill, net............................... 74,896 119,542 25,763 (4,776) 215,425
Other Assets, net........................... 4,236 3,368 1,470 -- 9,074
-------------- ----------- ----------- ------------ ------------
$ 243,868 $ 300,214 $ 66,723 $ (227,832) $ 382,973
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
LIABILITIES AND STOCKHOLDER'S INVESTMENT
Current Liabilities:
Current portion of long-term debt......... $ 7,059 $ -- $ -- $ -- $ 7,059
Accounts payable.......................... -- 22,878 10,918 -- 33,796
Accrued expenses.......................... 1,903 44,859 7,316 (10) 54,068
Due to affiliates......................... 18,344 351 1,359 (20,054) --
-------------- ----------- ----------- ------------ ------------
Total current liabilities............... 27,306 68,088 19,593 (20,064) 94,923
-------------- ----------- ----------- ------------ ------------
Non-Current Liabilities:
Long-term debt, less current portion...... 121,650 14,923 226 -- 136,799
Note payable to Parent.................... (3,476) 649 31,495 (28,668) --
Accrued pension and other postretirement
liabilities............................. -- 11,891 1,066 -- 12,957
Other noncurrent liabilities.............. -- 34,767 2,433 -- 37,200
-------------- ----------- ----------- ------------ ------------
Total liabilities....................... 145,480 130,318 54,813 (48,732) 281,879
-------------- ----------- ----------- ------------ ------------
Minority Interest in Subsidiary Company..... -- -- 786 -- 786
Stockholder's Investment.................... 98,388 169,896 11,124 (179,100) 100,308
-------------- ----------- ----------- ------------ ------------
$ 243,868 $ 300,214 $ 66,723 $ (227,832) $ 382,973
-------------- ----------- ----------- ------------ ------------
-------------- ----------- ----------- ------------ ------------
</TABLE>
F-88
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRIDENT NON-
AUTOMOTIVE GUARANTOR GUARANTOR
PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues....................................... $ -- $ 69,293 $ 17,755 $ (706) $ 86,342
Cost of sales.................................. -- 57,249 14,752 (706) 71,295
----------- ----------- ----------- ------------ ------------
Gross profit................................. -- 12,044 3,003 -- 15,047
Selling, general and administrative expenses... 22 6,329 2,386 -- 8,737
Amortization expense........................... 301 727 143 -- 1,171
----------- ----------- ----------- ------------ ------------
Operating income............................. (323) 4,988 474 -- 5,139
Interest expense............................... 3,748 3,611 799 (4,340) 3,818
Interest income................................ (2,481) (1,932) (132) 4,340 (205)
Exchange loss.................................. -- 1 921 -- 922
Other income................................... (1,188) 792 (24) 396 (24)
----------- ----------- ----------- ------------ ------------
Income before provision for income taxes..... (402) 2,516 (1,090) (396) 628
Provision for income taxes..................... (525) 1,328 (298) -- 505
----------- ----------- ----------- ------------ ------------
Net income (loss)............................ $ 123 $ 1,188 $ (792) $ (396) $ 123
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
F-89
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
TRIDENT GUARANTOR GUARANTOR
AUTOMOTIVE PLC COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
-------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)............................... $ 123 $ 1,188 $ (792) $ (396) $ 123
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities--
Depreciation and amortization................... 301 2,364 882 -- 3,547
(Income) loss from investment subsidiaries...... (1,188) 792 -- 396 --
Exchange gain................................... -- 1 921 -- 922
Minority interest............................... -- -- (24) -- (24)
Changes in other operating items................ (6,304) 6,763 1,134 53 1,646
-------------- ----------- ----------- ------------- -------------
Net cash provided by (used in) operating
activities.................................... (7,068) 11,108 2,121 53 6,214
-------------- ----------- ----------- ------------- -------------
INVESTING ACTIVITIES:
Capital expenditures, net....................... -- (6,279) (1,507) -- (7,786)
Purchase of Predecessor, net of cash acquired... (3,315) (118,321) (33,854) -- (155,490)
Investment in subsidiaries...................... (42,508) (15,897) -- 58,405 --
-------------- ----------- ----------- ------------- -------------
Net cash provided by (used in) investing
activities.................................... (45,823) (140,497) (35,361) 58,405 (163,276)
-------------- ----------- ----------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........ 125,000 -- -- -- 125,000
Proceeds from borrowings on revolving credit
facility...................................... 7,263 500 -- -- 7,763
Payments on revolving credit facility........... (4,463) (500) -- -- (4,963)
Receipt of capital from Investor Group.......... 42,585 -- -- -- 42,585
Equity fees paid to affiliates of Investor
Group......................................... (1,500) -- -- -- (1,500)
Notes (issued to subsidiary) received from
parent........................................ (115,699) 91,983 23,716 -- --
Payments received (made) on intercompany
notes......................................... -- 1,435 (1,435) -- --
Equity contribution from parent................. -- 42,500 15,905 (58,405) --
-------------- ----------- ----------- ------------- -------------
Net cash provided by (used in) financing
activities.................................... 53,186 135,918 38,186 (58,405) 168,885
-------------- ----------- ----------- ------------- -------------
EFFECT OF EXCHANGE RATES ON CASH................ -- (229) (126) (53) (408)
-------------- ----------- ----------- ------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS......... 295 6,300 4,820 -- 11,415
CASH AND CASH EQUIVALENTS, beginning of
period........................................ -- -- -- -- --
-------------- ----------- ----------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period........ $ 295 $ 6,300 $ 4,820 $ -- $ 11,415
-------------- ----------- ----------- ------------- -------------
-------------- ----------- ----------- ------------- -------------
</TABLE>
F-90
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Excel Industries, Inc.
We have audited the accompanying consolidated balance sheets of Excel
Industries, Inc. (an Indiana corporation) and Subsidiaries as of December 27,
1997 and January 2, 1999 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended January 2, 1999. 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 Excel Industries, Inc. and
Subsidiaries as of December 27, 1997 and January 2, 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended January 2, 1999 in conformity with generally accepted accounting
principles.
As explained in Note 2 to the financial statements, effective December 28,
1997, the Company changed its method of computing depreciation.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
June 16, 1999
F-91
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 27, JAN. 2,
1997 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments....................................................... $ 2,317 $ 16,290
Marketable securities................................................................. 24,420 14,000
Accounts receivable--trade, less allowances of $1,318 in 1997 and $1,810
in 1998............................................................................. 140,910 167,400
Customer tooling to be billed......................................................... 22,356 30,649
Inventories........................................................................... 40,929 59,402
Prepaid expenses...................................................................... 14,929 15,640
----------- -----------
Total current assets................................................................ 245,861 303,381
Property, plant and equipment:
Land.................................................................................. 3,227 5,153
Buildings and improvements............................................................ 52,056 77,101
Machinery and equipment............................................................... 225,046 302,691
Accumulated depreciation.............................................................. (119,361) (152,276)
----------- -----------
160,968 232,669
Goodwill, net of accumulated amortization of $5,387 in 1997 and $7,012
in 1998............................................................................... 35,960 41,865
Other assets............................................................................ 15,008 16,469
----------- -----------
$ 457,797 $ 594,384
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................... $ 85,469 $ 107,052
Accrued liabilities:
Salaries and wages.................................................................. 9,249 16,875
Employee benefits................................................................... 11,136 14,464
Other............................................................................... 20,785 25,439
Income taxes payable.................................................................. -- 3,599
Current maturities of long-term debt.................................................. 2,672 17,156
----------- -----------
Total current liabilities........................................................... 129,311 184,585
Long-term debt.......................................................................... 105,943 149,879
Long-term employee benefits............................................................. 32,934 44,469
Other long-term liabilities............................................................. 4,294 9,085
Minority interest....................................................................... -- 12,108
Commitments and contingent liabilities.................................................. -- --
Shareholders' equity:
Preferred shares--no par value, authorized 1,000 shares; none issued.................. -- --
Common shares--no par value, authorized 20,000 shares; issued and outstanding in 1997,
12,414; issued in 1998, 12,468...................................................... 114,730 115,646
Retained earnings..................................................................... 70,585 81,373
Accumulated other comprehensive income................................................ -- 1,045
Treasury shares at cost, 289 shares................................................... -- (3,806)
----------- -----------
Total shareholders' equity.......................................................... 185,315 194,258
----------- -----------
$ 457,797 $ 594,384
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-92
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
<S> <C> <C> <C>
DEC. 28, DEC. 27, JAN. 2,
1996 1997 1999
---------- ---------- ------------
Net sales.................................................................. $ 887,741 $ 962,333 $ 1,106,103
Cost of goods sold......................................................... 783,375 846,990 995,982
---------- ---------- ------------
Gross profit............................................................. 104,366 115,343 110,121
Selling, administrative and engineering expenses........................... 65,652 79,267 78,615
---------- ---------- ------------
Operating income......................................................... 38,714 36,076 31,506
Interest expense........................................................... 9,784 10,984 11,628
Other income, net.......................................................... (1,736) (1,930) (2,074)
---------- ---------- ------------
Income before income taxes and minority interest......................... 30,666 27,022 21,952
Provision for income taxes................................................. 11,550 9,458 3,632
Minority interest.......................................................... -- -- 1,367
---------- ---------- ------------
Net income............................................................... $ 19,116 $ 17,564 $ 16,953
---------- ---------- ------------
---------- ---------- ------------
Net income per share:
Basic.................................................................... $ 1.79 $ 1.59 $ 1.37
Diluted.................................................................. 1.62 1.48 1.36
Cash dividends per share................................................... $ .455 $ .50 $ .50
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-93
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
DEC. 28, DEC. 27, JAN. 2,
1996 1997 1999
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................................. $ 19,116 $ 17,564 $ 16,953
---------- ---------- ----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................. 26,246 33,382 39,679
Deferred income taxes..................................................... (1,613) 3,093 782
Other..................................................................... 348 2,093 2,121
Changes in assets and liabilities, excluding effect of acquisitions:
Accounts receivable and prepaid expenses................................ 19,206 (12,396) 14,769
Inventories and customer tooling........................................ 25,955 (3,180) 5,119
Accounts payable and accrued liabilities................................ (19,409) (79) (3,421)
---------- ---------- ----------
Total adjustments..................................................... 50,733 22,913 59,049
---------- ---------- ----------
Net cash provided by operating activities............................. 69,849 40,477 76,002
---------- ---------- ----------
Cash flows from investing activities:
Purchase of property, plant and equipment................................... (29,209) (39,287) (45,958)
Businesses acquired......................................................... (58,984) (2,415) (10,080)
Sale (purchase) of investments, net......................................... 8,290 (2,471) 10,420
Proceeds from disposal of business.......................................... -- 6,793 --
Other....................................................................... 929 199 1,693
---------- ---------- ----------
Net cash used for investing activities................................ (78,974) (37,181) (43,925)
---------- ---------- ----------
Cash flows from financing activities:
Issuance of common shares................................................... 278 543 916
Payments of long-term debt.................................................. (79,934) (2,470) (15,905)
Dividends................................................................... (4,875) (5,632) (6,165)
Purchase of treasury shares................................................. (155) -- (3,806)
Issuance of long-term debt.................................................. 100,000 -- 3,359
Other....................................................................... -- -- 3,497
---------- ---------- ----------
Net cash provided by (used for) financing activities.................. 15,314 (7,559) (18,104)
---------- ---------- ----------
Net change in cash and short-term investments................................. 6,189 (4,263) 13,973
Cash and short-term investments at beginning of period........................ 391 6,580 2,317
---------- ---------- ----------
Cash and short-term investments at end of period.............................. $ 6,580 $ 2,317 $ 16,290
---------- ---------- ----------
---------- ---------- ----------
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest.................................................................... $ 9,288 $ 11,182 $ 11,504
Income taxes, net of refunds................................................ 10,524 8,895 3,594
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-94
<PAGE>
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON OTHER
SHARES COMMON RETAINED COMPREHENSIVE TREASURY
OUTSTANDING SHARES EARNINGS INCOME SHARES TOTAL
----------- ---------- --------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 30, 1995................. 10,703 $ 95,157 $ 44,412 $ (659) $ (4,593) $ 134,317
Comprehensive income:
Net income................................. 19,116 19,116
Cumulative translation adjustment.......... 45 45
Minimum pension liability adjustment....... 499 499
----------
Total comprehensive income................... 19,660
----------
Dividends.................................... -- -- (4,875) -- -- (4,875)
Share options exercised...................... 12 86 -- -- -- 86
Shares issued under employee stock purchase
plan....................................... 15 192 -- -- -- 192
Warrants issued.............................. 1,500 -- -- -- 1,500
Treasury shares purchased.................... (12) -- -- -- (155) (155)
Treasury shares canceled..................... -- (4,748) -- -- 4,748 --
----------- ---------- --------- ------ --------- ----------
BALANCE AT DECEMBER 28, 1996................. 10,718 92,187 58,653 (115) -- 150,725
Comprehensive income:
Net income................................. 17,564 17,564
Cumulative translation adjustment.......... (45) (45)
Minimum pension liability adjustment....... 160 160
----------
Total comprehensive income................... 17,679
----------
Dividends.................................... -- -- (5,632) -- -- (5,632)
Share options exercised...................... 9 116 -- -- -- 116
Shares issued under employee stock purchase
plan....................................... 22 427 -- -- -- 427
Conversion of 10% subordinated notes......... 1,665 22,000 -- -- -- 22,000
----------- ---------- --------- ------ --------- ----------
BALANCE AT DECEMBER 27, 1997................. 12,414 114,730 70,585 -- -- 185,315
Comprehensive income:
Net income................................. 16,953 16,953
Cumulative translation adjustment.......... 2,042 2,042
Minimum pension liability adjustment....... (997) (997)
----------
Total comprehensive income................... 17,998
----------
Dividends.................................... -- -- (6,165) -- -- (6,165)
Share options exercised...................... 13 162 -- -- -- 162
Shares issued under employee stock purchase
plan....................................... 41 754 -- -- -- 754
Treasury shares purchased.................... (289) -- -- -- (3,806) (3,806)
----------- ---------- --------- ------ --------- ----------
BALANCE AT JANUARY 2, 1999................... 12,179 $ 115,646 $ 81,373 $ 1,045 $ (3,806) $ 194,258
----------- ---------- --------- ------ --------- ----------
----------- ---------- --------- ------ --------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-95
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
The Company designs, manufactures and sells automotive window, door and
seating systems and decorative trims for original equipment manufacturers (OEMs)
and Tier I suppliers. It also manufactures and sells appliances, jacks and
couplers, and window and door systems for the recreational vehicle industry and
windows for the mass transit and heavy truck industries. The Company has
manufacturing facilities located in the United States, Mexico, Germany, United
Kingdom, Spain, Portugal, and the Czech Republic.
Effective July 1, 1998, the Company acquired 70 percent of Schade GmbH & Co.
KG, headquartered in Plettenberg, Germany as described in note 3.
2. SIGNIFICANT ACCOUNTING PRINCIPLES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany transactions,
profits and balances are eliminated. The Company has a 25% interest in a
Brazilian joint venture, which is accounted for on the equity method and
resulted in losses of $1.5 million in 1998.
FISCAL YEAR
The Company's fiscal year consists of 52 or 53 weeks ending on the Saturday
nearest the calendar year end.
NET INCOME PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share." All net income per share amounts reported
herein are in accordance with this Statement.
Basic net income per share is computed using the weighted average number of
shares outstanding during the period. Shares used to compute basic net income
per share were 10,709,000 for 1996, 11,079,000 for 1997 and 12,370,000 for 1998.
Diluted earnings per share assumes, when dilutive, the exercise of common
share options and warrants outstanding and the conversion of the 10% convertible
subordinated notes until their conversion into common shares in October, 1997.
Shares used to compute diluted earnings per share included the number of shares
used for basic net income per share plus 56,000 in 1996, 187,000 in 1997 and
118,000 in 1998 for the exercise of options and warrants and 2,220,000 in 1996
and 1,370,000 in 1997 for the assumed conversion of the notes. Net income used
to compute diluted earnings per share included an add-back of $1,907,000 in 1996
and $1,192,000 in 1997 for interest, net of taxes, on the notes.
SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments amounting to $2,000,000 at December 27, 1997 and
$3,770,000 at January 2, 1999 consist of investments generally held in money
market funds.
Marketable securities represent investments with maturities generally longer
than 90 days. All securities mature prior to December, 1999 and are considered
available for sale. Interest and dividends
F-96
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
on marketable securities are included in income as earned. Realized gains or
losses are determined on the specific identification method.
Marketable securities are carried at cost, which approximates market value,
and consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Government securities................................................... $ 10,885 $ --
Tax-free municipal securities........................................... 5,335 --
Municipal fund par value preferred shares............................... 2,200 --
Other tax-free securities............................................... 6,000 14,000
--------- ---------
$ 24,420 $ 14,000
--------- ---------
--------- ---------
</TABLE>
Other income includes interest income of $1,772,000 in 1996, $1,957,000 in
1997 and $2,005,000 in 1998.
INVENTORIES
Inventories are valued at the lower of cost or market. At December 27, 1997,
the LIFO method was used to value 84% of inventories. At January 2, 1999, the
last-in, first-out (LIFO) method was used to determine cost for approximately
60% of inventories while the first-in, first-out (FIFO) method was used for the
remaining inventories primarily related to foreign inventories.
CUSTOMER TOOLING TO BE BILLED
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.
PROPERTIES
Property, plant and equipment are carried at cost and include expenditures
for new facilities and those which substantially increase the useful lives of
existing plant and equipment. Expenditures for repairs and maintenance are
expensed as incurred.
DEPRECIATION
The Company provides for depreciation of property, plant and equipment using
methods and rates designed to amortize the cost of such equipment over its
useful life. The estimated useful lives range from 10 to 40 years for buildings
and improvements and 2 to 20 years for machinery and equipment. Prior to 1998,
depreciation was computed using accelerated methods of depreciation for new
plant and equipment. A survey conducted by the Company confirmed that the
straight-line method of depreciation as the predominant method used throughout
the automotive supply industry. Accordingly, for new capital expenditures for
the 1998 fiscal year and thereafter, the Company adopted the straight-line
method of depreciation for financial reporting purposes. The favorable effect of
the change on net income for the year ending January 2, 1999 was approximately
$1.1 million or $.09 per share.
F-97
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
GOODWILL
The excess of purchase price over the fair value of net assets of acquired
businesses (goodwill) is amortized on a straight-line basis over 15 to 40 years.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of the
remaining balance of its goodwill and other long-lived assets. If such events or
circumstances were to indicate that the carrying amount of these assets would
not be recoverable, the Company would estimate the future cash flows expected to
result from the use of the assets and their eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) were
less than the carrying amount of goodwill, the Company would recognize an
impairment loss.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of all financial instruments where the
face value differs from the fair value, primarily long-term debt, based upon
quoted amounts or the current rates available for similar financial instruments.
If fair value accounting had been used at January 2, 1999, long-term debt would
exceed the reported level by approximately $9 million.
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 seven 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. The Company recorded a
$4.5 million reserve for these losses in 1998.
INCOME TAXES
Deferred income taxes are provided using the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes".
FOREIGN CURRENCY TRANSLATION
For operations outside the United States that prepare financial statements
in currencies other than the United States dollar, the balance sheet, income,
expense and cash flow amounts are translated in accordance with SFAS No. 52
"Foreign Currency Translation".
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-98
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective for
years beginning after June 15, 1999. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge criteria are met. Special accounting
for qualifying hedges allow a derivative's gains or losses to offset related
results on the hedged item in the statement of operations and requires that a
company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. The Company has not yet quantified
the impacts of adopting SFAS No. 133 and has not yet determined the timing of
adoption.
3. ACQUISITIONS AND DISPOSALS
Effective July 1, 1998, the Company purchased through its wholly-owned
subsidiary, Excel Industries Germany GmbH, a 70% interest in Schade GmbH & Co.
K.G. (Schade) a German limited partnership. The aggregate purchase price for
Schade was DM 17,036,400, or approximately $9,689,000 plus transaction costs.
The Company also assumed approximately $68 million of Schade's debt. The amount
of the Company's contribution to the capital of Schade was DM 27,340,000, or
approximately $15,548,000. Funds for the purchase price for the interests and
the contribution came from the Company's cash on hand.
The remaining 30 percent of Schade is owned by Hella KG Hueck & Co., another
international OEM supplier. Schade has sales and manufacturing operations in
Germany, Portugal, Spain, United Kingdom and the Czech Republic with annual
sales of more than $300 million. Schade and its affiliated companies are engaged
in the manufacture and distribution of decorative trims, body components,
injected molded plastic components and modular windows for the automotive
industry.
The acquisition of Schade was accounted for as a purchase. The assets
acquired and liabilities assumed have been recorded based on preliminary
estimates of fair value as of the date 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. The excess of the purchase price over
the estimated fair value of net assets acquired has been accounted for as
goodwill and is being amortized over 40 years using the straight-line method.
The accompanying consolidated statements of income include the operating
results of Schade since July 1, 1998. Pro forma unaudited consolidated operating
results of the Company and Schade for the year ended December 27, 1997 and
January 2, 1999, assuming the acquisition had been made as of the beginning of
1997 and 1998, are summarized below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
Net sales......................................................... $ 1,243,541 $ 1,264,654
Net income........................................................ 21,116 18,919
Net income per share, basic....................................... 1.91 1.53
Net income per share, diluted..................................... 1.77 1.52
</TABLE>
F-99
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS AND DISPOSALS (CONTINUED)
On April 3, 1996, the Company completed the purchase of all of the
outstanding common shares of Anderson Industries, Inc. (Anderson) for
approximately $62,562,000 including five-year warrants for 381,000 shares of
Excel common stock exercisable at $13.25 per share (valued at $1.5 million) and
expenses of the transaction.
The acquisition of Anderson, a holding company whose main asset was Atwood
Industries, Inc. (Atwood), was accounted for as a purchase. Accordingly, the
purchase price was allocated to the net assets acquired based upon their
estimated fair market values. The excess of the purchase price over the
estimated fair value of net assets acquired, $26,482,000, was accounted for as
goodwill and is being amortized over 35 years using the straight-line method.
The accompanying consolidated statements of income include the operating
results of Anderson since April 3, 1996. Pro forma unaudited consolidated
operating results of the Company and Anderson, assuming the acquisition had been
made as of the beginning of 1996, are summarized below (in thousands except per
share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
1996
-----------
<S> <C>
Net sales........................................................................ $ 985,555
Net income....................................................................... 20,745
Net income per share, basic...................................................... 1.94
Net income per share, diluted.................................................... 1.74
</TABLE>
The unaudited pro forma financial information presented for both
acquisitions is not necessarily indicative either of the results of operations
that would have occurred had the transactions been completed on the indicated
dates or of future results of operations of the combined companies.
In the first quarter of 1997 the Company recorded an $8.7 million pre-tax
restructuring reserve for the closure of manufacturing facilities in 1997 at
Rockford, Illinois and Battle Creek, Michigan which had been acquired as part of
the acquisition of Anderson. The reserve consists of personnel related costs
(mainly severance pay and fringe benefits) and costs related to the disposals of
buildings and equipment. The reserve increased the associated goodwill by $5.4
million (which is net of income taxes) and was not a charge to earnings. Total
charges to the reserve (personnel related costs and costs related to the
disposals of buildings and equipment) through January 2, 1999 were $7.8 million.
Any excess reserves remaining at the completion of the restructuring activities
will be recorded as a reduction in goodwill.
In January, 1997, the Company completed the purchase of the assets of The
Compliance Group located in Greendale, Wisconsin for approximately $2.4 million
in cash. The excess of the purchase price over the estimated fair value of
assets acquired ($2.5 million) has been accounted for as goodwill and is being
amortized over 15 years using the straight-line method.
In May, 1997, the Company completed the sale of the automotive parking brake
product line for $2.9 million, which was acquired when the Company purchased
Anderson. Sales were approximately $6 million in 1997 and $12 million in 1996 or
less than 2% of total sales. At the date of the Anderson acquisition, this asset
was held for sale and the gain on the sale was recorded as an adjustment to
goodwill.
In September, 1997, the Company announced the closure of its Italian
manufacturing division. Closing expenses recorded in the third quarter of 1997
were approximately $1,242,000. Historically, this
F-100
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS AND DISPOSALS (CONTINUED)
division had annual sales of approximately $2.5 million and losses in excess of
$1 million. Losses in 1997 were approximately $900,000.
4. RESEARCH, ENGINEERING AND DEVELOPMENT
Research, engineering and development expenditures charged to operations
approximated $17,237,000 in 1996, $25,245,000 in 1997 and $28,900,000 in 1998.
5. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Raw materials........................................................... $ 23,591 $ 32,515
Work in process and finished goods...................................... 18,674 28,553
LIFO reserve............................................................ (1,336) (1,666)
--------- ---------
$ 40,929 $ 59,402
--------- ---------
--------- ---------
</TABLE>
6. PENSION AND OTHER EMPLOYEE BENEFIT PLANS
PENSION AND PROFIT SHARING PLANS
The Company and its subsidiaries provide retirement benefits to
substantially all employees through various pension, savings and profit sharing
plans. Defined benefit plans provide pension benefits that are based on the
employee's final average salary for salaried employees and stated amounts for
each year of credited service for hourly employees.
It is the Company's policy to fund the ERISA minimum contribution
requirement. Plan assets are invested primarily in corporate equity securities,
fixed income bonds and insurance annuity contracts.
Contributions and costs for the Company's various other benefit plans are
generally determined based on the employee's annual salary. The Company also
provides supplemental retirement benefits for certain executives. Total expense
relating to the Company's retirement plans, including the defined contribution
and defined benefit pension plans, aggregated $7,577,000 in 1996, $8,153,000 in
1997, and $8,541,000 in 1998.
SUPPLEMENTAL AND OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits, the Company provides certain
health care benefits to substantially all active employees and postretirement
health care benefits to certain salaried employees. In addition, certain hourly
and salary employees are eligible for postretirement medical coverage until age
65. The Company is primarily self-insured for such benefits.
F-101
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. PENSION AND OTHER EMPLOYEE BENEFIT PLANS (CONTINUED)
The following provides a reconciliation of benefit obligations, plan assets
and funded status of the Company's pension and other postretirement benefit
plans (in thousands):
<TABLE>
<CAPTION>
OTHER
POSTRETIREMENT
PENSION BENEFITS BENEFITS
--------------------- ----------------------
1997 1998 1997 1998
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year......................... $ 43,613 $ 46,320 $ 12,656 $ 11,285
Acquired company................................................ -- 11,607 -- --
Service cost.................................................... 2,687 3,221 1,060 952
Interest cost................................................... 3,207 3,779 913 922
Plan amendments................................................. 215 -- (1,804) --
Actuarial (gain) loss........................................... 320 2,802 (698) 2,476
Curtailments.................................................... (254) -- -- --
Benefits paid................................................... (3,468) (2,648) (842) (943)
--------- ---------- ---------- ----------
Benefit obligation at end of year............................... 46,320 65,081 11,285 14,692
--------- ---------- ---------- ----------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year.................. 34,451 40,117 -- --
Acquired company................................................ -- 2,614 -- --
Actual return on plan assets.................................... 6,139 4,943 -- --
Company contributions........................................... 2,995 3,367 842 943
Benefits paid................................................... (3,468) (2,648) (842) (943)
--------- ---------- ---------- ----------
Fair value of plan assets at end of year........................ 40,117 48,393 -- --
--------- ---------- ---------- ----------
Funded status................................................... (6,203) (16,688) (11,285) (14,692)
Unrecognized actuarial (gain) loss.............................. 36 1,124 (4,524) (1,847)
Unrecognized prior service cost................................. 187 170 (2,556) (2,452)
Unrecognized transition obligation.............................. (52) (41) -- --
--------- ---------- ---------- ----------
Net amount recognized........................................... $ (6,032) $ (15,435) $ (18,365) $ (18,991)
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
Amounts recognized in the balance sheet consist of:
Accrued benefit liability..................................... $ (6,260) $ (16,907) $ (18,365) $ (18,991)
Intangible asset.............................................. 228 475 -- --
Accumulated other comprehensive income........................ -- 997 -- --
--------- ---------- ---------- ----------
Net amount recognized........................................... $ (6,032) $ (15,435) $ (18,365) $ (18,991)
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
Weighted-average assumptions as of year end:
Discount rate................................................... 7.5% 5.5%-7.0% 7.5% 7.0%
Expected return on plan assets.................................. 8.0% 8.0% N/A N/A
Rate of compensation increase................................... 5.0% 2.5%-4.0% N/A N/A
</TABLE>
The weighted average assumed health care cost trend rate used in measuring
the accumulated postretirement benefit obligation was 8.3% in 1997 and 7.7% in
1998, declining by .5% per year to a weighted average rate of 6.3%.
F-102
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. PENSION AND OTHER EMPLOYEE BENEFIT PLANS (CONTINUED)
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $14,200,000, $14,151,000, and $12,117,000 at 1997
and $39,659,000, $37,479,000, and $24,927,000 at 1998 respectively.
The projected benefit obligation for pension plans outside of the U.S. are
$11,728,000 at January 2, 1999.
Components of net pension expense for qualified defined benefit pension
plans are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Service cost..................................................... $ 2,470 $ 2,687 $ 3,221
Interest cost.................................................... 2,711 3,207 3,779
Expected return on plan assets................................... (2,248) (2,770) (3,086)
Net amortization of deferrals.................................... 53 48 28
--------- --------- ---------
Net periodic benefit cost........................................ $ 2,986 $ 3,172 $ 3,942
--------- --------- ---------
--------- --------- ---------
</TABLE>
The components of net periodic postretirement benefit cost are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Service cost..................................................... $ 868 $ 1,060 $ 952
Interest cost.................................................... 780 913 922
Amortization of prior service cost............................... (57) (56) (174)
Recognized actuarial gain........................................ (143) (147) (131)
--------- --------- ---------
Net periodic benefit cost........................................ $ 1,448 $ 1,770 $ 1,569
--------- --------- ---------
--------- --------- ---------
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the other postretirement benefit plans. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects (in thousands):
<TABLE>
<CAPTION>
1-PERCENTAGE
POINT 1-PERCENTAGE
INCREASE POINT DECREASE
------------- --------------
<S> <C> <C>
Effect on total of service and interest cost................... $ 348 $ (283)
Effect on postretirement benefit obligation.................... 2,306 (1,920)
</TABLE>
F-103
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. LONG-TERM DEBT
Following is a summary of long-term debt of the Company (in thousands):
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
7.78% Senior notes.................................................... $ 100,000 $ 100,000
German bank loans..................................................... -- 51,261
Other................................................................. 8,615 15,774
---------- ----------
108,615 167,035
Current maturities.................................................... (2,672) (17,156)
---------- ----------
$ 105,943 $ 149,879
---------- ----------
---------- ----------
</TABLE>
The Senior notes are due April 30, 2011. Interest only is payable in
quarterly installments until 2000 at which time annual payments will commence
ranging from $3.9 million to $12.2 million. The debt agreements contain certain
restrictive covenants which, among other things, require that the Company
maintain certain financial ratios at specified levels, restrict the amount of
additional borrowings and limit the amount of dividends that can be paid.
The German bank loans consist of various loans that are payable periodically
through 2008 with interest rates ranging from 4% to 9%.
The other debt consists primarily of loans from previous Schade
shareholders, mortgages and equipment loans with interest rates ranging from
5.5% to 10.1%. Certain plant and equipment purchased with the proceeds of the
debt collateralize these obligations.
The Company had available unused unsecured lines of credit of approximately
$56,000,000 at January 2, 1999 under terms of an agreement executed in April,
1996. Funds are available under this agreement through April, 2000 at an
interest rate equal to the London Interbank rate plus 75 basis points.
Long-term debt maturities are $17,156,000 in 1999, $17,081,000 in 2000,
$11,904,000 in 2001, $11,020,000 in 2002, $21,243,000 in 2003 and $88,631,000
thereafter.
8. LEASES
The Company leases certain of its manufacturing facilities, sales offices,
transportation and other equipment. Total rental expense was approximately
$4,471,000 in 1996, $5,037,000 in 1997 and $4,505,000 in 1998. Future minimum
lease payments under noncancellable operating leases are $3,691,000 in 1999,
$2,811,000 in 2000, $2,180,000 in 2001, $1,638,000 in 2002, $1,188,000 in 2003
and $713,000 thereafter.
F-104
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
Pre-tax income reported by U.S. and foreign subsidiaries was as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
United States................................................ $ 31,531 $ 29,070 $ 16,715
Foreign...................................................... (865) (2,048) 5,237
--------- --------- ---------
$ 30,666 $ 27,022 $ 21,952
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision (benefit) for income taxes is summarized below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Current:
U.S. federal.................................................. $ 11,070 $ 5,187 $ 236
Foreign....................................................... -- -- 1,479
State......................................................... 2,093 1,178 1,078
--------- --------- ---------
13,163 6,365 2,793
--------- --------- ---------
Deferred:
U.S. federal.................................................. (1,720) 3,022 (96)
Foreign....................................................... -- -- 1,124
State......................................................... 107 71 (189)
--------- --------- ---------
(1,613) 3,093 839
--------- --------- ---------
$ 11,550 $ 9,458 $ 3,632
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and tax basis of the Company's assets and liabilities.
Current deferred income tax assets of $11,076,000 and $10,608,000 are classified
as prepaid expenses at December 27, 1997 and January 2, 1999, respectively.
Long-term deferred income tax liabilities of $2,051,000 and $4,510,000 are
classified as other long-term liabilities at December 27, 1997 and January 2,
1999 respectively.
F-105
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
Deferred income taxes are comprised of the following at December 27, 1997
and January 2, 1999 (in thousands):
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Gross deferred tax liabilities
Property, plant and equipment......................................... $ 16,457 $ 19,427
Other................................................................. 607 590
--------- ---------
17,064 20,017
--------- ---------
Gross deferred tax assets
Pension and postretirement benefit obligations........................ 14,036 16,486
Other accrued liabilities............................................. 11,898 9,629
Inventories........................................................... 155 --
Tax credit and net operating loss carryforwards....................... 1,355 1,162
--------- ---------
27,444 27,277
Valuation allowance..................................................... (1,355) (1,162)
--------- ---------
Net deferred tax assets................................................. $ 9,025 $ 6,098
--------- ---------
--------- ---------
</TABLE>
At December 27, 1997 and January 2, 1999 the Company maintained a valuation
allowance for foreign tax credit and foreign net operating loss carryforwards,
which expire in 1999-2004. Based upon past operating results, the Company
estimates that it is more likely than not that these carryforwards cannot be
utilized before they expire. The Company does not provide U.S. income taxes on
earnings of foreign subsidiaries ($3.2 million) since it is intended that these
earnings be indefinitely reinvested.
Provision for taxes on income in 1998 includes the benefit of tax credits
related to prior years. In 1998, the Company completed a review of qualified
research and development expenditures for the years 1994-1997 and recorded tax
credits totaling $4 million. The provision for income taxes computed by applying
the Federal statutory rate to income before income taxes is reconciled to the
recorded provision as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Tax at United States statutory rate............................. $ 10,733 $ 9,458 $ 7,683
State income taxes, net of federal benefit...................... 1,430 812 578
Research and development tax credits............................ (80) (187) (5,472)
Foreign income taxed at rates different than U.S................ 303 (186) 770
Foreign Sales Corporation....................................... (494) (682) (684)
Non-taxable interest income (340) (382) (235)
Amortization of goodwill........................................ 346 479 561
Other........................................................... (348) 146 431
--------- --------- ---------
$ 11,550 $ 9,458 $ 3,632
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-106
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMON SHARES
In 1997, the Company reserved 500,000 common shares for the Excel
Industries, Inc. 1997 Long-Term Incentive Plan (LTIP). Under the LTIP,
performance shares awarded to key executives of the Company are earned based on
the attainment of one or more pre-established performance goals over a specified
performance period. Through January 2, 1999, 135,000 performance shares had been
awarded.
The Company has 473,550 common shares reserved for issuance to officers,
other key employees and non-employee directors for the 1994 Stock Compensation
Plan (the Plan). The Plan provides that options may be granted at not less than
fair market value and are exercisable for ten years from the date of grant.
Generally, the options become exercisable at the rate of 25% per year commencing
one year from the date of grant.
The following table sets forth stock option activity.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------------
1996 1997 1998
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stock options outstanding at beginning of
year........................................ 263,750 $ 12.23 250,900 $ 12.45 352,250 $ 14.73
Options granted............................... 15,000 12.25 127,000 19.19 9,000 17.17
Options exercised............................. (12,200) 7.54 (9,400) 12.38 (13,100) 12.38
Options canceled.............................. (15,650) 12.38 (16,250) 15.73 (26,250) 16.53
--------- ----------- --------- ----------- --------- -----------
Stock options outstanding at end of year...... 250,900 $ 12.45 352,250 $ 14.73 321,900 $ 14.75
--------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- -----------
Options exerciseable at year end.............. 57,300 $ 12.56 110,000 $ 12.51 177,275 $ 13.48
--------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
EXERCISE PRICE RANGE
--------------------------
$12.25-$13.81 $16.13-$21.38 TOTAL
------------ ------------ ----------
<S> <C> <C> <C>
Options outstanding.................................. 210,900 111,000 321,900
Weighted average exercise price...................... $12.40 $19.21 $14.75
Remaining contractual life........................... 6.2 years 8.2 years 6.9 years
Options exercisable.................................. 147,525 29,750 177,275
Weighted average exercise price...................... $12.37 $18.98 $13.48
</TABLE>
The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock Based Compensation." Accordingly, the element of
compensation cost applicable to the granting of stock options has not been
recognized for financial statement purposes. Had compensation cost for the
options granted been recognized for financial statement purposes using the
Black-Scholes option
F-107
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMON SHARES (CONTINUED)
pricing model, the Company's net earnings and basic earnings per share would
have been reduced to the pro-forma amounts indicated below (in thousands except
per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------------
1996 1997 1998
---------------------- ---------------------- ----------------------
REPORTED PRO-FORMA REPORTED PRO-FORMA REPORTED PRO-FORMA
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net earnings..................... $ 19,116 $ 18,882 $ 17,564 $ 17,191 $ 16,953 $ 16,523
Per share........................ 1.79 1.77 1.59 1.55 1.37 1.34
</TABLE>
The fair value of the option grant is estimated on the date of grant with
the following assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Dividend yield................................................. 3.2% 2.8% 2.86%
Expected volatility............................................ 33% 31% 33%
Risk-free interest rate 6.5% 5.75% 4.5%
Expected life.................................................. 5 years 5 years 5 years
</TABLE>
The Company has an employee stock purchase plan and has reserved 251,659
common shares for this purpose. The plan allows eligible employees to authorize
payroll withholdings which are used to purchase common shares from the Company
at ninety percent (90%) of the closing price of the common shares on the date of
purchase. Through January 2, 1999, 198,341 shares had been issued under the
plan.
The Company has outstanding warrants for the purchase of 381,000 common
shares at a price of $13.25. These warrants were issued in connection with the
acquisition of Anderson Industries and if not exercised, expire April 2001.
The Company has a shareholder rights plan to protect shareholders against
unsolicited attempts to acquire control of the Company that do not offer what
the Company believes to be an adequate price to all shareholders. The rights
were issued to shareholders of record on January 22, 1996 and will expire on
January 22, 2006. The plan provides for the issuance of one right for each
outstanding share of the Company's Common Stock. The rights will become
exercisable only if a person or group acquires or announces a tender offer to
acquire 20% or more of the Company's outstanding voting stock. Each right
entitles the holder to buy one one-hundredth share of a newly authorized series
of preferred stock from the Company. Also, after such acquisition all rights
holders except the acquirer will be entitled to purchase common shares at
one-half of the then current market price of the common shares. Any activity
regarding this plan would have a dilutive effect on earnings per share
calculations.
11. SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company adopted SFAS No 131, "Disclosures About Segments of an
Enterprise and Related Information," in 1998 and restated prior year disclosures
for certain minor differences. The Company's operating segments are aggregated
for reporting purposes into two reportable segments based on similarities of the
nature of products and production processes, the types of customers, the method
of distribution of products, and economic characteristics.
F-108
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SEGMENT INFORMATION AND MAJOR CUSTOMERS (CONTINUED)
The light vehicle products segment designs, manufactures and sells products
for passenger cars and pick-up trucks for OEMs and Tier I suppliers. Products
include plastic and metal framed window and door assemblies, manual and power
window regulator systems, manual seat systems, decorative trims and injection
molded plastic parts. Principal markets are in North America, Europe, and
Mexico.
The recreational vehicles, mass transit and heavy truck products segment
(RV/MT/HT) manufactures and sells products for recreational vehicles, mass
transit and heavy trucks. Products include appliances such as water heaters,
furnaces, stoves and ranges, hardware such as jacks and couplers, seating frames
and seat adjusters, preassembled doors and windows for motor homes and window
assembles for mass transit systems and heavy trucks. Principal markets are in
the United States. Segment information is summarized in the following tables
with years prior to 1998 restated (in thousands):
<TABLE>
<CAPTION>
LIGHT
VEHICLE RV/MT/HT
PRODUCTS PRODUCTS CORPORATE TOTAL
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
DECEMBER 28, 1996
Sales.................................... $ 730,255 $ 157,486 $ -- $ 887,741
Operating income (expense)............... 34,140 13,337 (8,763) 38,714
Assets................................... 301,197 87,643 54,394 443,234
Capital expenditures..................... 23,816 3,768 1,625 29,209
Depreciation and amortization expense.... 20,626 4,283 1,337 26,246
DECEMBER 27, 1997
Sales.................................... $ 759,569 $ 202,764 $ -- $ 962,333
Operating income (expense)............... 28,546 15,392 (7,862) 36,076
Assets................................... 319,284 84,156 54,357 457,797
Capital expenditures..................... 32,932 5,916 439 39,287
Depreciation and amortization expense.... 24,348 7,481 1,553 33,382
JANUARY 2, 1999
Sales.................................... $ 885,383 $ 220,720 $ -- $ 1,106,103
Operating income (expense)............... 18,051 19,737 (6,282) 31,506
Assets................................... 484,126 81,198 29,060 594,384
Capital expenditures..................... 40,824 4,779 355 45,958
Depreciation and amortization expense.... 31,725 6,905 1,049 39,679
</TABLE>
F-109
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. SEGMENT INFORMATION AND MAJOR CUSTOMERS (CONTINUED)
The following table presents revenues by country (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ------------
<S> <C> <C> <C>
United States.......................................... $ 742,047 $ 788,952 $ 786,672
Canada................................................. 106,640 134,801 125,376
Germany................................................ -- -- 111,180
Mexico................................................. 29,863 24,062 23,411
Other.................................................. 9,191 14,518 59,464
---------- ---------- ------------
$ 887,741 $ 962,333 $ 1,106,103
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The following table presents long-lived assets by country (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
United States............................................ $ 201,253 $ 209,012 $ 216,230
Germany.................................................. -- -- 39,539
Other.................................................... 3,031 2,924 35,234
---------- ---------- ----------
$ 204,284 $ 211,936 $ 291,003
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Sales to three major customers, Ford Motor Company, DaimlerChrysler, and
General Motors Corporation, were approximately 47%, 12% and 6%, respectively, of
the Company's net sales in 1996 as compared to 41%, 11% and 7% in 1997 and 36%,
9% and 5% in 1998.
Accounts receivable from Ford Motor Company, DaimlerChrysler, and General
Motors Corporation approximated 60% of trade accounts receivable at December 27,
1997 and 46% at January 2, 1999.
12. CONTINGENCIES
A chemical cleaning compound, trichloroethylene (TCE), was found in the soil
and groundwater on the Company's property in Elkhart, Indiana, and in 1981 TCE
was found in a well field of the City of Elkhart in close proximity to the
Company's facility. On June 9, 1998, the United States District Court for the
Northern District of Indiana accepted a consent decree specifying a payment of
Federal Past Response Costs. Together with amounts due the Indiana Department of
Environmental Management, the Company paid approximately $3.4 million in 1998 to
complete its obligation for the remedial clean-up.
The Company has been named a potentially responsible party for costs at six
disposal sites. The remedial investigations and feasibility studies have been
completed, and the results of those studies have been provided to the
appropriate agencies. The studies indicated a range of viable remedial
approaches, but agreement has not yet been reached with the authorities on the
final remediation approach. Furthermore, the PRPs for these sites have not
reached an agreement on the allocation of costs between the PRPs. The Company
believes it either has no liability as a responsible party or that adequate
provisions have been recorded for current estimates of the Company's liability
and estimated legal costs associated with the settlement of these claims. It is
reasonably possible that the Company's recorded estimate of its obligation may
change in the near term.
F-110
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. CONTINGENCIES (CONTINUED)
There are claims and pending legal proceedings against the Company and its
subsidiaries with respect to taxes, workers' compensation, warranties and other
matters arising out of the ordinary conduct of the business. The ultimate result
of these claims and proceedings at January 2, 1999 is not determinable, but, in
the opinion of management, adequate provision for anticipated costs has been
made or insurance coverage exists to cover such costs.
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth in summary form the quarterly results of
operations for the fiscal years ended December 27, 1997 and January 2, 1999 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1997
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales.................................... $ 251,216 $ 264,474 $ 213,548 $ 233,095
Gross profit................................. 30,998 37,099 21,659 25,587
Net income................................... 6,302 9,067 297 1,898
Net income per share:
Basic...................................... $ .59 $ .85 $ .03 $ .16
Diluted.................................... .53 .75 .03 .16
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales.................................... $ 230,994 $ 247,237 $ 280,231 $ 347,641
Gross profit................................. 27,580 28,650 20,648 33,243
Net income................................... 5,379 5,756 1,589 4,229
Net income per share:
Basic...................................... $ .43 $ .46 $ .13 $ .35
Diluted.................................... .43 .46 .13 .35
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
14. SUBSEQUENT EVENT
On March 23, 1999, all of the Company's outstanding stock was acquired by
Dura Automotive Systems, Inc. (Dura). In the aggregate, the stockholders of
Excel received consideration of approximately $155.5 million in cash and
approximately 5.1 million shares of Dura's Class A common stock. Upon completion
of this transaction, the Company became a wholly owned subsidiary of Dura.
Dura is a leading designer and manufacturer of driver control systems,
engineered mechanisms and cable-related systems for the global automotive
industry. Their products include parking brake systems, automotive cables,
transmission shifter systems, latches, underbody tire carriers, jacks, brake,
clutch and accelerator pedals and other mechanical assemblies. Their products
are sold to major North American OEMs, including Ford, General Motors and
DaimlerChrysler, as well as Japanese OEMs including Toyota and Honda. Dura's
European and Latin American facilities support Ford, GM, Volkswagen, Mercedes,
BMW, PSA (Peugeot and Citroen) and various other OEMs. Dura's operating
headquarters are in Rochester Hills, MI, and its corporate office is in
Minneapolis, MN.
F-111
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
The following consolidating financial information presents balance sheet,
statement of income and cash flow information related to the Company's
businesses. Upon completion of the transaction described in Note 14, each
Guarantor became a direct or indirect wholly owned subsidiary of Dura and fully
and unconditionally guaranteed Dura's 9% senior subordinated notes, on a joint
and several basis. Separate financial statements and other disclosures
concerning the Guarantors have not been presented because management believes
that such information is not material.
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 28, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 878,037 $ 9,807 $ (103) $ 887,741
Cost of goods sold........................................... 773,972 9,506 (103) 783,375
----------- ----------- ----- ------------
Gross profit............................................... 104,065 301 -- 104,366
Selling, administrative and engineering expenses............. 64,440 1,212 -- 65,652
----------- ----------- ----- ------------
Operating income (loss).................................... 39,625 (911) -- 38,714
Interest expense............................................. 9,785 47 (48) 9,784
Other income, net............................................ (1,691) (93) 48 (1,736)
----------- ----------- ----- ------------
Income (loss) before taxes and minority interest........... 31,531 (865) -- 30,666
Provision for income taxes................................... 11,550 -- -- 11,550
----------- ----------- ----- ------------
Net income (loss).......................................... $ 19,981 $ (865) $ -- $ 19,116
----------- ----------- ----- ------------
----------- ----------- ----- ------------
</TABLE>
F-112
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 28, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $ 19,981 $ (865) $ 19,116
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 25,731 515 26,246
Deferred income taxes.................................................. (1,613) -- (1,613)
Other.................................................................. 348 -- 348
Changes in other operating items....................................... 24,594 1,158 25,752
----------- ----------- ------------
Net cash provided by operating activities............................ 69,041 808 69,849
----------- ----------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment................................ (28,744) (465) (29,209)
Businesses acquired...................................................... (58,984) -- (58,984)
Sale of investments, net................................................. 8,290 -- 8,290
Other.................................................................... 389 540 929
----------- ----------- ------------
Net cash provided by (used for) investing activities................. (79,049) 75 (78,974)
----------- ----------- ------------
Cash flows from financing activities:
Issuance of common shares................................................ 278 -- 278
Payments of long-term debt............................................... (79,934) -- (79,934)
Dividends................................................................ (4,875) -- (4,875)
Purchase of treasury shares.............................................. (155) -- (155)
Issuance of other long-term debt......................................... 100,000 -- 100,000
----------- ----------- ------------
Net cash provided by financing activities............................ 15,314 -- 15,314
----------- ----------- ------------
Net change in cash and short-term investments.............................. 5,306 883 6,189
Cash and short-term investments at beginning of period..................... 39 352 391
----------- ----------- ------------
Cash and short-term investments at end of period........................... $ 5,345 $ 1,235 $ 6,580
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-113
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 27, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments............................ $ 590 $ 1,727 $ -- $ 2,317
Marketable securities...................................... 24,420 -- -- 24,420
Accounts receivable--trade................................. 140,380 530 -- 140,910
Customer tooling to be billed.............................. 22,176 180 -- 22,356
Inventories................................................ 40,116 813 -- 40,929
Prepaid expenses........................................... 14,927 2 -- 14,929
----------- ----------- ------------ ------------
Total current assets..................................... 242,609 3,252 -- 245,861
Property, plant & equipment, net............................. 158,044 2,924 -- 160,968
Goodwill, net................................................ 35,960 -- -- 35,960
Other assets................................................. 23,035 -- (8,027) 15,008
----------- ----------- ------------ ------------
$ 459,648 $ 6,176 $ (8,027) $ 457,797
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 85,160 $ 309 $ -- $ 85,469
Accrued liabilities:
Salaries and wages....................................... 9,249 -- -- 9,249
Employee benefits........................................ 11,136 -- -- 11,136
Other.................................................... 20,032 753 -- 20,785
Current maturities of long-term debt....................... 2,672 -- -- 2,672
----------- ----------- ------------ ------------
Total current liabilities................................ 128,249 1,062 -- 129,311
Long-term debt............................................... 105,943 -- -- 105,943
Long-term employee benefits.................................. 32,934 -- -- 32,934
Other long-term liabilities.................................. 4,294 1,617 (1,617) 4,294
Shareholders' equity......................................... 188,228 3,497 (6,410) 185,315
----------- ----------- ------------ ------------
$ 459,648 $ 6,176 $ (8,027) $ 457,797
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
F-114
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 27, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 951,611 $ 10,906 $ (184) $ 962,333
Cost of goods sold........................................... 836,634 10,540 (184) 846,990
----------- ----------- ----- ------------
Gross profit............................................... 114,977 366 -- 115,343
Selling, administrative and engineering expenses............. 76,910 2,357 -- 79,267
----------- ----------- ----- ------------
Operating income (loss).................................... 38,067 (1,991) -- 36,076
Interest expense............................................. 10,984 20 (20) 10,984
Other (income) expense, net.................................. (1,987) 37 20 (1,930)
----------- ----------- ----- ------------
Income (loss) before taxes and minority interest........... 29,070 (2,048) -- 27,022
Provision for income taxes................................... 9,458 -- -- 9,458
----------- ----------- ----- ------------
Net income (loss).......................................... $ 19,612 $ (2,048) $ -- $ 17,564
----------- ----------- ----- ------------
----------- ----------- ----- ------------
</TABLE>
F-115
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 27, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $ 19,612 $ (2,048) $ 17,564
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 32,822 560 33,382
Deferred income taxes.................................................. 3,093 -- 3,093
Other.................................................................. 2,080 13 2,093
Due (to)/from affiliates............................................... 1,710 (1,710) --
Changes in other operating items....................................... (19,157) 3,502 (15,655)
----------- ----------- ------------
Net cash provided by operating activities............................ 40,160 317 40,477
----------- ----------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment................................ (39,008) (279) (39,287)
Businesses acquired...................................................... (2,415) -- (2,415)
Purchase of investments, net............................................. (2,471) -- (2,471)
Proceeds from disposal of business....................................... 6,793 -- 6,793
Other.................................................................... (255) 454 199
----------- ----------- ------------
Net cash provided by (used for) investing activities................. (37,356) 175 (37,181)
----------- ----------- ------------
Cash flows from financing activities:
Issuance of common shares................................................ 543 -- 543
Payments of long-term debt............................................... (2,470) -- (2,470)
Dividends................................................................ (5,632) -- (5,632)
----------- ----------- ------------
Net cash used for financing activities............................... (7,559) -- (7,559)
----------- ----------- ------------
Net change in cash and short-term investments.............................. (4,755) 492 (4,263)
Cash and short-term investments at beginning of period..................... 5,345 1,235 6,580
----------- ----------- ------------
Cash and short-term investments at end of period........................... $ 590 $ 1,727 $ 2,317
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-116
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS AS OF JANUARY 2, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments............................ $ 295 $ 15,995 $ -- $ 16,290
Marketable securities...................................... 14,000 -- -- 14,000
Accounts receivable--trade................................. 127,110 40,290 -- 167,400
Customer tooling to be billed.............................. 21,646 9,003 -- 30,649
Inventories................................................ 39,869 19,533 -- 59,402
Prepaid expenses........................................... 15,089 551 -- 15,640
----------- ----------- ------------ ------------
Total current assets..................................... 218,009 85,372 -- 303,381
Property, plant & equipment, net............................. 162,374 70,295 -- 232,669
Goodwill, net................................................ 41,865 -- -- 41,865
Other assets................................................. 47,594 4,478 (35,603) 16,469
----------- ----------- ------------ ------------
$ 469,842 $ 160,145 $ (35,603) $ 594,384
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 85,188 $ 21,864 $ -- $ 107,052
Accrued liabilities:
Salaries and wages....................................... 16,875 -- -- 16,875
Employee benefits........................................ 14,464 -- -- 14,464
Other.................................................... 9,765 15,674 -- 25,439
Income taxes payable....................................... 1,461 2,138 -- 3,599
Current maturities of long-term debt....................... 2,001 15,155 -- 17,156
----------- ----------- ------------ ------------
Total current liabilities................................ 129,754 54,831 -- 184,585
Long-term debt............................................... 103,928 45,951 -- 149,879
Long-term employee benefits.................................. 44,469 -- -- 44,469
Other long-term liabilities.................................. (695) 20,359 (10,579) 9,085
Minority interest............................................ -- 12,108 -- 12,108
Shareholders' equity......................................... 192,386 26,896 (25,024) 194,258
----------- ----------- ------------ ------------
$ 469,842 $ 160,145 $ (35,603) $ 594,384
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
F-117
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED JANUARY 2, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
----------- ----------- ------------
<S> <C> <C> <C>
Net sales.................................................................. $ 936,940 $ 169,163 $1,106,103
Cost of goods sold......................................................... 844,573 151,409 995,982
----------- ----------- ------------
Gross profit............................................................. 92,367 17,754 110,121
Selling, administrative and engineering expenses........................... 69,272 9,343 78,615
----------- ----------- ------------
Operating income......................................................... 23,095 8,411 31,506
Interest expense........................................................... 11,628 -- 11,628
Other (income) expense, net................................................ (3,772) 1,698 (2,074)
----------- ----------- ------------
Income before taxes and minority interest................................ 15,239 6,713 21,952
Provision for income taxes................................................. 1,029 2,603 3,632
Minority interest.......................................................... -- 1,367 1,367
----------- ----------- ------------
Net income............................................................... $ 14,210 $ 2,743 $ 16,953
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-118
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JANUARY 2, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................... $ 14,210 $ 2,743 $ 16,953
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 31,726 7,953 39,679
Deferred income taxes.................................................. (394) 1,176 782
Other.................................................................. (734) 2,855 2,121
Due (to)/from affiliates............................................... (986) 986 --
Changes in other operating items....................................... 19,185 (2,718) 16,467
----------- ----------- ------------
Net cash provided by operating activities............................ 63,007 12,995 76,002
----------- ----------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment................................ (37,040) (8,918) (45,958)
Businesses acquired...................................................... (608) (9,472) (10,080)
Sale of investments, net................................................. 10,420 -- 10,420
Disposal of business..................................................... (18,605) 18,605 --
Other.................................................................... (3,239) 4,932 1,693
----------- ----------- ------------
Net cash provided by (used for) investing activities................. (49,072) 5,147 (43,925)
----------- ----------- ------------
Cash flows from financing activities:
Issuance of common shares................................................ 916 -- 916
Payments of long-term debt............................................... (5,175) (10,730) (15,905)
Dividends................................................................ (6,165) -- (6,165)
Purchase of treasury shares.............................................. (3,806) -- (3,806)
Issuance of other long-term debt......................................... -- 3,359 3,359
Other.................................................................... -- 3,497 3,497
----------- ----------- ------------
Net cash used for financing activities............................... (14,230) (3,874) (18,104)
----------- ----------- ------------
Net change in cash and short-term investments.............................. (295) 14,268 13,973
Cash and short-term investments at beginning of period..................... 590 1,727 2,317
----------- ----------- ------------
Cash and short-term investments at end of period........................... $ 295 $ 15,995 $ 16,290
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-119
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS AS OF MARCH 28, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments............................ $ 24,746 $ 809 $ -- $ 25,555
Accounts receivable--trade................................. 147,687 780 -- 148,467
Customer tooling to be billed.............................. 24,723 4 -- 24,727
Inventories................................................ 39,147 848 -- 39,995
Prepaid expenses........................................... 12,181 14 -- 12,195
----------- ----------- ------------ ------------
Total current assets..................................... 248,484 2,455 -- 250,939
Property, plant & equipment, net............................. 161,664 2,867 -- 164,531
Other assets................................................. 59,379 -- (7,941) 51,438
----------- ----------- ------------ ------------
$ 469,527 $ 5,322 $ (7,941) $ 466,908
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 82,716 $ 304 $ -- $ 83,020
Accrued liabilities........................................ 43,759 409 -- 44,168
Income taxes payable....................................... 4,662 -- -- 4,662
Current maturities of long-term debt....................... 2,712 -- -- 2,712
----------- ----------- ------------ ------------
Total current liabilities................................ 133,849 713 -- 134,562
Long-term debt............................................... 105,317 -- -- 105,317
Other long-term liabilities.................................. 37,546 1,531 (1,531) 37,546
Shareholders' equity......................................... 192,815 3,078 (6,410) 189,483
----------- ----------- ------------ ------------
$ 469,527 $ 5,322 $ (7,941) $ 466,908
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
F-120
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 28, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
----------- ----------- ------------
<S> <C> <C> <C>
Net sales.................................................................. $ 230,583 $ 411 $ 230,994
Cost of goods sold......................................................... 202,714 700 203,414
----------- ----- ------------
Gross profit (loss)...................................................... 27,869 (289) 27,580
Selling, administrative and engineering expenses........................... 17,110 126 17,236
----------- ----- ------------
Operating income (loss).................................................. 10,759 (415) 10,344
Other expense, net......................................................... 2,190 4 2,194
----------- ----- ------------
Income (loss) before taxes and minority interest......................... 8,569 (419) 8,150
Provision for income taxes................................................. 2,771 -- 2,771
----------- ----- ------------
Net income (loss)........................................................ $ 5,798 $ (419) $ 5,379
----------- ----- ------------
----------- ----- ------------
</TABLE>
F-121
<PAGE>
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 28, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................ $ 5,798 $ (419) $ 5,379
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation and amortization.......................................... 7,735 113 7,848
Deferred income taxes.................................................. 2,246 -- 2,246
Other.................................................................. 206 8 214
Due (to)/from affiliates............................................... 86 (86) --
Changes in other operating items....................................... (575) (470) (1,045)
----------- ----------- ------------
Net cash provided by (used for) operating activities................. 15,496 (854) 14,642
----------- ----------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment................................ (11,226) (64) (11,290)
Other.................................................................... (2,737) -- (2,737)
----------- ----------- ------------
Net cash used for investing activities............................... (13,963) (64) (14,027)
----------- ----------- ------------
Cash flows from financing activities:
Issuance of common shares................................................ 344 -- 344
Payments of long-term debt............................................... (586) -- (586)
Dividends................................................................ (1,555) -- (1,555)
----------- ----------- ------------
Net cash used for financing activities............................... (1,797) -- (1,797)
----------- ----------- ------------
Net change in cash and short-term investments.............................. (264) (918) (1,182)
Cash and short-term investments at beginning of period..................... 25,010 1,727 26,737
----------- ----------- ------------
Cash and short-term investments at end of period........................... $ 24,746 $ 809 $ 25,555
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
F-122
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF ADWEST AUTOMOTIVE PLC
We have audited the accompanying consolidated balance sheets of Adwest
Automotive Plc and its subsidiaries at 30 June 1998 and 1997, and the related
consolidated profit and loss accounts, statements of movements in shareholders'
equity and consolidated cash flow statements for each of the years in the three
year period ended 30 June 1998. These consolidated financial statements are the
responsibility of the management of Adwest Automotive Plc. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United Kingdom, which are substantially consistent with those of
the United States of America. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Adwest
Automotive Plc and its subsidiaries at 30 June 1998 and 1997, and the results of
their operations and their cash flows for each of the years in the three year
period ended 30 June 1998, in conformity with generally accepted accounting
principles in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States would have affected net profit for the two years
ended 30 June 1998 and shareholders' equity at 30 June 1998 and 1997, to the
extent summarised in Note 31 to the consolidated financial statements.
<TABLE>
<S> <C>
London, England KPMG Audit Plc
7 September 1998 Chartered Accountants
Registered Auditor
</TABLE>
F-123
<PAGE>
ADWEST AUTOMOTIVE PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE
<TABLE>
<CAPTION>
NOTES 1998 L000 1997 L000 1996 L000
----- --------- --------- ---------
<S> <C> <C> <C> <C>
TURNOVER.................................................................
Continuing operations.................................................. 149,166 150,842 127,345
Acquisitions........................................................... 73,024 -- --
--------- --------- ---------
TOTAL CONTINUING OPERATIONS.............................................. 222,190 150,842 127,345
Discontinued operations................................................ 24,680 40,570 96,305
Discontinued acquisitions.............................................. 2,983 -- --
--------- --------- ---------
2 249,853 191,412 223,650
--------- --------- ---------
OPERATING PROFIT
Continuing operations.................................................. 13,586 14,602 10,221
Acquisitions........................................................... 4,937 -- --
--------- --------- ---------
TOTAL CONTINUING OPERATIONS.............................................. 18,523 14,602 10,221
Discontinued operations................................................ 2,959 3,411 4,729
Discontinued acquisitions.............................................. (124) -- --
--------- --------- ---------
2 21,358 18,013 14,950
EXCEPTIONAL ITEMS........................................................ 3
Continuing operations.................................................. -- -- (3,130)
Discontinued operations................................................ -- -- (1,835)
--------- --------- ---------
OPERATING PROFIT AFTER EXCEPTIONAL ITEMS................................. 4 21,358 18,013 9,985
Associated undertakings................................................ 21 21 86
Profit less losses on disposal of interests in associates.............. -- -- 53
Profit/(losses) and provision for losses on disposal of subsidiaries... 4,051 (791) (9,096)
Goodwill written off on disposal of subsidiaries....................... (17,552) -- (20,173)
6 (13,501) (791) (29,269)
--------- --------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE INTEREST..................... 7,878 17,243 (19,145)
Net interest charge...................................................... 7 (5,199) (2,892) (3,852)
--------- --------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION..................... 2,679 14,351 (22,997)
Taxation credit (charge)................................................. 8 (4,529) (4,527) 2,082
--------- --------- ---------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION...................... (1,850) 9,824 (25,079)
Minority interests--equity............................................... (505) (400) (263)
--------- --------- ---------
(LOSS)/PROFIT FOR THE FINANCIAL YEAR..................................... (2,355) 9,424 (25,342)
Dividends................................................................ 9 (6,442) (6,428) (6,400)
--------- --------- ---------
RETAINED PROFIT/(LOSS)................................................... 24 (8,797) 2,996 (31,742)
--------- --------- ---------
--------- --------- ---------
EARNINGS PER SHARE
(Loss)/earnings per share................................................ 10 (2.8)p 11.4p (30.7)p
</TABLE>
F-124
<PAGE>
ADWEST AUTOMOTIVE PLC
CONSOLIDATED BALANCE SHEET
AT 30 JUNE
<TABLE>
<CAPTION>
NOTES 1998 L000 1997 L000
--------- --------- ---------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets................................................................... 12 61,545 37,336
Investments....................................................................... 14 755 805
--------- ---------
62,300 38,141
--------- ---------
CURRENT ASSETS
Stock and work in progress........................................................ 15 18,969 15,387
Debtors (see note below).......................................................... 16 59,646 45,840
Bank and cash balances............................................................ 19,732 22,272
--------- ---------
98,347 83,499
--------- ---------
CREDITORS: DUE WITHIN ONE YEAR
Bank loans and overdrafts......................................................... 19 9,885 821
Creditors......................................................................... 17 72,159 43,266
Proposed final dividend........................................................... 4,545 4,536
--------- ---------
86,589 48,623
--------- ---------
NET CURRENT ASSETS................................................................ 11,758 34,876
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES............................................. 74,058 73,017
CREDITORS: DUE AFTER MORE THAN ONE YEAR:
Borrowings........................................................................ 18 54,319 33,061
Others............................................................................ 18 8,375 6,320
--------- ---------
62,694 39,381
PROVISIONS FOR LIABILITIES AND CHARGES............................................ 21 (74) 1,533
--------- ---------
NET ASSETS........................................................................ 2 11,438 32,103
--------- ---------
--------- ---------
CAPITAL AND RESERVES
Called up share capital........................................................... 23 20,794 20,746
Share premium account............................................................. 23 486 355
Revaluation reserve............................................................... 24 761 876
Special reserve................................................................... 25 20,561 20,561
Profit and loss account........................................................... 24 38,885 47,235
--------- ---------
EQUITY SHAREHOLDERS' FUNDS BEFORE GOODWILL........................................ 81,487 89,773
Goodwill on acquisition........................................................... 26 73,241 60,322
--------- ---------
SHAREHOLDERS' FUNDS--EQUITY....................................................... 8,246 29,451
MINORITY EQUITY INTERESTS......................................................... 3,192 2,652
--------- ---------
11,438 32,103
--------- ---------
--------- ---------
</TABLE>
Debtors include amounts recoverable after more than one year of L8,655,000
(1997:L7,671,000).
F-125
<PAGE>
ADWEST AUTOMOTIVE PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE
<TABLE>
<CAPTION>
1998 1997 1996
NOTES L000 L000 L000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES................................ 28A 26,353 25,201 15,769
--------- --------- ---------
DIVIDENDS FROM ASSOCIATES................................................ 5 5 4
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received........................................................ 427 400 538
Interest paid on loans................................................... (4,961) (3,235) (4,079)
Interest paid on finance leases.......................................... (434) (285) (329)
Dividends paid to minority interest...................................... -- -- (122)
--------- --------- ---------
Net cash outflow from returns on investments and servicing of finance.... (4,968) (3,120) (3,992)
--------- --------- ---------
TAXATION PAID............................................................ (5,762) (3,459) (4,679)
--------- --------- ---------
CAPITAL EXPENDITURE
Purchase of tangible fixed assets........................................ (18,554) (6,708) (9,830)
Disposal of fixed assets................................................. 1,817 792 811
--------- --------- ---------
Net cash outflow from capital expenditure................................ (16,737) (5,916) (9,019)
--------- --------- ---------
ACQUISITIONS AND DISPOSALS
Receipts from sale of subsidiaries and businesses........................ 28F 21,141 12,373 28,445
Overdrafts and cash balances transferred as part of sale of
subsidiaries........................................................... -- 1,191 (44)
Receipts from sale of interest in associated undertaking................. -- -- 1,221
Purchase of subsidiary undertakings...................................... 28G (35,172) (1,809) (34,282)
Cash acquired with subsidiary acquired................................... 28G 2,697 -- 508
Additional investment in associate....................................... (38) -- --
--------- --------- ---------
Net cash flow from acquisitions and disposals............................ (11,372) 11,755 (4,152)
--------- --------- ---------
EQUITY DIVIDENDS PAID.................................................... (6,440) (6,418) (6,398)
--------- --------- ---------
MANAGEMENT OF LIQUID RESOURCES
Cash withdrawn from/(paid into) short term deposits...................... 12,811 (12,811) --
Monies paid into escrow account.......................................... (1,822) -- --
--------- --------- ---------
Net cash flow from management of liquid resources........................ 10,989 (12,811) (12,467)
--------- --------- ---------
NET CASH FLOW BEFORE FINANCING........................................... (7,932) 5,237 (12,467)
--------- --------- ---------
FINANCING
Receipts from issue of ordinary share capital............................ 179 188 352
Additional capital contribution from minority interest................... -- -- 1,346
New loans................................................................ 34,813 -- --
Repayment of loans....................................................... (23,951) (9,853) (1,455)
Finance lease capital repayments......................................... (875) (344) (321)
Movement on loan with associated undertaking............................. -- -- 420
--------- --------- ---------
Net cash flow from financing............................................. 10,166 (10,009) 342
--------- --------- ---------
Increase/(decrease) in cash.............................................. 28B 2,234 (4,772) (12,125)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-126
<PAGE>
ADWEST AUTOMOTIVE PLC
CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
NOTES L000 L000 L000
--------- --------- --------- ---------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (NOTE 28d)
<S> <C> <C> <C> <C>
Increase/(decrease) in cash in the year.................................. 2,234 (4,772) (12,125)
Cash outflow from reduction in debt and lease financing.................. 24,826 10,369 1,732
Cash inflow from new loans............................................... (34,813) (172) --
Cash flow from (decrease)/increase in liquid resources................... (10,989) 12,811 --
--------- --------- ---------
Change in net debt resulting from cash flows............................. (18,742) 18,236 (10,393)
--------- --------- ---------
Finance leases sold with subsidiaries.................................... 435 -- --
Loans and finance leases acquired with subsidiaries...................... (15,297) -- (537)
New finance leases....................................................... (1,840) (4,641) (78)
Translation difference................................................... 1,266 2,607 --
--------- --------- ---------
Movement in net debt in the year......................................... (34,178) 16,202 (11,008)
Net debt at 1 July....................................................... (17,959) (34,161) (23,153)
--------- --------- ---------
Net debt at 30 June...................................................... (52,137) (17,959) (34,161)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-127
<PAGE>
ADWEST AUTOMOTIVE PLC
STATEMENT OF CONSOLIDATED RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
(Loss)/profit for the financial year.............................................. (2,355) 9,424 (25,342)
Unrealised deficit on revaluation of properties................................... -- -- (50)
Currency translation differences on net investments............................... 332 (2,219) (462)
--------- --------- ---------
TOTAL RECOGNISED (LOSSES)/GAINS FOR THE FINANCIAL YEAR............................ (2,023) 7,205 (25,854)
--------- --------- ---------
--------- --------- ---------
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 JUNE
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
<S> <C> <C> <C>
(Loss)/profit for the financial year.............................................. (2,355) 9,424 (25,342)
Ordinary dividends................................................................ (6,442) (6,428) (6,400)
--------- --------- ---------
Retained (loss)/profit for the year............................................... (8,797) 2,996 (31,742)
Goodwill on disposal of subsidiaries included in the profit and loss account for
the year but previously written off............................................. 17,552 -- 20,173
Other recognised gains and losses................................................. 332 (2,219) (512)
New share capital issued.......................................................... 179 188 352
Goodwill in the year on acquisitions (see note 26)................................ (30,471) (1,329) (29,289)
--------- --------- ---------
Net reductions to shareholders' funds............................................. (21,205) (364) (41,018)
--------- --------- ---------
Shareholders' funds brought forward............................................... 29,451 29,815 70,833
--------- --------- ---------
Shareholders' funds carried forward............................................... 8,246 29,451 29,815
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-128
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS
1 PRINCIPAL ACCOUNTING POLICIES
(a) The financial statements have been prepared under the historical cost
convention modified by the revaluation of certain properties, the Companies
Act 1985 and in accordance with applicable accounting standards.
(b) The consolidated accounts incorporate the accounts of the holding company
and its subsidiaries, together with the group's share of the results of its
associated undertakings.
Results of subsidiaries acquired are included from the effective date of
acquisition. Results of subsidiary and business disposals are included up to
the effective date of disposal.
(c) Premiums for goodwill and discounts on the acquisition of businesses,
subsidiary and associated undertakings are dealt with through reserves at
the time of purchase. The profit or loss on disposal of previously acquired
businesses reflects the attributable amount of premium or discount on
acquisition relating to that business.
(d) Depreciation and amortisation of fixed assets is on a straight line basis
calculated at the annual rates set out below which are estimated to write
off each asset over the term of its useful life to its residual value.
<TABLE>
<S> <C>
Freehold buildings.............. 2-2 1/2% Plant and equipment............... 10-15%
Long leasehold property........... 2 1/2% Vehicles............................. 25%
Short leasehold property.... over term of
lease
</TABLE>
(e) Deferred taxation is calculated using the liability method in respect of the
taxation effect of all timing differences to the extent that it is probable
that provisions will crystallise in the foreseeable future.
(f) Assets held under finance leases are capitalised as tangible fixed assets
and depreciated in line with group policy. The corresponding liability, net
of interest charges, is categorised under creditors due within one year and
after one year, as appropriate.
The interest element of the lease instalments is allocated over the life of
each lease so as to produce a constant periodic rate of charge.
(g) Operating leases are accounted for by charging the instalments as an expense
in the profit and loss account, on a straight line basis.
(h) Exchange rates
(i) Transactions denominated in foreign currencies are recorded at the rate
of exchange ruling at the date of the transaction. Balances denominated
in foreign currencies are translated into sterling at the exchange rate
ruling on the balance sheet date. Differences on exchange are dealt with
through the profit and loss account.
(ii) Exchange differences on translation of the net investment in overseas
subsidiaries and associated undertakings are taken to reserves. To the
extent that such net investment is matched by a corresponding currency
borrowing, the matching exchange difference is also taken to reserves.
(iii) Profits and losses of overseas subsidiaries are translated at average
rates of exchange during the year. The adjustment to financial year end
rates is taken to reserves.
(i) Research and development expenditure is charged to the profit and loss
account as incurred.
F-129
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(j) Estimated current pension scheme surpluses are spread over the expected
average working lifetime of current pension scheme members after deducting
the regular cost of providing pension benefits.
(k) Stock and work in progress
(i) Stock and work in progress is stated at the lower of cost, including
factory overheads, and net realisable value.
(ii) Any significant pre-production costs on new products which are not
pre-funded by the customer are carried forward in work in progress. These
costs are then written off on a unit of production basis over the life of
the contract with the customer.
2 SEGMENTAL ANALYSIS
Turnover of the group, operating profit and net assets are analysed as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
CLASS OF BUSINESS
TURNOVER
Automotive:
UK............................................................................... 79,696 77,347 45,649
Rest of Europe................................................................... 134,384 65,315 70,871
USA.............................................................................. 8,110 8,180 10,825
--------- --------- ---------
Continuing operations............................................................ 222,190 150,842 127,345
Discontinued operations.......................................................... 27,663 40,570 96,305
--------- --------- ---------
249,853 191,412 223,650
--------- --------- ---------
--------- --------- ---------
OPERATING PROFIT
Automotive:
UK............................................................................... 7,281 6,637 3,827
Rest of Europe................................................................... 11,864 7,547 2,242
USA.............................................................................. (622) 418 1,022
--------- --------- ---------
Continuing operations............................................................ 18,523 14,602 7,091
Discontinued operations.......................................................... 2,835 3,411 2,894
--------- --------- ---------
21,358 18,013 9,985
--------- --------- ---------
--------- --------- ---------
NET ASSETS
Automotive continuing operations................................................. 62,545 35,028
Discontinued operations.......................................................... (501) 13,704
--------- ---------
62,044 48,732
--------- ---------
--------- ---------
</TABLE>
F-130
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
2 SEGMENTAL ANALYSIS (CONTINUED)
<TABLE>
<CAPTION>
TURNOVER BY DESTINATION TURNOVER BY ORIGIN
------------------------------- -------------------------------
1998 1997 1996 1998 1997 1996
L000 L000 L000 L000 L000 L000
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
GEOGRAPHICAL SEGMENTS
United Kingdom.................................. 76,193 84,583 98,189 79,696 91,895 112,316
Rest of Europe.................................. 140,542 72,736 64,905 137,367 65,315 81,697
USA............................................. 29,627 31,167 39,003 32,790 34,202 29,637
Rest of the World............................... 3,491 2,926 21,553 -- -- --
--------- --------- --------- --------- --------- ---------
249,853 191,412 223,650 249,853 191,412 223,650
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT NET ASSETS
------------------------------- --------------------
1998 1997 1996 1998 1997
L000 L000 L000 L000 L000
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
GEOGRAPHICAL SEGMENTS
United Kingdom............................................. 7,281 7,397 5,348 26,708 24,570
Rest of Europe............................................. 11,740 7,547 2,242 28,964 9,209
USA........................................................ 2,337 3,069 2,395 6,372 14,953
Rest of the World.......................................... -- -- -- -- --
--------- --------- --------- --------- ---------
21,358 18,013 9,985 62,044 48,732
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
RECONCILIATION OF CONSOLIDATED NET ASSETS
Net assets as shown above.................................................................... 62,044 48,732
Associated undertaking....................................................................... 114 81
Proposed dividend............................................................................ (4,545) (4,536)
Net borrowings............................................................................... (44,472) (11,610)
Net taxation payable and deferred taxation................................................... (1,703) (564)
--------- ---------
Net assets per consolidated balance sheet.................................................... 11,438 32,103
--------- ---------
--------- ---------
</TABLE>
3 EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
ONGOING ACTIVITIES:
Reorganisation and redundancy costs within the Automotive Division including
reduction of French Productive capacity................................................ -- -- 3,130
DISCONTINUED AND TO BE DISCONTINUED ACTIVITIES
Reorganisation and redundancy cost re Power Systems Division............................. -- -- 607
Redundancy, disruption and related costs with US electronics following
cancellation of customer order......................................................... -- -- 1,228
--------- --------- ---------
-- -- 4,965
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-131
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
4 OPERATING PROFIT
Operating profit can be analysed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
<S> <C> <C> <C>
Turnover....................................................................... 249,853 191,412 223,650
Cost of sales.................................................................. (210,178) (156,799) 188,046
---------- ---------- ---------
Gross profit................................................................... 39,675 34,613 35,604
Distribution costs............................................................. (6,197) (4,404) (7,274)
Administration expenses........................................................ (12,120) (12,196) (18,345)
---------- ---------- ---------
Operating profit after exceptional items....................................... 21,358 18,013 9,985
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
Included above in 1996 is cost of sales of L670,000 and administration costs of
L4,295,000 relating to exceptional items.
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
OPERATING PROFIT IS AFTER CREDITING
Rents receivable..................................................................... 378 127 2,437
Pension credit (note 5).............................................................. 1,200 1,050 876
Industrial development government grant.............................................. 36 68 80
AND AFTER CHARGING:
Hire of plant and machinery.......................................................... 269 125 560
Other operating leases............................................................... 428 220 1,937
Depreciation of fixed assets--owned.................................................. 9,193 7,481 8,691
Depreciation of fixed assets held under finance leases............................... 402 174 159
Auditors' remuneration--audit........................................................ 257 274 358
Auditors' remuneration--other........................................................ 79 142 438
Research and development............................................................. 4,283 3,988 4,140
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-132
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
5 EMPLOYEES OF THE GROUP AND PENSIONS COST
<TABLE>
<CAPTION>
1998 1997 1996
NUMBER NUMBER NUMBER
----------- ----------- -----------
<S> <C> <C> <C>
THE AVERAGE NUMBER OF PERSONS EMPLOYED BY THE GROUP WAS AS FOLLOWS:
Production.......................................................................... 3,270 2,290 3,219
Distribution........................................................................ 85 49 106
Administration...................................................................... 418 398 446
----------- ----------- -----------
3,773 2,737 3,771
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
----------- ----------- -----------
<S> <C> <C> <C>
THE AGGREGATE PAYROLL COSTS OF THESE PERSONS WERE AS FOLLOWS:
Wages and salaries.................................................................. 55,506 40,207 53,413
Social security costs............................................................... 11,149 7,950 9,711
Pension costs....................................................................... 138 70 278
----------- ----------- -----------
66,793 48,227 63,402
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Adwest Group 1988 Pension and Assurance Plan is a defined benefit scheme for
employees of the company and its UK subsidiaries who qualify for membership. The
assets of the scheme are held in separate trustee administered funds. Other
small pension schemes exist in certain subsidiaries.
Pension costs are determined in accordance with the recommendations of
independent actuaries using the projected unit method, so as to spread the cost
of pensions over employees' working lives with the group. Actuarial valuations
are completed every three years, the most recent being at 6 April 1995. The
assumptions which have the most significant effect on the results of the
valuation are those relating to the rate of return on investments and the rates
of increase in salaries and pensions. It was assumed that the average investment
return would exceed by 2% per annum the average rate of salary increase and that
present and future pensions would increase at a rate of 4% per annum.
At 6 April 1995 the assets of the plan amounted to L36,646,000, with investments
taken at market value. At that date, the actuarial value of the assets was
sufficient to cover 128% of the benefits that had accrued to members, after
allowing for expected future increases in earnings and pensions. Accordingly,
the actuaries have indicated that no company contributions were required and
therefore the Trustees have not called for, and the group has not paid, any
contributions during the year. The actuaries are currently carrying out a
valuation of the Plan as at 6 April 1998.
Using the same assumptions as in previous years, the credit to profits for the
year in respect of pensions would have been L1,600,000. In the light of recent
changes to tax credits available to exempt funds and until the actuarial
valuation at 6 April 1998 is available, it has been decided based on actuarial
advice, to limit the effect of pensions on the profit and loss account for the
year to a credit of L1,200,000 (1997: L1,050,000, 1996: L876,000). This credit
represents the amortisation of surpluses over the expected average working
lifetime of the current membership less the regular cost of providing pension
benefits.
The consolidated balance sheet recognises a prepayment of L7,948,000 (1997:
L6,748,000) representing the excess of the amortisation of surpluses over the
accumulated regular cost of providing benefits.
F-133
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
6 DISPOSALS
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
Discontinued:
Property Division.................................................................... (689) -- (1,574)
Automotive Division.................................................................. -- -- 15
UK Power Systems..................................................................... (558) (791) (5,742)
Profit on disposal of US Electronics before goodwill write off....................... 5,891 -- --
Loss on disposal of Heidemann Oberflachentechnik GmbH................................ (593) -- --
Cost of disposal..................................................................... -- -- (1,795)
--------- --- ---------
4,051 (791) (9,096)
Goodwill on disposal................................................................. (17,552) -- (20,173)
--------- --- ---------
(13,501) (791) (29,269)
--------- --- ---------
--------- --- ---------
</TABLE>
7 NET INTEREST CHARGE
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
Payable on bank loans and overdrafts repayable within five years...................... (4,250) (2,390) (1,991)
Payable on loans repayable after more than five years................................. (916) (852) (2,162)
Payable on finance leases............................................................. (434) (309) (329)
--------- --------- ---------
(5,600) (3,551) (4,482)
Bank and other interest receivable.................................................... 401 659 630
--------- --------- ---------
(5,199) (2,892) (3,852)
--------- --------- ---------
--------- --------- ---------
</TABLE>
8 TAXATION ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
TAXATION OF PROFITS ON ORDINARY ACTIVITIES IS MADE UP AS FOLLOWS:
UK corporation tax at 31% (1997:32.5%; 1996:33%)........................................ 2,901 1,258 1,906
Overseas taxation....................................................................... 1,994 2,112 1,320
Associated undertakings (including overseas taxation of L2,000 (1997: L8,000, 1996:
L12,000))............................................................................. 2 8 31
Deferred taxation (note 21)............................................................. (332) 1,133 (1,878)
Prior year adjustments.................................................................. (36) 16 (297)
ACT written off......................................................................... -- -- 1,000
--------- --------- ---------
4,529 4,527 2,082
--------- --------- ---------
--------- --------- ---------
</TABLE>
Total loss on disposals included in the Profit and Loss account, including
goodwill, is L13.5 million (1997 L791,000, 1996 L29.3 million) and the related
taxation charge is nil (1997 nil, 1996 nil).
F-134
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
9 DIVIDENDS
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
Interim paid 2.3p per share.............................................................. 1,897 1,892 1,877
Final proposed 5.5p per share............................................................ 4,545 4,536 4,523
--------- --------- ---------
6,442 6,428 6,400
--------- --------- ---------
--------- --------- ---------
</TABLE>
Shareholders holding 468,009 (1997: 533,792, 1996: 554,678) shares at 30 June
1998 have waived their entitlement to dividends and have been paid no dividends
during the year.
10 EARNINGS PER SHARE
(Loss)/earning per share are based on losses of L2,355,000 (1997 earnings of
L9,424,000, 1996 losses of L25,342,000) and on 83,057,054 (1997: 82,863,578,
1996: 82,504,902) ordinary shares in issue in the year weighted on a time basis.
11 NOTE OF HISTORICAL COST PROFITS/(LOSSES)
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
Profit/(loss) on ordinary activities before taxation................................ 2,679 14,351 (22,997)
Realisation of property revaluation gains of prior years............................ -- 433 14,845
Difference between the historical cost depreciation charge and the actual
depreciation for the year calculated on the revalued amount....................... 100 75 21
--------- --------- ---------
Historical cost profit/(loss) on ordinary activities before taxation................ 2,779 14,859 (8,131)
--------- --------- ---------
Historical cost (loss)/profit retained after taxation, minority interest and
dividends......................................................................... (8,697) 3,504 (16,876)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-135
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
12 FIXED ASSETS: TANGIBLE ASSETS
<TABLE>
<CAPTION>
ASSETS IN
LAND AND PLANT VEHICLES COURSE
BUILDINGS AND EQUIPMENT OF CONSTRUCTION TOTAL
L000 L000 L000 L000
----------- --------------- --------------- ---------
<S> <C> <C> <C> <C>
COST OR VALUATION
At 1 July 1997............................................. 11,155 62,758 2,763 76,676
Exchange rate adjustments.................................. (966) (2,462) -- (3,428)
Additions.................................................. 2,353 17,639 -- 19,992
Disposals.................................................. (2,192) (7,334) -- (9,526)
Transfers between categories............................... 3,255 (492) (2,763) --
Acquisition of subsidiaries................................ 12,267 35,277 -- 47,544
Disposal of fixed assets with subsidiaries sold............ (1,206) (6,162) -- (7,368)
----------- ------ ------ ---------
At 30 June 1998............................................ 24,666 99,224 -- 123,890
----------- ------ ------ ---------
DEPRECIATION
At 1 July 1997............................................. 2,403 36,937 -- 39,340
Exchange rate adjustments.................................. (146) (1,816) -- (1,962)
Disposals.................................................. (692) (5,936) -- (6,628)
Transfer between categories................................ 158 (158) -- --
Acquisition of subsidiaries................................ 1,406 24,738 -- 26,144
Disposal of subsidiaries................................... (945) (3,199) -- (4,144)
Charge for the year........................................ 671 8,924 -- 9,595
----------- ------ ------ ---------
At 30 June 1998............................................ 2,855 59,490 -- 62,345
----------- ------ ------ ---------
NET BOOK VALUES AT 30 JUNE 1998............................ 21,811 39,734 -- 61,545
----------- ------ ------ ---------
Net book values at 30 June 1997............................ 8,752 25,821 2,763 37,336
----------- ------ ------ ---------
----------- ------ ------ ---------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT OTHER
PROPERTIES PROPERTIES TOTAL
L000 L000 L000
------------- ----------- ---------
<S> <C> <C> <C>
ANALYSIS OF LAND AND BUILDINGS
BY TENURE AT NET BOOK VALUE:
Freehold........................................................................ -- 19,103 19,103
Long lease...................................................................... 434 -- 434
Short lease..................................................................... 137 2,137 2,274
--- ----------- ---------
571 21,240 21,811
--- ----------- ---------
--- ----------- ---------
BY COST OR VALUATION:
Cost............................................................................ -- 23,014 23,014
Professional valuation--1989 to 1997............................................ -- 1,050 1,050
Directors' valuation--1998...................................................... 602 -- 602
--- ----------- ---------
602 24,064 24,666
--- ----------- ---------
--- ----------- ---------
</TABLE>
F-136
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
12 FIXED ASSETS: TANGIBLE ASSETS (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
HISTORICAL COST OF LAND AND BUILDINGS:
Cost........................................................................................... 23,843 10,276
Depreciation................................................................................... 2,793 2,400
--------- ---------
21,050 7,876
--------- ---------
--------- ---------
</TABLE>
The net book value for the group included L6,578,000 (1997: L4,462,000) in
respect of land and buildings and assets in the course of construction and
L1,222,000 (1997: L551,000) in respect of plant, vehicles and equipment held
under finance leases. The depreciation included above in respect of these assets
is L402,000 (1997: L174,000).
The net book value of land and buildings includes amounts of L571,000 (1997:
L1,945,000) relating to investment properties and L1,110,000 (1997: L486,000)
relating to the value of land in other freehold property on which no
depreciation is charged.
<TABLE>
<CAPTION>
1998 1997 1996
L000 L000 L000
--------- --------- ---------
<S> <C> <C> <C>
CAPITAL COMMITMENTS:
Contracts placed......................................................................... 3,298 3,494 2,718
--------- --------- ---------
--------- --------- ---------
</TABLE>
13 SHARE OPTION TRUST
As at 30 June 1998, the total market value of own shares within the share
option trust was L62,000 below the original total cost. The directors do not
consider this diminution in value to be permanent and therefore no provision has
been made.
At 30 June 1998 the nominal value of own shares with the share option trust
was L114,392 (1997: L133,448).
14 INVESTMENTS
<TABLE>
<CAPTION>
1998 1997
L000 L000
----- -----
<S> <C> <C>
Investment in associated undertaking................................................................ 114 81
Investment in own shares............................................................................ 641 724
--- ---
755 805
--- ---
--- ---
</TABLE>
F-137
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
14 INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
L000 L000
----- -----
<S> <C> <C>
THE GROUP'S INVESTMENTS IN ASSOCIATED UNDERTAKING IS AS FOLLOWS:
Investments in shares of associated undertaking at cost
Share of post acquisition retained profits.......................................................... 53 15
Share of net assets................................................................................. 61 66
--
---
114 81
--
--
---
---
</TABLE>
<TABLE>
<CAPTION>
UNLISTED SHARES
L000
-----------------
<S> <C>
At July 1997...................................................................................... 81
Exchange differences.............................................................................. (19)
Share of profit before taxation................................................................... 21
Share of taxation................................................................................. (2)
Dividends......................................................................................... (5)
Additional investments in year.................................................................... 38
---
At 30 June 1998................................................................................... 114
---
---
</TABLE>
The results included for the associate are for the year ended 31 March 1998, the
latest available audited accounts.
Details of associated undertakings are set out in note 30.
15 STOCK AND WORK IN PROGRESS
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Raw materials.................................................................................. 7,756 5,866
Work in progress............................................................................... 8,709 6,142
Finished goods................................................................................. 2,504 3,379
--------- ---------
18,969 15,387
--------- ---------
--------- ---------
</TABLE>
16 DEBTORS
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Trade debtors.................................................................................. 38,384 32,925
Other debtors.................................................................................. 7,738 2,843
Taxation recoverable........................................................................... 1,395 923
Prepayments and accrued income................................................................. 12,129 9,149
--------- ---------
59,646 45,840
--------- ---------
--------- ---------
</TABLE>
Included in group prepayments is a sum of L7,948,000 (1997: L6,748,000)
attributable to advanced pension contributions extending beyond one year (note
5).
F-138
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
16 DEBTORS (CONTINUED)
Taxation recoverable in the group includes advanced corporation tax recoverable
after more than one year of L502,000 (1997: L923,000) which is expected to be
offset against mainstream corporation tax.
17 CREDITORS
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Trade creditors................................................................................ 37,952 26,077
Finance lease obligations (note 20)............................................................ 891 643
Other creditors................................................................................ 11,505 1,702
PAYE and social security....................................................................... 4,553 3,543
Taxation payable............................................................................... 3,551 3,158
Accruals and deferred income................................................................... 13,707 8,143
--------- ---------
72,159 43,266
--------- ---------
--------- ---------
</TABLE>
Taxation payable in the Group includes advance corporation tax amounting to
L1,136,000 (1997: L1,132,000) attributable to the proposed final dividend.
18 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Borrowings (note 19)........................................................................... 54,319 33,061
Finance lease obligations (note 20)............................................................ 6,774 5,706
Retirement indemnity provision................................................................. 1,601 614
--------- ---------
62,694 39,381
--------- ---------
--------- ---------
</TABLE>
19 BORROWINGS
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
Bank overdrafts................................................................................ 6,842 298
Bank and other loans repayable within one year................................................. 3,043 523
--------- ---------
9,885 821
--------- ---------
Bank and other loans repayable:
Between one and two years.................................................................... 14,503 150
Between two and five years................................................................... 25,358 23,292
In five years or more........................................................................ 14,458 9,619
--------- ---------
54,319 33,061
--------- ---------
--------- ---------
</TABLE>
In 1998, loans repayable after one year represent:
/ / Loans from two financial institutions totalling US $40,000,000. These US
notes are repayable in six annual instalments commencing in March 2000 and
bear interest at a fixed rate of 8.6%.
F-139
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
19 BORROWINGS (CONTINUED)
/ / A FF 85,000,000 loan from a UK bank, which is repayable in December 1999
and bears interest at a fixed rate of 4.99%.
/ / A DM 30,000.000 loan from a UK bank, which bears interest at a fixed rate
of 5.51%, and is repayable in five annual instalments commencing in October
1998.
/ / A DM 20,000,000 loan which bears interest at a fixed rate of 5.47%, and is
repayable in January 2003.
/ / A DM 20,000,000 loan which bears interest at a fixed rate of 5.84%, and is
repayable in twenty quarterly instalments commencing in March 2003.
Other bank borrowing bear interest at fluctuating rates, linked to the London
Inter-Bank Market rate.
There are no borrowings in the associated undertaking.
At 30 June 1998, the Group had forward contracts outstanding in Japanese Yen
amounting to the equivalent of L1,124,798 (1997: L1,415,000).
20 OBLIGATIONS UNDER FINANCE LEASES
<TABLE>
<CAPTION>
1998 1997
L000 L000
--------- ---------
<S> <C> <C>
THE FUTURE FINANCE LEASES PAYMENTS, TO WHICH THE GROUP WERE COMMITTED
AT 30 JUNE, WERE AS FOLLOWS:
Within one year.................................................................................. 891 643
Between one and five years....................................................................... 2,810 3,599
Over five years.................................................................................. 3,964 2,107
--------- ---------
7,665 6,349
--------- ---------
--------- ---------
</TABLE>
F-140
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
21 PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
PROVISION FOR LOSS ON
DISPOSAL OF REORGANISATION DEFERRED
SUBSIDIARIES PROVISION TAXATION TOTAL
L000 L000 L000 L000
--------------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
At 1 July 1997........................................... 400 2,804 (1,671) 1,533
Exchange rate adjustments................................ -- (26) (32) (58)
Acquisition of subsidiaries.............................. -- -- 17 17
Charge to profit and loss account........................ -- 279 (332) (53)
Provisions utilised...................................... (300) (1,895) -- (2,195)
Advance corporation tax and other movements.............. -- -- 867 867
Disposal of subsidiaries and business.................... -- (883) 698 (185)
--- ------ ----------- ---------
At 30 June 1998.......................................... 100 279 (453) (74)
--- ------ ----------- ---------
--- ------ ----------- ---------
</TABLE>
<TABLE>
<CAPTION>
AMOUNTS AMOUNTS
NOT PROVIDED FOR PROVIDED FOR
IN THESE ACCOUNTS IN THESE ACCOUNTS
-------------------- --------------------
1998 1997 1998 1997
L000 L000 L000 L000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BALANCES FOR THE PROVISION OF DEFERRED TAXATION ARE ANALYSED AS
FOLLOWS:
Accelerated capital allowances................................. -- -- (1,650) 2,097
Other timing differences....................................... 349 163 1,432 (1,247)
--------- --------- --------- ---------
349 163 (218) 850
Advanced corporation tax recoverable........................... -- -- (235) (2,521)
--------- --------- --------- ---------
349 163 (453) (1,671)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-141
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
22 LEASE OBLIGATIONS
<TABLE>
<CAPTION>
LAND AND BUILDINGS
OTHER
-------------------- ------------------------
1998 L000 1997 L000 1998 L000 1997 L000
--------- --------- ----- -----
<S> <C> <C> <C> <C>
OPERATING LEASE RENTALS PAYABLE WITHIN ONE YEAR RELATING TO
COMMITMENTS EXPIRING:
Within one year.............................................................. -- 77 271 121
Within two and five years.................................................... 97 384 443 475
After five years............................................................. 945 884 -- --
--------- --------- --- ---
1,042 1,345 714 596
--------- --------- --- ---
--------- --------- --- ---
</TABLE>
23 SHARE CAPITAL AND SHARE PREMIUM ACCOUNT
<TABLE>
<CAPTION>
CALLED UP AND FULLY
AUTHORISED PAID
-------------------- --------------------
1998 L000 1997 L000 1998 L000 1997 L000
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Ordinary shares of 25p each.......................................... 25,000 25,000 20,794 20,746
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
NOMINAL VALUE SHARE PREMIUM
NUMBER L000 L000
------------ ------------- -----------------
<S> <C> <C> <C>
At 1 July 1997...................................................... 82,983,820 20,746 355
Shares issued under option schemes.................................. 190,088 48 131
------------ ------ ---
At 30 June 1998..................................................... 83,173,908 20,794 486
------------ ------ ---
------------ ------ ---
</TABLE>
24 RESERVES
<TABLE>
<CAPTION>
PROFIT AND LOSS
REVALUATION COMPANY AND PROFIT AND LOSS PROFIT AND
RESERVE SUBSIDIARIES ASSOCIATED LOSS TOTAL
L000 L000 UNDERTAKING L000 L000
------------- --------------- ----------------- -----------
<S> <C> <C> <C> <C>
At 1 July 1997........................................... 876 47,169 66 47,235
Retained (loss)/profit for the year...................... -- (8,811) 14 (8,797)
Exchange rate adjustments................................ (15) 366 (19) 347
Depreciation on revalued assets.......................... (100) 100 -- 100
--
--- ------ -----------
At 30 June 1998.......................................... 761 38,824 61 38,885
--
--
--- ------ -----------
--- ------ -----------
</TABLE>
25 SPECIAL RESERVE
The special reserve was created on 31 January 1996 when court permission was
obtained for the cancellation of the share premium account, which had a value at
that date of L20,561,000. The special reserve is non distributable.
F-142
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
26 GOODWILL
<TABLE>
<CAPTION>
1998 L000 1997 L000 1996 L000
--------- --------- ---------
<S> <C> <C> <C>
At start of year................................................................... 60,322 58,993 49,877
Purchase of Conversion Devices Inc................................................. -- -- 3,498
Purchase of Rearsby Automotive Limited............................................. -- -- 25,539
Transferred to profit and loss account on disposal of subsidiaries................. (17,552) -- (20,173)
Additional goodwill re Conversion Devices Inc...................................... -- 734 --
Additional goodwill re Rearsby Automotive Limited.................................. -- 595 --
Purchase of Heidemann Verwatungsgesellschaft mit beschranker Haftung............... 29,318 -- --
Other adjustments.................................................................. 1,153 -- 252
--------- --------- ---------
At end of year..................................................................... 73,241 60,322 58,993
--------- --------- ---------
--------- --------- ---------
</TABLE>
27 DIRECTORS' EMOLUMENTS AND SHARE INTERESTS
<TABLE>
<CAPTION>
1998 L000 1997 L000 1996 L000
--------- --------- ---------
<S> <C> <C> <C>
TOTAL DIRECTORS' EMOLUMENTS:
Fees and benefits to non-executive directors....................................... 99 121 130
Remuneration (including pension contributions)..................................... 621 498 622
Performance related emoluments..................................................... 95 217 100
--- --- ---
815 836 852
--- --- ---
--- --- ---
</TABLE>
28 CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<CAPTION>
1998 L000 1997 L000 1996 L000
--------- --------- ---------
<S> <C> <C> <C>
(a) RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM
OPERATING ACTIVITIES
Operating profit................................................................ 21,358 18,013 9,985
Depreciation.................................................................... 9,595 7,655 8,850
Loss/(profit) on disposal of fixed assets....................................... 247 (86) --
Acquisition provisions utilised................................................. -- -- (272)
(Increase)/decrease in stocks................................................... (3,688) 5,241 (2,093)
(Increase)/decrease in debtors.................................................. (3,726) (1,145) (2,102)
Increase/(decrease) in creditors................................................ 2,567 (4,477) 1,401
--------- --------- ---------
Net cash flow from operating activities......................................... 26,353 25,201 15,769
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-143
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
28 CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
<TABLE>
<CAPTION>
SHARE CAPITAL SHARE PREMIUM
CASH L000 L000 L000
--------- ------------- -----------------
<S> <C> <C> <C>
(b) ANALYSIS OF CHANGES IN CASH AND FINANCING DURING THE YEAR
At 1 July 1996........................................................... 12,073 20,695 218
Non-cash movements....................................................... 3,000 -- --
Exchange movements....................................................... (1,138) -- --
Net cash inflows......................................................... (4,772) 51 137
--------- ------ ---
Change in the year....................................................... (2,910) 51 137
--------- ------ ---
At 1 July 1997........................................................... 9,163 20,746 355
Exchange movements....................................................... (305) -- --
Net cash inflows......................................................... 2,234 48 131
--------- ------ ---
Change in the year....................................................... 1,929 48 131
--------- ------ ---
At 30 June 1998.......................................................... 11,092 20,794 486
--------- ------ ---
--------- ------ ---
</TABLE>
<TABLE>
<CAPTION>
1998 L000 1997 L000
--------- ---------
<S> <C> <C>
(c) ANALYSIS OF CASH
Cash at bank and in hand.................................................................... 17,934 9,461
Bank overdrafts............................................................................. (6,842) (298)
--------- ---------
11,092 9,163
--------- ---------
--------- ---------
</TABLE>
F-144
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
28 CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
<TABLE>
<CAPTION>
ACQUISITION OTHER NON
AT 1 JULY (EXCL CASH & CASH DISPOSAL OF EXCHANGE
1996 CASH FLOW OVERDRAFTS) MOVEMENTS SUBSIDIARIES MOVEMENT
L000 L000 L000 L000 L000 L000
---------- ---------- ----------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(d) RECONCILIATION OF NET DEBT
Cash at bank and in hand...................... 13,515 (2,864) -- -- -- (1,190)
Bank overdrafts............................... (1,442) (1,908) -- 3,000 -- 52
----------
(4,772)
Borrowings due after one year................. (26,572) 263 -- (9,489) -- 2,737
Borrowings due within one year................ (16,741) 9,590 -- 6,489 -- 139
Finance leases................................ (2,921) 344 -- (4,641) -- 869
----------
10,197
Current asset investments..................... -- 12,811 -- -- -- --
--
---------- ---------- ----------- ----- -----------
(34,161) 18,236 -- (4,641) -- 2,607
--
--
---------- ---------- ----------- ----- -----------
---------- ---------- ----------- ----- -----------
<CAPTION>
AT 30 JUNE
1997
L000
-----------
<S> <C>
(d) RECONCILIATION OF NET DEBT
Cash at bank and in hand...................... 9,461
Bank overdrafts............................... (298)
Borrowings due after one year................. (33,061)
Borrowings due within one year................ (523)
Finance leases................................ (6,349)
Current asset investments..................... 12,811
-----------
(17,959)
-----------
-----------
</TABLE>
Current asset investments at 30 June 1997 represent cash balances on one month
and three months deposit.
<TABLE>
<CAPTION>
ACQUISITION
(EXCL CASH OTHER NON
AT 1 JULY & CASH DISPOSAL OF EXCHANGE
1997 CASH FLOW OVERDRAFTS) MOVEMENTS SUBSIDIARIES MOVEMENT
L000 L000 L000 L000 L000 L000
----------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash at bank and in hand.............. 9,461 8,897 -- -- -- (514)
Bank overdrafts....................... (298) (6,753) -- -- -- 209
-----------
2,234
Borrowings due after one year......... (33,061) (9,453) (13,152) 83 -- 1,264
Borrowings due within one year........ (523) (1,409) (1,129) (83) -- 101
Finance leases........................ (6,349) 875 (1,016) (1,840) 435 230
-----------
(9,987)
Current asset investments............. 12,811 (10,989) -- -- -- (24)
----------- ----------- ----------- ----------- --- -----------
(17,959) (18,742) (15,297) (1,840) 435 1,266
----------- ----------- ----------- ----------- --- -----------
----------- ----------- ----------- ----------- --- -----------
<CAPTION>
AT 30 JUNE
1998
L000
-----------
<S> <C>
Cash at bank and in hand.............. 17,934
Bank overdrafts....................... (6,842)
Borrowings due after one year......... (54,319)
Borrowings due within one year........ (3,043)
Finance leases........................ (7,665)
Current asset investments............. 1,798
-----------
(52,137)
-----------
-----------
</TABLE>
Current asset investments at 30 June 1998 represent part of the sale proceeds
from the sale of the US Electronics companies, which are being held in an escrow
account until May 2001.
F-145
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
28 CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
(e) MAJOR NON-CASH TRANSACTIONS
During 1998 the Group entered into finance lease arrangements in respect of
assets with a total capital value at the inception of the leases of L1,840,000
(1997:L4,641,000).
<TABLE>
<CAPTION>
US ELECTRONICS
COMPANIES
L000
<S> <C>
(f) SALE OF SUBSIDIARY UNDERTAKINGS
Net assets sold excluding cash:
Fixed assets...................................................................................... 3,224
Stock............................................................................................. 8,157
Other working capital............................................................................. 3,741
------
Total net assets sold............................................................................. 15,122
Disposal costs paid out in cash................................................................... 1,937
Disposal costs accrued............................................................................ 128
Profit on sale.................................................................................... 5,891
------
23,078
------
------
SATISFIED BY:
Receipt of cash................................................................................... 21,256
Receipt of escrow monies.......................................................................... 1,822
------
Net inflow of cash................................................................................ 23,078
------
------
</TABLE>
The US Electronics subsidiaries sold during the year contributed L1,432,000 to
the group's net operating cash flows, paid L715,000 in respect of net returns on
investments and serving of finance, paid L731,000 in respect of taxation and
utilised L815,000 for capital expenditure.
F-146
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
28 CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
<TABLE>
<CAPTION>
FAIR VALUE
ADJUSTMENTS
HEIDEMANN ACCOUNTING POLICY FAIR VALUE
COMPANIES REVALUATIONS ADJUSTMENTS OTHER ADJUSTMENTS BALANCE SHEET
L000 L000 L000 L000 L000
----------- ------------- ------------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
(g) PURCHASE OF SUBSIDIARY
UNDERTAKINGS
Provisional net assets acquired:
Fixed assets...................... 22,549 (1,149) -- -- 21,400
Stock............................. 9,122 -- (316) -- 8,806
Other working capital............. (11,716) -- -- -- (11,716)
Provisions........................ -- -- (101) (562) (663)
Net borrowings.................... (14,281) -- -- -- (14,281)
----------- ------ --- --- -------------
5,674 (1,149) (417) (562) 3,546
Provisional goodwill (note 26).... 29,318
-------------
32,864
-------------
-------------
SATISFIED BY:
Purchase consideration............ 31,127
Acquisition costs................. 3,217
Cash acquired..................... (2,733)
-------------
Net outflow of cash (i)........... 31,611
Purchase consideration accrued.... 1,253
-------------
32,864
-------------
-------------
</TABLE>
The net assets acquired above exclude 5% of the net assets of Adwest Heidemann
Iberica SA which are held by a third party.
Certain fixed assets have been written down in the revaluation column to reflect
their value based upon current earnings and cash generation. The accounting
policy adjustments are to bring stock, warranty and repairs and maintenance
provisions in line with UK GAAP requirements. Other adjustments represent
provisions in respect of potential environmental liabilities at the time of
acquisition.
F-147
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
28 CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
<TABLE>
<CAPTION>
PURCHASE OF
SUBSIDIARY CASH ACQUIRED WITH
UNDERTAKINGS SUBSIDIARY ACQUIRED TOTAL
L000 L000 L000
------------ ------------------- ---------
<S> <C> <C> <C>
Net cash outflow of cash as above (i)................................ (34,344) 2,733 (31,611)
Minority interest in Adwest Heidemann Iberica SA cash................ -- (36) (36)
Deferred consideration re Electronics Division....................... (767) -- (767)
Other................................................................ (61) -- (61)
------------ ----- ---------
Per cash flow statement.............................................. (35,172) 2,697 (32,475)
------------ ----- ---------
------------ ----- ---------
</TABLE>
Heidemann Verwaltungsgesellschaft mit beschranker Haftung and its subsidiary
undertakings were acquired on 11 September 1997, and have been accounted for
using the acquisition method.
The subsidiary undertakings acquired during the year contributed L2,963,000 to
the group's net operating cash flows, paid L1,425,000 in respect of net returns
on investments and servicing of finance, received L372,000 in respect of
taxation and utilised L6,620,000 for capital expenditure.
In the year ended 31 January 1997, the latest available statutory accounts
before acquisition, the Heidemann group of companies had profit after tax of
L1,073,000 and minority interests of L281,000.
In the period 1 February 1997 to 11 September 1997 -- the date of acquisition by
Adwest, the unaudited results for the company showed the following.
<TABLE>
<CAPTION>
L000
<S> <C>
Turnover................................................................................................. 54,530
Operating profit......................................................................................... 2,788
Profit before taxation................................................................................... 1,954
Taxation charge.......................................................................................... 974
Minority interests....................................................................................... 97
---------
---------
</TABLE>
There were no material recognised gains or losses, other than the results for
the period shown above.
F-148
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
29 PRINCIPAL SUBSIDIARY UNDERTAKINGS
<TABLE>
<S> <C> <C> <C>
Adwest Steering Ltd. Woodley Power steering gears, precision UK
plastic parts
Adwest Bowden TSK Ltd. Llanelli Control cables, gearshifters UK
Adwest Bowden France SA Cauvigny, Boynes Control cables, gearshifters, France
handbrakes, jacks
Adwest Dauphinoise Thomson SA Grenoble Engine thermostats, wax element France
regulators
Adwest OCI SA La Talaudiere Gearshifters France
Adwest Driver Systems Ltd. Rearsby Pedal boxes, gearshifters, UK
handbrakes, suspension links
Adwest Western Automotive Inc. Michigan Precision tubular components and USA
engine thermostats
Adwest Western Thomson Ltd. Woodley, Chard Engine thermostats, radiator UK
caps
Adwest Heidemann Einbeck GmbH Einbeck Gearshifters, steering columns, Germany
tubular structures
Adwest Heidemann Rotenburg Rotenburg Valve spring retainers, fine Germany
GmbH blanked parts, tubular
structures
Adwest Heidemann Iberica SA Valencia, Pamplona Gearshifters, steering columns Spain
Adwest Kohler GmbH Lippstadt Fuel caps, precision pressed Germany
parts
Adwest Heidemann do Brasil Curitiba Gearshifters Brazil
</TABLE>
The Company owns 100% of the ordinary share capital of all subsidiaries, with
the exception of Adwest Bowden TSK Ltd of which 35% of the ordinary share
capital is owned by Nippon Cable Systems Inc. (TSK), a Japanese company, and
Adwest Heidemann Iberica SA, of which 5% of the ordinary share capital is owned
by local management.
The subsidiaries operate principally in the country in which they are
incorporated.
A full list of subsidiaries will be included within the next annual return.
30 ASSOCIATED UNDERTAKING
<TABLE>
<CAPTION>
ISSUED SHARE CAPITAL ACTIVITIES HOLDING INCORPORATED
------------------------------ ------------------- ----------- ---------------
<S> <C> <C> <C> <C>
Western Thomson (India) Ltd. (1) 295,878 shares (10 rupees p.s) Engine thermostats 49% India
</TABLE>
- --------------------------
(1) Held by Adwest Western Thomson Ltd. and located in Madras, India.
31 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The Group's accounts are prepared in conformity with generally accepted
accounting principles applicable in the United Kingdom (UK GAAP), which differ
in certain significant respects from those applicable in the United States (US
GAAP). These differences, together with the approximate effects of the
adjustments on net profit and shareholders' funds, relate principally to the
items set out below:
F-149
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
31 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
GOODWILL AND OTHER INTANGIBLE ASSETS
Under UK GAAP goodwill arising on acquisition has been charged to reserves.
Under US GAAP goodwill is capitalised and amortised by charges against income
over the period, not to exceed 40 years, over which the benefit arises. For US
GAAP, goodwill has been amortised by the Group over 40 years.
Under UK GAAP the profit and loss on the disposal of all or part of a previously
acquired business has been calculated after taking account of the gross amount
of any goodwill previously charged to reserves. Under US GAAP an adjustment to
profit or loss on disposal is required in respect of goodwill previously
amortised.
CUMULATIVE EXCHANGE LOSS ON SALE OF FOREIGN SUBSIDIARIES
Under UK GAAP gains or loss arising on the sale or liquidation of a foreign
subsidiary does not include the related cumulative exchange gain or loss,
previously recorded as a separate component of shareholders' equity for that
investment. Under US GAAP, the gain or loss on sale or liquidation includes the
related cumulative exchange gain or loss.
DIVIDENDS
Under UK GAAP dividends proposed after the end of an accounting period in
respect of that accounting period are deducted in arriving at retained earnings
for that period. Under US GAAP such dividends are not deducted until declared.
DEFERRED TAXATION
Under UK GAAP provision is made for deferred taxation only to the extent that it
is probable that an actual liability or asset will crystallise in the
foreseeable future. US GAAP requires full provision for deferred income taxes
under the liability method on all temporary differences and, if required, a
valuation allowance is established to reduce gross deferred taxation assets to
the amount which is more likely than not to be realised.
Deferred taxation also arises in relation to the tax effect of other US GAAP
differences.
PENSION COSTS
Under UK GAAP, the cost of providing pensions is charged against profits on a
systematic basis, with pension surpluses and deficits being amortised over the
expected remaining service lives of current employees. Under US GAAP, costs and
surpluses are similarly spread over the expected remaining service lives but
based on prescribed actuarial assumptions, allocation of costs and valuation
methods, which differ in certain respects from those used for UK GAAP.
DEFERRED PROFIT ON SALE OF PROPERTY
In 1996, properties were disposed of which had previously been revalued under UK
GAAP. No profit arose on this transaction under UK GAAP. A profit arises under
US GAAP on the basis that US GAAP does not permit the revaluation of property.
Under US GAAP, the element of the profit in respect of property subsequently
leased back on an operating lease basis is amortised in equal instalments over
the life of the lease.
F-150
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
31 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
EMPLOYEE SHARE TRUST ARRANGEMENTS
Employee share trusts have been established in order to hedge obligations in
respect of options issued under certain employee share option schemes. Under UK
GAAP the Company's ordinary shares held by the employee share trusts are
included at cost in fixed asset investments. Dividends receivable on such shares
are included in the statement of income. Under US GAAP, such shares and
dividends receivable from those shares are treated as treasury stock and
included in shareholders' equity.
REVALUATION OF FIXED ASSETS
Under UK GAAP the Group has revalued certain fixed assets. This is not permitted
under US GAAP.
PRE-PRODUCTION COSTS
Under UK GAAP, certain significant pre-production costs on new products which
are not prefunded by the customer are carried forward in work in progress. These
costs are then written off on a unit of production basis over the life of the
contract with the customer. Under US GAAP these costs are generally expensed as
incurred.
CURRENT ASSETS AND LIABILITIES
Under UK GAAP current assets include amounts which fall due after more than one
year. Under US GAAP such assets would be reclassified as non-current assets.
Also under UK GAAP provisions for liabilities and charges include amounts due
within one year which would be reclassified to current liabilities under US
GAAP.
EARNINGS PER ORDINARY SHARE
Under UK GAAP earnings per share is based on profit for the financial year and
computed using the weighted average number of Ordinary Shares in issue during
the year. Under US GAAP basic earnings per share is based on net income and
computed using the weighted average number of Ordinary Shares in issue during
the year. US GAAP also requires the presentation of diluted earnings per share
which is based upon net income, as adjusted, computed using the weighted average
shares and the effect of other dilutive instruments.
CASH FLOWS
The principal difference between UK GAAP and US GAAP is in respect of
classification. Under UK GAAP, the Group presents its cash flows for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditures and financial investments, acquisition and disposals, equity
dividends paid, management of liquid resources, and financing. US GAAP requires
only three categories of cash flow activities which are operating, investing and
financing.
Cash flows arising from taxation and returns on investments and servicing of
finance under UK GAAP would, with the exception of dividends paid, be included
as operating activities under US GAAP; dividend payments would be included as a
financing activity under US GAAP. In addition, capital expenditures and
financial investment, acquisition and disposals, and management of liquid
resources under UK GAAP would be presented as investing activities under US
GAAP.
F-151
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
31 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
UK GAAP defines cash as cash in hand and deposits repayable on demand. Short
term deposits which are readily convertible into known amounts of cash at, or
close to, their carrying value are classified as liquid resources. US GAAP
defines cash and cash equivalents as cash in hand and short term highly liquid
investments with original maturities of three months or less. Cash flows in
respect of short term deposits with original maturities exceeding three months
are included in investing activities under US GAAP and are included in capital
expenditure and financial investment under UK GAAP.
Under US GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
1998 1997
L'000 L'000
--------- ---------
<S> <C> <C>
Net cash provided by operating activities.................................................... 15,628 18,627
Net cash used in investing activities........................................................ (29,931) 5,839
Net cash provided by/(used in) financing activities.......................................... 10,479 (14,519)
Effect of changes in exchange rate........................................................... (514) (1,190)
--------- ---------
Net (decrease)/increase in cash and cash equivalents......................................... (4,338) 8,757
Cash and cash equivalents at beginning of year............................................... 22,272 13,515
--------- ---------
Cash and cash equivalents at end of year..................................................... 17,934 22,272
--------- ---------
--------- ---------
</TABLE>
Effect on (loss)/profit attributable to shareholders of differences between UK
and US GAAP
<TABLE>
<CAPTION>
1998 1997
L'000 L'000
--------- ---------
<S> <C> <C>
(Loss)/profit attributable to shareholders as reported under UK GAAP......................... (2,355) 9,424
US GAAP adjustments:
Goodwill................................................................................... (1,377) (1,467)
Impact of goodwill previously amoritised on sale of subsidiary............................. 2,905 --
Cumulative exchange loss on sale of foreign subsidiaries................................... (1,182) --
Pension costs.............................................................................. 16 331
Deferred taxation--full provision.......................................................... (143) (168)
Tax effect of other US GAAP reconciling items.............................................. (30) (266)
Fixed asset revaluations................................................................... 100 508
Deferred profit on sale of property........................................................ 303 303
Pre-production costs....................................................................... (1,200) --
Other...................................................................................... 21 (16)
Minority interests......................................................................... -- (5)
--------- ---------
Net (loss)/income under US GAAP.............................................................. (2,942) 8,644
--------- ---------
--------- ---------
Net (loss)/income under US GAAP
Continuing................................................................................. 6,001 6,015
Discontinued............................................................................... (8,943) 2,629
--------- ---------
(2,942) 8,644
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
PENCE PER SHARE PENCE PER SHARE
1998 1997
----------------- -----------------
<S> <C> <C>
Basic and diluted earnings per share under US GAAP...............................
Continuing..................................................................... 7.3 7.2
Discontinued................................................................... (10.9) 3.3
----- ---
(3.6) 10.5
----- ---
----- ---
</TABLE>
F-152
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
31 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Effect on shareholders' funds of differences between UK and US GAAP
<TABLE>
<CAPTION>
1998 1997
L'000 L'000
--------- ---------
<S> <C> <C>
Shareholders' funds as reported under UK GAAP.................................................. 8,246 29,451
US GAAP adjustments:
Goodwill..................................................................................... 64,744 52,109
Pension costs................................................................................ 4,930 4,913
Deferred taxation--full provision............................................................ (310) (168)
Tax effect of other US GAAP reconciling items................................................ (1,285) (1,283)
Fixed asset revaluations..................................................................... (761) (876)
Proposed dividends........................................................................... 4,545 4,536
Deferred profit on sale of property.......................................................... (4,127) (4,430)
Pre-production costs......................................................................... (1,200) --
Employee share trust arrangements............................................................ (641) (724)
Other........................................................................................ 99 86
Minority interests........................................................................... (149) (146)
--------- ---------
Shareholders' funds under US GAAP.............................................................. 74,091 83,468
--------- ---------
--------- ---------
</TABLE>
NEW US ACCOUNTING STANDARDS AND PRONOUNCEMENTS NOT YET ADOPTED
SFAS 133--In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities". This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognise
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management has not determined the effect of the adoption of SFAS 133.
SOP 98-1--During January 1998, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position 98-1 ACCOUNTING FOR THE COSTS
OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP 98-1") which
becomes effective for all fiscal years beginning after December 15, 1998. Under
SOP 98-1, computer software costs that are incurred in the preliminary project
stage are expensed as incurred. Once specific capitalisation criteria have been
met, external direct costs of materials and service consumed in developing or
obtaining internal-use computer software, certain personnel costs, and interest
costs incurred when developing computer software for internal use are
capitalised. Training costs and data conversion costs are generally expensed as
incurred. Such capitalised costs are amortised over the estimated useful life of
the software. The company is evaluating the effect of the pronouncement.
NEW UK ACCOUNTING STANDARDS NOT YET ADOPTED
FRS 10 - Goodwill and Intangible Assets: In December 1997, the Accounting
Standard Board in the United Kingdom issued Financial Reporting Standard No. 10
"Goodwill and Intangible Assets" (FRS 10). FRS 10 requires that purchased
goodwill and intangible assets should be capitalised as assets and amortised
over the life of the assets. Goodwill and intangible assets need not be
amortised if it can be
F-153
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS (CONTINUED)
31 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
demonstrated that the current market value of the goodwill or intangible is not
below its carrying value. FRS 10 is effective for accounting periods ending on
or after 23 December 1998. The standard does not require reinstatement of
goodwill previously eliminated against retained surplus.
FRS 11--Impairment of fixed assets and goodwill: In July 1998, the Accounting
Standards Board in the United Kingdom issued Financial Reporting Standard No. 11
"Impairment of fixed assets and goodwill" (FRS 11). The standard requires that
any impairment in the carrying value of fixed assets should be recognised in the
profit and loss account in the current period and requires that impairment
reviews be undertaken when there is some indication of impairment. The review
should be performed on individual income generating units based on discounted
cash flows. FRS 11 covers not only tangible fixed assets, intangible fixed
assets and goodwill but also investments in subsidiaries, associates and joint
ventures to the extent that they are not covered by other standards. FRS 11 is
effective for accounting periods ending on or after 23 December 1998.
FRS 12--Provisions, contingent liabilities and contingent assets: In September
1998, the Accounting Standard Board in the United Kingdom issued Financial
Reporting Standard No. 12 "Provisions, contingent liabilities and contingent
assets" (FRS 12). The principal feature of the standard is that it requires that
a provision is recognised when there is a legal or constructive obligation
arising from past events and it is probable (ie, more likely than not) that
there will be an outflow of benefits and the amount can be reliably estimated.
FRS 12 is effective for accounting periods ending on or after 23 March 1999.
FRS 13--Derivatives and other financial instruments--disclosures: In September
1998, the Accounting Standards Board in the United Kingdom issued Financial
Reporting Standard No. 13 "Derivatives and other financial instruments:
disclosures" (FRS 13). FRS 13 is concerned only with disclosure and the
requirements comprise both narrative and numerical disclosures. FRS 13 is
effective for accounting periods ending on or after 23 March 1999.
FRS 14--Earnings per share: In October 1998, the Accounting Standards Board in
the United Kingdom issued Financial Reporting Standard No. 14 "Earnings per
share" (FRS 14). The standard applies to all entities whose ordinary or
potential ordinary shares are currently publicly traded, or are in the process
of becoming so, and to any other entity providing earnings per share (eps)
information voluntarily. FRS 14 is effective for accounting periods ending on or
after 23 December 1998.
COMPANIES ACT 1985
These consolidated financial statements do not constitute "statutory accounts"
within the meaning of the Companies Act 1985 of Great Britain for any of the
periods presented. Statutory accounts for the years ended 30 June 1997 and 30
June 1998 have been filed with the United Kingdom's Registrar of Companies. The
auditor has reported on these accounts. The reports were unqualified and did not
contain statements under Section 237 (2) or (3) of the Act.
These consolidated financial statements exclude certain parent company
statements and other information required by the Companies Act 1985, however,
they include all material disclosures required by generally accepted accounting
principles in the United Kingdom including those Companies Act 1985 disclosures
relating to the statement of income and balance sheet items.
F-154
<PAGE>
ADWEST AUTOMOTIVE PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT--UK GAAP
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
----------- -----------
L000 L000
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
TURNOVER
Continuing operations................................................................... 118,155 99,203
Discontinued operations................................................................. -- 12,987
----------- -----------
118,155 112,190
----------- -----------
OPERATING PROFIT
Continuing operations................................................................... 8,326 7,587
Discontinued operations................................................................. -- 1,867
----------- -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST........................................... 8,326 9,454
Net interest charge..................................................................... (2,924) (2,196)
----------- -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION........................................... 5,402 7,258
Taxation charge......................................................................... (1,536) (2,249)
----------- -----------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION............................................ 3,866 5,009
Profit attributable to minority shareholders--equity.................................... (133) (246)
----------- -----------
PROFIT FOR THE PERIOD................................................................... 3,733 4,763
Dividends:
Interim 0p per share (1997 2.3p)...................................................... -- (1,897)
----------- -----------
RETAINED PROFIT FOR THE PERIOD.......................................................... 3,733 2,866
----------- -----------
----------- -----------
Earnings per share--UK GAAP............................................................. 4.5p 5.7p
</TABLE>
F-155
<PAGE>
ADWEST AUTOMOTIVE PLC
CONSOLIDATED BALANCE SHEET--UK GAAP
AT 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
L000 L000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
FIXED ASSETS
Tangible assets....................................................... 70,822 61,513
Investments........................................................... 755 770
----------- -----------
71,577 62,283
----------- -----------
CURRENT ASSETS
Stock and work in progress............................................ 22,314 26,295
Debtors............................................................... 53,214 56,004
Bank and cash balances................................................ 11,005 12,459
----------- -----------
86,533 94,758
----------- -----------
CREDITORS: DUE WITHIN ONE YEAR
Borrowings............................................................ (17,916) (9,143)
Other creditors....................................................... (70,906) (72,133)
----------- -----------
(88,822) (81,276)
----------- -----------
NET CURRENT (LIABILITIES) / ASSETS.................................... (2,289) 13,482
CREDITORS: DUE AFTER ONE YEAR
Borrowings............................................................ (45,593) (60,542)
Provisions and other creditors........................................ (8,782) (7,718)
----------- -----------
(54,375) (68,260)
----------- -----------
NET ASSETS............................................................ 14,913 7,505
----------- -----------
----------- -----------
CAPITAL AND RESERVES
Called up share capital............................................... 20,794 20,758
Reserves.............................................................. 63,464 72,503
----------- -----------
Equity shareholders' funds before goodwill............................ 84,258 93,261
Goodwill on acquisition............................................... (72,681) (88,890)
----------- -----------
Shareholders' funds--equity........................................... 11,577 4,371
MINORITY INTEREST--EQUITY............................................. 3,336 3,134
----------- -----------
14,913 7,505
----------- -----------
----------- -----------
</TABLE>
F-156
<PAGE>
ADWEST AUTOMOTIVE PLC
CONSOLIDATED CASH FLOW STATEMENT--UK GAAP
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1997
1998 (RESTATED)
L000 L000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net cash inflow from operating
activities............................ 8,391 17,807
Return on investments and servicing of
finance............................... (2,947) (1,821)
Taxation paid........................... (1,075) (3,180)
Capital expenditure..................... (7,977) (7,594)
Equity dividends paid................... (4,551) (4,536)
Acquisitions and disposals.............. 2,872 (32,095)
Management of liquid resources.......... -- 12,811
----------- -----------
Net cash flow before financing.......... (5,287) (18,608)
Financing............................... (2,946) 20,015
----------- -----------
(Decrease)/increase in cash............. (8,233) 1,407
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT L000 L000
- ---------------------------------------- ----------- -----------
<S> <C> <C>
(Decrease)/increase in cash in the
period................................ (8,233) 1,407
Cash outflow from reduction in debt and
lease financing....................... 2,946 2,464
Cash inflow from new loans.............. -- (22,420)
Cash inflow/(outflow) from movement in
liquid resources...................... -- (12,811)
----------- -----------
Change in net debt resulting from cash
flows................................. (5,287) (31,360)
Loans and finance leases acquired with
subsidiary............................ -- (14,848)
New finance leases...................... (2,038) (410)
Translation difference.................. (2,576) 420
----------- -----------
Movement in net debt in the period...... (9,901) (46,198)
Net debt at beginning of period......... (52,137) (17,959)
----------- -----------
Net debt at end of period............... (62,038) (64,157)
----------- -----------
----------- -----------
</TABLE>
F-157
<PAGE>
ADWEST AUTOMOTIVE PLC
RECONCILIATION OF MOVEMENTS IN CONSOLIDATED
SHAREHOLDERS' FUNDS
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
L000 L000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Profit for the period................................................. 3,733 4,763
Ordinary dividends.................................................... -- (1,897)
----------- -----------
Retained profit for the period........................................ 3,733 2,866
Currency translation differences on net investments................... (374) 562
Prior year adjustment................................................. (588) --
New share capital issued.............................................. -- 60
Goodwill in the period on acquisitions................................ 560 (28,568)
----------- -----------
NET ADDITIONS/(REDUCTIONS) TO SHAREHOLDERS' FUNDS..................... 3,331 (25,080)
SHAREHOLDERS' FUNDS AT BEGINNING OF PERIOD............................ 8,246 29,451
----------- -----------
SHAREHOLDERS' FUNDS AT END OF PERIOD.................................. 11,577 4,371
----------- -----------
----------- -----------
</TABLE>
RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
L000 L000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Operating profit...................................................... 8,326 9,454
Depreciation.......................................................... 4,931 4,508
Increase in stocks.................................................... (1,893) (2,105)
Decrease in debtors................................................... 5,811 3,794
(Decrease)/increase in creditors...................................... (8,784) 2,156
----------- -----------
NET CASH FLOW FROM OPERATING ACTIVITIES............................... 8,391 17,807
----------- -----------
----------- -----------
</TABLE>
F-158
<PAGE>
ADWEST AUTOMOTIVE PLC
ANALYSIS OF NET DEBT
<TABLE>
<CAPTION>
OTHER AT 31
AT 1 JULY NON CASH EXCHANGE DECEMBER
1998 CASH FLOW MOVEMENTS MOVEMENT 1998
----------- ----------- ----------- ----------- -----------
L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C>
Cash at bank and in hand..................... 17,934 (10,143) -- 1,411 9,202
Bank overdraft............................... (6,842) 1,910 -- (535) (5,467)
-----------
(8,233)
-----------
Borrowings due after one year................ (54,319) 10 11,083 (2,367) (45,593)
Borrowings due within one year............... (3,043) 2,185 (11,083) (508) (12,449)
Finance leases............................... (7,665) 751 (2,038) (582) (9,534)
-----------
2,946
-----------
Current asset investments.................... 1,798 -- -- 5 1,803
----------- ----------- ----------- ----------- -----------
(52,137) (5,287) (2,038) (2,576) (62,038)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
F-159
<PAGE>
ADWEST AUTOMOTIVE PLC
SEGMENTAL INFORMATION
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
L000 L000
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
TURNOVER
- ----------------------------------------------------------------------
CLASS OF BUSINESS
Automotive: UK........................................................ 32,460 36,004
Rest of Europe............................................. 80,327 59,274
USA........................................................ 5,368 3,925
----------- -----------
Continuing operations................................................. 118,155 99,203
Discontinued operations............................................... -- 12,987
----------- -----------
118,155 112,190
----------- -----------
----------- -----------
GEOGRAPHICAL SEGMENTS (BY DESTINATION)
- ----------------------------------------------------------------------
UK.................................................................... 30,841 34,437
Rest of Europe........................................................ 80,337 62,127
USA................................................................... 5,628 14,664
Rest of the World..................................................... 1,349 962
----------- -----------
118,155 112,190
----------- -----------
----------- -----------
OPERATING PROFIT
- ----------------------------------------------------------------------
CLASS OF BUSINESS
Automotive: UK........................................................ 928 3,147
Rest of Europe............................................. 7,933 4,649
USA........................................................ (535) (209)
----------- -----------
Continuing operations................................................. 8,326 7,587
----------- -----------
Operating profit as % of turnover..................................... 7.1% 7.7%
Discontinued operations............................................... -- 1,867
----------- -----------
Operating profit as % of turnover..................................... -- 14.4%
----------- -----------
8,326 9,454
----------- -----------
----------- -----------
</TABLE>
F-160
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS
(UNAUDITED)
1 PREPARATION OF INTERIM FINANCIAL REPORT
The accompanying Condensed Consolidated Financial Statements present the
financial position and results of operations of the Group and have been prepared
in accordance with UK GAAP, which differ in certain significant respects from
U.S. GAAP. See Note 5 for a discussion and quantifications of the principal
differences between UK GAAP affecting the Group.
The interim financial information included in these Condensed Consolidated
Financial Statements is unaudited but reflects all adjustments (consisting only
of normal recurring accruals) which are in the opinion of management necessary
for a fair presentation of the results for interim periods presented. The
interim Condensed Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included herein.
2 TAXATION CHARGE
The taxation charge before disposals is at an effective rate of 29%. This
compares to an effective rate of 31% for the half year to 31 December 1997.
3 EARNINGS PER SHARE
Earnings per share is calculated on earnings of L3,733,000 (L4,763,000 for
the half year to 31 December 1997) and on 83,173,908 (83,025,820 for the half
year to 31 December 1997) shares in issue, weighted on a time basis. Fully
diluted earnings per share based on the exercise of options under the employee
share schemes show no material dilution.
4 ACQUISITIONS AND DISPOSALS
Heidemann Verwaltungsgesellschaft mit beschrankter Haftung was acquired on
11 September 1997. The US Electronics division was sold in May 1998.
5 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These accounts are prepared in conformity with generally accepted accounting
principles applicable in the United Kingdom (UK GAAP). These differ in certain
significant respects from those applicable in the United States (US GAAP). These
differences, together with the approximate effects of the adjustments on net
profits and shareholders' funds, relate principally to the items set out below:
GOODWILL AND OTHER INTANGIBLE ASSETS
Under UK GAAP goodwill arising on acquisition has been charged to reserves.
Under US GAAP goodwill is capitalised and amortised by charges against income
over the period, not to exceed 40 years, over which the benefit arises. For US
GAAP, goodwill has been amortised by the Group over 40 years.
PRIOR YEAR ADJUSTMENT
Under UK GAAP the introduction of a new accounting standard, FRS12, has been
treated as a prior year adjustment. Under US GAAP the charge is recognized in
the period in which the new accounting policy is implemented.
F-161
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS
(UNAUDITED)
5 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
DIVIDENDS
Under UK GAAP dividends proposed after the end of an accounting period in
respect of that accounting period are deducted in arriving at retained earnings
for that period. Under US GAAP such dividends are not deducted until declared.
DEFERRED TAXATION
Under UK GAAP provision is made for deferred taxation only to the extent
that it is probable that an actual liability or asset will crystallise in the
foreseeable future. US GAAP requires full provision for deferred income taxes
under the liability method on all temporary differences and, if required, a
valuation allowance is established to reduce gross deferred taxation assets to
the amount which is more likely than not to be realised.
Deferred taxation also arises in relation to the tax effect of other US GAAP
differences.
PENSION COSTS
Under UK GAAP, the cost of providing pensions is charged against profits on
a systematic basis, with pension surpluses and deficits being amortised over the
expected remaining service lives of current employees. Under US GAAP, costs and
surpluses are similarly spread over the expected remaining service lives but
based on prescribed actuarial assumptions, allocation of costs and valuation
methods, which differ in certain respects from those used for UK GAAP.
DEFERRED PROFIT ON SALE OF PROPERTY
In 1996, properties were disposed of which had previously been revalued
under UK GAAP. No profit arose on this transaction under UK GAAP. A profit
arises under US GAAP on the basis that US GAAP does not permit the revaluation
of property. Under US GAAP, the element of the profit in respect of property
subsequently leased back on an operating lease basis is amortised in equal
instalments over the life of the lease.
EMPLOYEE SHARE TRUST ARRANGEMENTS
Employee share trusts have been established in order to hedge obligations in
respect of options issued under certain employee share option schemes. Under UK
GAAP the Company's ordinary shares held by the employee share trusts are
included at cost in fixed asset investments. Dividends receivable on such shares
are included in the statement of income. Under US GAAP, such shares and
dividends receivable from those shares are treated as treasury stock and
included in shareholders' equity.
REVALUATION OF FIXED ASSETS
Under UK GAAP the Group has revalued certain fixed assets. This is not
permitted under US GAAP.
F-162
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS
(UNAUDITED)
5 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
PRE-PRODUCTION COSTS
Under UK GAAP, certain significant pre-production costs on new products
which are not pre-funded by the customer are carried forward in work in
progress. These costs are then written off on a unit of production basis over
the life of the contract with the customer. Under US GAAP these costs are
generally expensed as incurred.
CURRENT ASSETS AND LIABILITIES
Under UK GAAP current assets include amounts which fall due after more than
one year. Under US GAAP such assets would be re-classified as non-current
assets. Also under UK GAAP provisions for liabilities and charges include
amounts due within one year which would be re-classified to current liabilities
under US GAAP.
EARNINGS PER ORDINARY SHARE
Under UK GAAP earnings per share is based on profit for the financial year
and computed using the weighted average number of Ordinary Shares in issue
during the year. US GAAP also requires the presentation of diluted earnings per
share which is based upon net income, as adjusted, computed using the weighted
average shares and the effect of other dilutive instruments.
CASH FLOWS
The principal difference between UK GAAP and US GAAP is in respect of
classification. Under UK GAAP, the Group presents its cash flows for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditures and financial investments, acquisition and disposals, equity
dividends paid, management of liquid resources, and financing. US GAAP requires
only three categories of cash flow activities which are operating, investing and
financing.
Cash flows arising from taxation and returns on investments and servicing of
finance under UK GAAP would, with the exception of dividends paid, be included
as operating activities under US GAAP; dividend payments would be included as a
financing activity under US GAAP. In addition, capital expenditures and
financial investment, acquisition and disposals, and management of liquid
resources under UK GAAP would be presented as investing activities under US
GAAP.
UK GAAP defines cash as cash in hand and deposits repayable on demand. Short
term deposits which are readily convertible into cash, into known amounts of
cash at, or close to, their carrying value are classified as liquid resources.
US GAAP defines cash and cash equivalents as cash in hand and short term highly
liquid investments with original maturities of three months or less. Cash flows
in respect of short term deposits with original maturities of three months or
less. Cash flows in respect of short term deposits with original maturities
exceeding three months are included in investing activities under US GAAP and
are included in capital expenditure and financial investment under UK GAAP.
F-163
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS
(UNAUDITED)
5 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Under US GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
HALF YEAR HALF YEAR
TO TO
31 DEC 1998 31 DEC 1997
----------- -----------
L'000 L'000
<S> <C> <C>
Net cash provided by operating activities............................. 4,368 12,806
Net cash used in investing activities................................. (5,105) (39,689)
Net cash (used in)/provided by financing activities................... (9,406) 17,242
Effect of changes in exchange rate.................................... 1,411 (172)
----------- -----------
Net decrease in cash & cash equivalents............................... (8,732) (9,813)
Cash & cash equivalents at beginning of year.......................... 17,934 22,272
----------- -----------
Cash & cash equivalents at end of year................................ 9,202 12,459
----------- -----------
----------- -----------
</TABLE>
Effect on (loss)/profit attributable to shareholders of differences between
UK and US GAAP
<TABLE>
<CAPTION>
HALF YEAR HALF YEAR
TO TO
31 DEC 1998 31 DEC 1997
----------- -----------
L'000 L'000
<S> <C> <C>
Profit attributable to shareholders as reported under UK GAAP......... 3,733 4,763
US GAAP adjustments:
Goodwill............................................................ (908) (519)
Pension costs....................................................... (249) 9
Deferred taxation--full provision................................... (132) (91)
Tax effect of other US GAAP reconciling items....................... 54 (5)
Fixed asset revaluations............................................ 50 50
Deferred profit on sale of property................................. 152 152
Pre-production costs................................................ (1,262) (383)
Other............................................................... (36) (8)
Reverse prior year adjustment....................................... (588) --
Minority interests.................................................. 8 (2)
----------- -----------
Net income under US GAAP.............................................. 822 3,966
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
EARNINGS EARNINGS
PER SHARE PER SHARE
1998 1997
----------- -----------
PENCE PENCE
<S> <C> <C>
Basic and diluted earnings per share under US GAAP
Continuing.......................................................... 1.7 2.5
Discontinued........................................................ (0.7) 2.3
----------- -----------
1.0 4.8
----------- -----------
----------- -----------
</TABLE>
F-164
<PAGE>
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS
(UNAUDITED)
5 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
Effect on shareholders' funds of differences between UK and US GAAP
<TABLE>
<CAPTION>
AS AT AS AT
31 DEC 1998 31 DEC 1997
----------- -----------
L'000 L'000
<S> <C> <C>
Shareholders' funds as reported under UK
GAAP.................................. 11,577 4,371
US GAAP adjustments:
Goodwill.............................. 66,323 80,545
Pension costs......................... 4,681 4,922
Deferred taxation--full provision..... (442) (259)
Tax effect of other US GAAP
reconciling items................... (1,231) (1,288)
Fixed asset revaluations.............. (711) (819)
Proposed dividends.................... -- 1,897
Deferred profit on sale of property... (3,976) (4,278)
Pre-production costs.................. (2,462) (383)
Employee share trust arrangements..... (641) (651)
Other................................. (134) (94)
Minority interests.................... (141) (148)
----------- -----------
Shareholders' funds under US GAAP....... 72,843 83,815
----------- -----------
----------- -----------
</TABLE>
F-165
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
152,401 SHARES
[LOGO]
DURA AUTOMOTIVE SYSTEMS, INC.
CLASS A COMMON STOCK
--------------
PROSPECTUS
--------------
August 9, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
PART II:
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses, to be paid solely by
Dura, of the issuance and distribution of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 1,384
Printing expenses.................................................. 50,000
Accounting fees and expenses....................................... 5,000
Legal fees and expenses............................................ 25,000
Miscellaneous expenses............................................. 3,616
---------
Total...................................................... $ 85,000
---------
---------
</TABLE>
ITEM 14: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Dura is incorporated under the laws of the State of Delaware. Section 145 of
the General Corporation Law of the State of Delaware ("Section 145") provides
that a Delaware corporation may indemnify any persons who are, or are threatened
to be made, parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, or are threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reason of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
Article Eleven of the Restated Certificate of Incorporation of Dura provides
that no director of the corporation shall be liable to the corporation or its
stockholders for monetary damages arising from a breach of fiduciary duty owed
to the corporation or its stockholders to the fullest extent permitted by the
Delaware General Corporation Law.
Article V of Dura's Amended and Restated By-laws (the "Dura By-laws")
provides that each person who was or is made a party or is threatened to be made
a party to or is otherwise involved (including involvement as a witness) in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he or she is or was a director or
officer of the corporation, is or was serving at the request of the corporation
as a director, officer, employee or agent
II-1
<PAGE>
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan, whether
the basis of such proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided below with respect to proceedings to enforce
rights to indemnification, the corporation shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors. The right to indemnification is a contract right and includes the
right to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (advancement of expenses);
provided, however, that, if and to the extent that the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the corporation of an undertaking by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal than such indemnitee is not entitled to be indemnified for such expenses.
Article V of the Dura By-laws further provides that any person serving as a
director, officer, employee or agent of a subsidiary of Dura shall be
conclusively presumed to be serving in such capacity at the request of Dura and,
hence, subject to indemnification by Dura.
Article V of the Dura By-laws further provides that persons who after the
date of the adoption of Article V become or remain directors or officers of the
corporation or who, while a director or officer of the corporation, become or
remain a director, officer, employee or agent of a subsidiary, shall be
conclusively presumed to have relied on the rights to indemnity, advancement of
expenses and other rights contained in Article V in entering into or continuing
such service. The rights to indemnification and to the advancement of expenses
conferred in Article V shall apply to claims made against a indemnitee arising
out of acts or omissions which occurred or occur both prior and subsequent to
the adoption hereof. The rights to indemnification and to the advancement of
expenses conferred in Article V shall not be exclusive of any other right which
any person may have or hereafter acquire under the Amended and Restated
Certificate of Incorporation or under any statute, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
All of the directors and officers of Dura are covered by insurance policies
maintained and held in effect by such corporation against certain liabilities
for actions taken in such capacities, including liabilities under the Securities
Act of 1933.
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the past three years, Dura Automotive Systems, Inc. has not issued
any securities without registration under the Securities Act of 1933, as
amended, except that, on April 22, 1999, Dura Operating Corp., a wholly owned
subsidiary of Dura Automotive Systems, Inc., sold $300 million in aggregate
principal amount of 9%. Senior Subordinated Notes due 2009 and (100 million in
aggregate principal amount of 9% Senior Subordinated Notes due 2009, each of
which were guaranteed by DASI and certain of DOC's subsidiaries. The
above-described transaction was exempt from registration under the Securities
Act pursuant to Section 4(2) of the Securities Act as a transaction not
involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration Statement
or incorporated by reference herein:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of January 19, 1999, among Dura
Automotive Systems, Inc., Excel Industries, Inc. and Windows
Acquisition Corporation, incorporated by reference to Exhibit 2.1 to
Dura's Current Report on Form 8-K, dated January 22, 1999.
2.2 Amendment to Agreement and Plan of Merger, dated as of March 9, 1999, by
and among Dura Automotive Systems, Inc., Dura Operating Corp., Excel
Industries, Inc. and Windows Acquisition Corporation incorporated by
reference to the additional definitive proxy materials filed with the
SEC on March 11, 1999.
3.1 Restated Certificate of Incorporation of Dura Automotive Systems, Inc.,
incorporated by reference to Exhibit 3.1 of the Registration Statement
on Form S-4 (Registration No. 333-81213) (the "S-4").
3.2 Amended and Restated By-laws of Dura Automotive Systems, Inc.,
incorporated by reference to Exhibit 3.2 of the Registration Statement
on Form S-1 (Registration No. 333-06601) (the "S-1").
4.1 Amended and Restated Stockholders Agreement, dated as of August 13, 1996,
by and among Dura, 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 10.30 of the
S-1.
4.2 Amendment No. 1 to Amended and Restated Stockholders Agreement, dated as
of August 13, 1996, by and between Dura, Onex DHC LLC, J2R, Alkin and
the HCI Stockholders and the Management Stockholders, incorporated by
reference to Exhibit 4.1 of the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
4.3 Registration Agreement, dated as of August 31, 1994, among Dura, 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
Dura, the MC Stockholders (as defined therein) and Alkin, incorporated
by reference to Exhibit 4.4 of the S-1.
4.5 Amended and Restated Investor Stockholder Agreement, dated as of August
13, 1996, by and among Dura, Onex U.S. Investments, Inc., J2R and
certain other stockholders party thereto, incorporated by reference to
Exhibit 10.31 of the S-1.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------
<C> <S>
4.6 Form of certificate representing Class A common stock of Dura,
incorporated by reference to Exhibit 4.6 of the S-1.
4.7 Indenture, dated April 22, 1999, between Dura Operating Corp., Dura
Automotive Systems, Inc., the Subsidiary Guarantors and U.S. Bank Trust
National Association, as trustee, relating to the 9% senior
subordinated notes denominated in U.S. dollars, incorporated by
reference to Exhibit 4.7 of the S-4.
4.8 Indenture, dated April 22, 1999, between Dura Operating Corp., Dura
Automotive Systems, Inc., the Subsidiary Guarantors and U.S. Bank Trust
National Association, as trustee, relating to the 9% senior
subordinated notes denominated in euros, incorporated by reference to
Exhibit 4.8 of the S-4.
4.9 Registration Rights Agreement, dated April 22, 1999, between the initial
purchasers named therein and Dura Operating Corp., Dura Automotive
Systems, Inc. and the Subsidiary Guarantors, relating to the 9% senior
subordinated notes denominated in U.S. dollars, incorporated by
reference to Exhibit 4.9 of the S-4.
4.10 Registration Rights Agreement, dated April 22, 1999, between the initial
purchasers named therein and Dura Operating Corp., Dura Automotive
Systems, Inc. and the Subsidiary Guarantors, relating to the 9% senior
subordinated notes denominated in euros, incorporated by reference to
Exhibit 4.10 of the S-4.
5.1 Opinion of Kirkland & Ellis regarding the validity of the securities
offered hereby.
10.1 Amended and Restated Credit Agreement, dated as of March 19, 1999, among
Dura Automotive Systems, Inc., as Parent Guarantor, Dura Operating
Corp., Dura Automotive Systems (Europe) GmbH, Dura Asia-Pacific Pty
Limited ACN 004884539 and Dura Automotive Systems (Canada), Ltd., as
Dura Borrowers, Trident Automotive plc, Dura Automotive Systems
Limited, Spicebright Limited, Dura Automotive Systems Cable Operating
Inc., Dura Automotive Systems Cable Operations Canada, Inc. and Moblan
Investments B.V., as Trident Borrowers, Dura Automotive Acquisition
Limited, as the initial Adwest Borrower, Bank of America National Trust
and Savings Association, as Agent, BA Australia Limited, as Australian
Lender, Bank of America Canada, as Canadian Lender, Bank of America
National Trust and Savings Association, as Swing Line Lender and
Issuing Lender, and the other financial institutions party thereto,
NationsBanc Montgomery Securities LLC, as Lead Arranger and Book
Manager, incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1999.
10.2 1996 Key Employee Stock Option Plan, incorporated by reference to Exhibit
10.27 of the S-1.
10.3 Independent Director Stock Option Plan, incorporated by reference to
Exhibit 10.28 of the S-1.
10.4 Employee Stock Discount Purchase Plan, incorporated by reference to
Exhibit 10.29 of the S-1.
10.5 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.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- -------------------------------------------------------------------------
<C> <S>
10.6 Joint Venture Agreement by and among Orscheln Co., MC Holding Corp., Onex
U.S. Investments, Inc., J2R Corporation and Dura Automotive Holding,
Inc., dated as of August 31, 1994, incorporated by reference to Exhibit
10.1 of the S-1.
10.7 Stock Purchase Agreement, dated April 8, 1998, by and among Dura
Automotive Systems (UK) Limited and the various selling shareholders
listed on the various signature pages thereto, incorporated by
reference to Exhibit 2.1 of the Amendment No. 1 to Form 8-K/A dated
April 30, 1998.
10.9 Stock Purchase Agreement, dated April 8, 1998, by and among Dura
Automotive Systems (UK) Limited and Mervyn Edgar (including a schedule
identifying Stock Purchase Agreements executed by D. Michael Dodge,
Geoff Hill, Thomas Humann, Dan Robosto, Frances Sarrazin and Lothar
Singe), incorporated by reference to Exhibit 2.2 of the Amendment No. 1
to Form 8-K/A dated April 30, 1998.
10.10 Stock Option Agreement, dated as of August 31, 1994, between Dura
Automotive Systems, Inc. and Alkin Co., incorporated by reference to
Exhibit 10.4 of the S-1.
10.11 Promissory Note, dated December 31, 1991, of Karl F. Storrie in favor of
Dura Automotive Systems, Inc., incorporated by reference to Exhibit
10.17 of the S-1.
10.12 1998 Stock Incentive Plan, incorporated by reference to Appendix B in the
Registration Statement on Form S-4 (Registration No. 333-71483).
21.1 Subsidiaries of Dura Automotive Systems, Inc., incorporated by reference
to Exhibit 21.1 of the S-4.
23.1 Consent of Arthur Andersen LLP, Minneapolis, Minnesota.
23.2 Consent of Arthur Andersen LLP, Grand Rapids, Michigan.
23.3 Consent of Arthur Andersen LLP, Stamford, Connecticut.
23.4 Consent of KPMG Audit Plc.
23.5 Consent of Kirkland & Ellis (included in Exhibit 5.1).
</TABLE>
- ------------------------
(b) No financial statement schedules are required to be filed herewith
pursuant to this Item.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Dura pursuant to the provisions, or otherwise, Dura has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Dura of expenses incurred or paid by
a directors, officer or controlling person of Dura in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, Dura
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
aggregate offing price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Dura Automotive
Systems, Inc. duly caused this Amendment No. 1 to Registration Statement on Form
S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in
City of Rochester Hills, State of Michigan, on the 6th day of August, 1999.
DURA AUTOMOTIVE SYSTEMS, INC.
By: /s/ DAVID R. BOVEE
----------------------------------
David R. Bovee
VICE PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED ON THE 6TH DAY OF AUGUST, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
*
- ------------------------------ Chairman
S.A. Johnson
President, Chief Executive
* Officer
- ------------------------------ and Director (principal
Karl F. Storrie executive officer)
*
- ------------------------------ Vice President and
Robert R. Hibbs Director
*
- ------------------------------ Director
Robert E. Brooker, Jr.
*
- ------------------------------ Director
W.H. Clement
*
- ------------------------------ Director
J. Richard Jones
*
- ------------------------------ Director
Jack K. Edwards
*
- ------------------------------ Director
John C. Jorgensen
*
- ------------------------------ Director
James O. Futterknecht
*
- ------------------------------ Director
Ralph R. Whitney, Jr.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
*
- ------------------------------ Director
William L. Orscheln
*
- ------------------------------ Director
Eric J. Rosen
Vice President and Chief
* Financial Officer
- ------------------------------ (principal financial and
Stephen E. K. Graham accounting officer)
</TABLE>
* The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 1 to Registration Statement pursuant to the Power of Attorney
executed by the above-named officers and directors of the Registrant and
previously filed with the Commission.
By: /s/ DAVID R. BOVEE
----------------------------------
David R. Bovee
ATTORNEY IN FACT
II-8
<PAGE>
EXHIBIT 5.1
[Letterhead of Kirkland & Ellis]
August 6, 1999
Dura Automotive Systems, Inc.
4508 IDS Center
Minneapolis, Minnesota 55402
Re: Dura Automotive Systems, Inc.
Registration Statement on Form S-1
Registration No. 333-82703
----------------------------------
Ladies and Gentlemen:
We are acting as special counsel to Dura Automotive
Systems, Inc., a Delaware corporation (the "COMPANY"), in connection with the
proposed registration by the Company of 152,401 shares (the "SHARES") of its
Class A Common Stock, par value $.01 per share, issuable upon the exercise of
certain outstanding warrants (the "WARRANTS") pursuant to a Registration
Statement on Form S-1 (Registration No. 333-82703), filed with the Securities
and Exchange Commission (the "COMMISSION") under the Securities Act of 1933,
as amended (the "ACT") (such Registration Statement, as amended or
supplemented, is hereinafter referred to as the "REGISTRATION STATEMENT").
The Warrants were issued on April 3, 1996 by Excel Industries, Inc. ("EXCEL")
pursuant to a Warrant Grant and Registration Rights Agreement (the "WARRANT
AGREEMENT"). The Company assumed all of Excel=s obligations under the Warrant
Agreement in connection with its acquisition of Excel, which was completed on
March 23, 1999.
We have examined such corporate proceedings, documents,
records and matters of law as we have deemed necessary to enable us to render
this opinion. For purposes of this opinion, we have assumed the authenticity
of all documents submitted to us as originals, the conformity to the
originals of all documents submitted to us as copies and the authenticity of
the originals of all documents submitted to us as copies. We have also
assumed the legal capacity of all natural persons, the genuineness of the
signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto other than the Company and the due authorization, execution
and delivery of all documents by the parties thereto other than the Company.
As to any facts material to the opinions expressed herein, we have relied
upon the statements and representations of officers and other representations
of the Company and others.
<PAGE>
KIRKLAND & ELLIS
Dura Automotive Systems, Inc.
August 6, 1999
Page 2
As of the date of this opinion, the Board of Directors of the
Company has taken action to approve the issuance of the Shares in accordance
with the terms of the Warrant Agreement.
Based upon and subject to the foregoing qualifications,
assumptions and limitations and the further limitations set forth below, we
hereby advise you that, in our opinion, the Shares have been duly authorized for
issuance, and, when the Registration Statement becomes effective under the Act,
the Shares have been issued in accordance with the terms of the Warrant
Agreement upon receipt of the consideration contemplated thereby, and
certificates representing the Shares have been duly executed and delivered on
behalf of the Company and duly registered by the Company's Transfer
Agent/Registrar, the Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 5.1 to the Registration Statement. We also consent to the
reference to our firm under the heading "Legal Matters" in the Registration
Statement. In giving this consent, we do not hereby admit that we are in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission. This opinion and consent may be
incorporated by reference in a subsequent registration statement on Form S-1
filed pursuant to Rule 462(b) under the Act with respect to the registration of
additional securities for sale in the offering contemplated by the Registration
Statement.
We express no opinion as to any laws other than the General
Corporation Law of the State of Delaware and the Delaware case law decided
thereunder and the federal law of the United States of America. We do not find
it necessary for the purposes of this opinion, and accordingly we do not purport
to cover herein, the application of the securities or "Blue Sky" laws of the
various states to the issuance and sale of the Shares.
This opinion is limited to the specific issues addressed
herein, and no opinion may be inferred or implied beyond that expressly stated
herein. We assume no obligation to revise or supplement this opinion should the
applicable law be changed by legislative action, judicial decision or otherwise
after the date on which the Registration Statement is declared effective by the
Commission.
This opinion is furnished to you in connection with the filing
of the Registration Statement and is not to be used, circulated, quoted or
otherwise relied upon for any other purpose.
Very truly yours,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
August 5, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
August 5, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Stamford, Connecticut,
August 5, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the registration statement on Form S-1 dated
9 August 1999 of Dura Automotive Systems, Inc. of our report dated 7 September
1998, in respect of the consolidated balance sheets of Adwest Automotive Plc and
its subsidiaries at 30 June 1998 and 30 June 1997, and the related consolidated
profit and loss accounts, reconciliations of movements in shareholders' funds
and consolidated cash flow statements for each of the years in the three year
period ended 30 June 1998 and to the reference to our firm under the heading
"Experts" in the Form S-1 dated 9 August 1999.
KPMG Audit Plc
August 6, 1999
