<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
-------------------------------------------------------
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended: Commission file number:
DECEMBER 31, 1998 0-21139
-------------------------------------------------------
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State of Incorporation) (I.R.S. Employer Identification No.)
4508 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (612) 342-2311
-------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
-------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
As of March 26, 1999, 9,063,588 shares of Class A Common Stock of the
Registrant were outstanding and the aggregate market value of the Class A
Common Stock of the Registrant (based upon the last reported sale price of
the Common Stock at that date by the Nasdaq National Market System),
excluding shares owned beneficially by affiliates, was approximately
$227,819,000. In addition, 3,325,303 shares of Class B Common Stock of the
Registrant were outstanding at March 26, 1999.
Information required by Items 10, 11, 12 and 13 of Part III of this Annual
Report on Form 10-K incorporates by reference information (to the extent
specific sections are referred to herein) from the Registrant's Proxy
Statement for its annual meeting to be held May 20, 1999 (the "1999 Proxy
Statement").
-------------------------------------------------------
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
</TABLE>
- 2 -
<PAGE>
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
BACKGROUND OF COMPANY
Dura Automotive Systems, Inc. and its subsidiaries (collectively
referred to as "Dura" or the "Company") is a leading designer and
manufacturer of driver control systems, cable-related systems and engineered
mechanical components for the global automotive industry. Dura's products
include parking brake systems, automotive cables, transmission shifter
systems, latches, hinges, underbody tire carriers, jacks, brake, clutch and
accelerator pedals and other mechanical assemblies. Dura sells its products
to the major North American, Japanese and European automotive original
equipment manufacturers ("OEMs"). Dura has manufacturing and product
development facilities located in the United States, Australia, Brazil,
Canada, France, Germany, Mexico, Spain and the United Kingdom and has
strategic alliances in India and Japan.
The automotive components supply industry is undergoing significant
consolidation and globalization as OEMs continue to reduce their supplier
base. In order to lower costs and improve quality, OEMs are awarding
sole-source contracts to full-service suppliers who are able to supply larger
portions of a vehicle on a global basis. OEMs' criteria for supplier
selection include not only cost, quality and responsiveness, but also
full-service design, engineering and program management capabilities. OEMs
are seeking suppliers capable of providing complete systems rather than
suppliers who only provide separate component parts. In addition, OEMs are
increasingly requiring their suppliers to have the capability to design and
manufacture their products in multiple geographic markets.
In response to these trends, Dura has pursued a disciplined strategy
whereby it has acquired a number of automotive suppliers that provide
additional product, manufacturing and technical capabilities, broaden its
geographic coverage and strengthen its ability to supply products on a global
basis, increase the number of models for which Dura supplies products and
increase the content level on existing models, and add new customers. Since
its formation in 1990, Dura has completed 10 such acquisitions and and has
entered into two joint ventures. As a full-service supplier with strong OEM
relationships, Dura expects to continue to benefit from the supply base
consolidation trends.
During 1998, Dura completed a series of strategic acquisitions, as
follows:
- In March 1998, Dura acquired Universal Tool & Stamping Co., Inc.
("Universal"), a manufacturer of jacks for the North American automotive
industry. The acquisition provided Dura with a market presence for jacks in
North America and added Honda as a significant new customer.
- In April 1998, Dura acquired all of the outstanding equity interests
of Trident Automotive plc ("Trident"). The acquisition of Trident increased
Dura's automotive cable design and manufacturing capabilities in North
America and Europe and added new products such as door handles and lighting
components. Dura subsequently concluded that the door handle business did not
meet the Company's objectives for continued investment and, as such, did not
represent a continuing core product line to Dura. As a result, in January
1999, Dura sold the door handles business for $15 million in total
consideration.
- 3 -
<PAGE>
- In August 1998, Dura acquired the hinge business ("the Hinge
Business") of Tower Automotive, Inc. This acquisition provided Dura with the
technology and manufacturing capabilities to produce automotive hood and deck
lid hinges.
As a result of these strategic acquisition efforts, Dura believes that
it is the leading North American supplier of parking brake mechanisms,
transmission shifter mechanisms and automotive cables. In addition, Dura
believes that it is a leading supplier of automotive cables in Europe. Dura
is now one of the few suppliers to offer integrated parking brake, shifter
and latch systems world wide. These systems, which consist of mechanisms and
cables, require significant design and engineering expertise because they are
critical to the vehicle's reliability, performance and safety. Dura believes
that its customers value its ability to design, manufacture and assemble
complete systems.
Dura's revenues have increased from $129.3 million in 1993 to $739.5
million in 1998, representing a compound annual growth rate of approximately
42%. Over this same period, Dura's operating income margin has improved from
2.8% of revenues to 9.6% of revenues. This growth is the result of the
Company's acquisition strategy, internal growth and disciplined manufacturing
efficiency and productivity initiatives related to both existing and acquired
operations.
Approximately 77% of Dura's 1998 revenues were generated from sales to
North American OEMs with its major customers being Ford, GM, DaimlerChrysler,
Toyota, Honda and Nissan. Dura manufactures products for many of the most
popular car, light truck and sport utility models, including all ten of the
top ten selling vehicles in North America for 1998: the Ford Taurus,
Explorer, Ranger and F-Series pickup, the GM C/K pickup, the Dodge Caravan
and Ram pickup; the Honda Accord and Civic, and the Toyota Camry. As a
result of recent acquisitions, approximately 23% of Dura's 1998 revenues were
generated from sales to European OEMs including Volkswagen, Mercedes, PSA
(Peugeot and Citroen), BMW and Renault. Dura is generally the sole supplier
of the parts it sells to OEMs and will ordinarily continue to supply parts
for a particular model for the life of the model, which usually ranges from
three to seven years.
RECENT DEVELOPMENTS
On March 23, 1999, Dura acquired Excel Industries, Inc. ("Excel"), a
designer and manufacturer of window, door and seating systems for the North
American and European automotive and heavy-truck markets. In addition, Excel
designs and manufactures appliances and other components for sale to the
North American recreational vehicle market. Excel had revenues of $1.1
billion during 1998 and operating income of $31.5 million. Excel's principle
customers include Ford, DaimlerChrysler, GM, Volkswagen, Fleetwood, Winnebago
and Navistar.
The acquisition of Excel expands Dura's product offerings through the
addition of window and door systems, increases penetration with important
customers such as DaimlerChrysler and Volkswagen and provides opportunities
for increased operational efficiencies through the consolidation of design,
engineering and administrative activities and through the application of
technological capabilities throughout the combined operation.
On March 15, 1999, Dura acquired Adwest Automotive plc ("Adwest"), a
designer and manufacturer of driver control mechanisms and engine control
products for the European automotive market. Adwest's revenues for its
fiscal year ended June 30, 1998 were $400 million
- 4 -
<PAGE>
and operating income was $30 million. Adwest's principle customers include
Volkswagen, BMW, PSA, Ford, and Renault.
Through its addition of driver control mechanism design and
manufacturing capabilities, the acquisition of Adwest enables Dura to supply
complete driver control systems (including the mechanism and related cable)
to the European automotive market. In addition, this acquisition strenghtens
Dura's relationship with a broad range of Europe's largest OEMs, including
Volkswagen and BMW. The physical proximity of Dura's European facilities to
those of Adwest will also provide opportunities to achieve operational
synergies through the consolidation of design, engineering and administrative
activities and through the reorganization of the combined company's
manufacturing activities.
On a pro forma basis, after giving effect to the acquisitions of
Universal, Trident, the Hinge Business, Excel and Adwest, total 1998 revenues
were in excess of $2.5 billion and operating income was approximately $249
million.
INDUSTRY TRENDS
Dura's performance and growth is directly related to certain trends
within the automotive market, including the consolidation of the component
supply industry, the growth of system sourcing and the increase in global
sourcing.
SUPPLIER CONSOLIDATION. During the 1990s, OEMs have continued to reduce
their supplier base in certain product segments, including mechanical
assemblies, awarding sole-source contracts to full-service suppliers. As a
result, OEMs currently work with a smaller number of full-service suppliers
each of which supplies a greater proportion of the total vehicle. These
requirements can best be met by suppliers with sufficient size, geographic
scope and financial resources to meet such demands. For full-service
suppliers such as Dura, this new environment provides an opportunity to grow
by obtaining business previously provided by other non full-service suppliers
and by acquiring suppliers that further enhance product, manufacturing and
service capabilities. OEMs rigorously evaluate suppliers on the basis of
product quality, cost control, reliability of delivery, product design
capability, financial strength, new technology implementation, quality and
condition of facilities and overall management. Suppliers that obtain
superior ratings are considered for sourcing new business; those that do not
generally continue their existing contracts, but normally do not receive
additional business. Although these supplier policies have already resulted
in significant consolidation of component suppliers in certain segments, Dura
believes that opportunities exist for further consolidation within Dura's
segment. This is particularly true in Europe, which has many suppliers in
this segment, many with relatively small market shares.
SYSTEM SOURCING. OEMs increasingly seek suppliers capable of
manufacturing complete systems of a vehicle rather than suppliers who only
produce the separate parts that comprise a system. By outsourcing complete
systems, OEMs are able to reduce their costs associated with the design and
integration of different components and improve quality by enabling their
suppliers to assemble and test major portions of the vehicle prior to
beginning production. Dura has capitalized on this trend by designing its
mechanisms and cable systems to function together and by providing cable and
mechanism designs that are integrated into the design of the entire vehicle.
GLOBAL SOURCING. Regions such as Asia, Latin America and Eastern Europe
are expected to experience significant growth in vehicle demand over the next
ten years. OEMs are positioning themselves to reach these emerging markets
in a cost-effective manner by seeking to
- 5 -
<PAGE>
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 the overall per-unit 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.
Dura has manufacturing facilities located in Australia, Brazil, Canada,
France, Germany, Mexico, Spain and the United Kingdom. Through the
acquisitions of Excel and Adwest, facilities in the Czech Republic and
Portugal have also been added. In addition, Dura has formed, or is in the
process of forming, strategic alliances with other suppliers throughout the
world. These strategic alliances, which range from investments in other
manufacturers to informal understandings, should not only give Dura access to
new geographic markets and customers, but also the capability of offering
complementary products. Dura also has four technical centers located at its
facilities in Europe and it has relocated technical personnel resources to
locations in which OEMs will develop "world cars." By participating in the
design of these vehicles and through implementation of manufacturing
processes near the international facilities of the OEMs, Dura believes it can
continue to expand on its international presence.
BUSINESS STRATEGY
Dura's business objective is to capitalize on the consolidation,
globalization and system sourcing trends in the automotive supply industry in
order to be the leading provider of driver control systems, cables and
engineered mechanical components to OEMs worldwide. Key elements of Dura's
operating and growth strategies are outlined below:
OPERATING STRATEGY
FULL-SERVICE DESIGN AND ENGINEERING CAPABILITIES. Dura has maintained a
technological advantage through its investment in product development and
advanced engineering. Dura works with OEMs throughout the product
development process from concept vehicle and prototype development through
the design and implementation of manufacturing processes. Dura's
computer-aided design systems are compatible with its major customers,
enabling Dura to communicate design developments with customer engineers
throughout the design and development stage.
EFFICIENT MANUFACTURING/CONTINUOUS IMPROVEMENT PROGRAMS. Dura continues
to implement strategic initiatives designed to improve product quality and
reduce manufacturing costs through, among other things, the introduction of
cellular manufacturing methods, consolidation of manufacturing facilities,
improvement in inventory management and reduction of scrap. Manufacturing
flexibility enables Dura's facilities to produce systems in a cost-effective
manner and strengthens Dura's ability to meet the just-in-time and in-line
sequence delivery schedules of many of its customers. In addition, Dura
utilizes the Dura Operating System, which is a common set of key metrics used
in all facilities, to measure actual performance in comparison to standards
and goals.
STRONG CUSTOMER RELATIONSHIPS. Dura has developed strong customer
relationships with over 20 OEMs based on its long history of high-quality
manufacturing and full system customer support. Significant investment in
design and engineering capabilities drive new product development, lower
costs and provide the capabilities necessary to produce complete systems.
Access to and relationships with OEMs' engineering and purchasing personnel
allow Dura to identify business opportunities and react to customer needs in
the early stages of vehicle design and give it a competitive advantage in
securing new business.
- 6 -
<PAGE>
DECENTRALIZED, PARTICIPATORY CULTURE. Dura's decentralized approach to
managing its manufacturing facilities encourages decision making and employee
participation in areas such as manufacturing processes and customer service.
This "team" approach enhances communication of strategic direction and goals
while facilitating a greater success rate in reaching and exceeding its
objectives and fosters a unified culture. Dura provides incentives to
managers and salaried and hourly employees through grants under Dura's stock
option plan and participation in the employee stock discount purchase plan.
GROWTH STRATEGY
STRATEGIC ACQUISITIONS. Dura seeks to make acquisitions that: (i)
provide additional product, manufacturing and technical capabilities; (ii)
broaden Dura's geographic coverage and strengthen its ability to supply
products on a global basis; (iii) increase the number of models for which
Dura supplies products and increase the content level on existing models; and
(iv) add new customers. Dura competes in what it believes to be a $10 to $12
billion, highly fragmented market that provides numerous potential
acquisition and joint venture opportunities.
Dura Automotive Systems, Inc. is a holding company whose predecessor was
formed by Hidden Creek Industries ("Hidden Creek"), Onex DHC LLC (together
with its affiliates, "Onex"), J2R Corporation ("J2R") and certain others for
the purpose of acquiring the Dura Automotive Hardware and Mechanical
Components divisions of Wickes Manufacturing Company ("Wickes") in November
1990. In August 1994, Dura entered into a transaction that combined the
operations of Dura's operating subsidiary, Dura Operating Corp. ("Dura"),
with the automotive parking brake and cable business and light duty cable
business (the "Brake and Cable Business") of Alkin Co. ("Alkin").
Since the completion of the acquisition of the Brake and Cable Business,
Dura has successfully completed the following strategic acquisitions and
joint venture:
- In August 1996, Dura formed a joint venture with Excel to
participate equally in the acquisition of a 25.5% interest in Pollone S.A.
("Pollone"), a manufacturer of automotive components and mechanical
assemblies headquartered in Sao Paulo, Brazil, for $5 million in total. The
joint venture also loaned Pollone an additional $10.5 million pursuant to
notes which are convertible into equity of Pollone at the joint venture's
option. In January 1998, the joint venture increased its interest in Pollone
to 51.0% through the conversion of certain of these notes. This investment
provided Dura with a manufacturing presence in Latin America.
- In October 1996, Dura acquired the parking brake business of
Rockwell Light Vehicle Systems France S.A. for approximately $3.8 million.
The parking brake business, which is operated from a facility in Cluses,
France, added a manufacturing presence in Europe and PSA (Peugeot and
Citroen) and Renault as customers.
- In December 1996, Dura acquired KPI Automotive Group ("KPI") from
Sparton Corporation for approximately $78.8 million. KPI manufactures
shifter systems, parking brake mechanisms, brake pedals and underbody tire
carriers for the North American automotive industry from facilities in
Indiana and Michigan. The acquisition added significant market penetration
in console-based shifter systems, increased platform content and added a
significant new product line in underbody tire carriers.
- In January 1997, Dura acquired the VOFA Group ("VOFA") for
approximately $38.0 million in cash and assumed indebtedness, plus contingent
payments. VOFA designs and
- 7 -
<PAGE>
manufactures shifter cables, brake cables and other light duty cables for the
European automotive and industrial markets from facilities in Dusseldorf,
Gehren and Daun, Germany and Barcelona, Spain. The acquisition added new
customers such as Mercedes, Volkswagen and BMW, provided a strong European
position and established Dura's cable manufacturing capabilities globally.
- In May 1997, Dura acquired the automotive parking brake business
from Excel for approximately $2.9 million. The acquisition increased Dura's
penetration of the parking brake market and expanded Dura's relationship with
Chrysler.
- In August 1997, Dura acquired GT Automotive Systems, Inc. ("GT
Automotive") for approximately $45.0 million in cash and assumed
indebtedness, plus contingent payments. GT Automotive designs and
manufactures column-mounted shifter systems and turn signal and tilt lever
assemblies for North American OEMs. At the time of the acquisition, GT
Automotive had a substantial share of the North American column-based shifter
market. The acquisition of GT Automotive, combined with Dura's existing
position in console-based shifter systems, increased Dura's share of the
North American shifter market to the leading position. In addition, the
acquisition added Nissan as a customer.
- In December 1997, Dura purchased approximately 19% of the
outstanding common stock of Thixotech Inc. ("Thixotech") for approximately
$0.5million. Dura also loaned Thixotech an additional $2.8 million pursuant
to notes which are convertible into additional common stock of Thixotech at
Dura's option. Thixotech is currently pursuing the development of an
alternative manufacturing technology for component parts.
- In December 1997, Dura acquired REOM Industries ("REOM"), an
Australian designer and manufacturer of jacks and parking brakes, for
approximately $3.7 million. The acquisition added market penetration in
parking brakes, a new product (jacks) and established a presence in the
Pacific Rim.
- In March 1998, Dura acquired Universal, a manufacturer of jacks for
the North American automotive industry, for approximately $19.5 million.
Universal had 1997 revenues of approximately $37.0 million. Universal's
customers include General Motors, Ford and Honda. The acquisition provided
Dura with a market presence for jacks in North America and added Honda as a
significant new customer.
- In April 1998, Dura acquired all of the outstanding equity interests
of 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 has manufacturing and technical facilities in
Michigan, Tennessee, Arkansas, Canada, the United Kingdom, Germany, France
and Brazil. Pursuant to the terms of the agreement, Dura acquired all of the
outstanding equity interests of Trident for total consideration of $93.2
million in cash. In addition, Dura assumed $75.0 million of Trident's
outstanding 10% Senior Subordinated Notes due 2005. Dura also repaid
Trident's outstanding senior indebtedness of approximately $53.0 million.
- In August 1998, Dura acquired the Hinge Business for approximately
$37.3 million. The Hinge Business has annual revenues of approximately $50.0
million and manufactures automotive hood and deck lid hinges.
- 8 -
<PAGE>
- In March 1999, Dura acquired Excel for approximately $155 million
in cash, 5.1 million shares of Dura Class A Common Stock and the assumption of
$167 million in indebtedness. Excel designs and manufactures window, door
and seating systems for the automotive, recreational vehicle, heavy truck and
mass transit markets and appliances and hardware for the recreational vehicle
market. Excel also manufactures decorative trim for the automotive market
and complex injection molded parts for the consumer and industrial markets.
Revenues for 1998 were approximately $1.1 billion. The acquisition of Excel
provided the Company with new, value-added product lines and strengthed
Dura's relatationship with important customers such as Ford, DaimlerChrysler,
Volkswagen and BMW.
- In March 1999, the Company acquired Adwest for $210 million in cash
and the assumption of $120 million in indebtedness. Adwest designs and
manufactures driver control mechanisms, engine control products and
automotive cable primarily for the European automotive market and has annual
revenues of $400 million. The acquisition of Adwest provided Dura with
substantial driver control mechanism design and production capability in
Europe and broadened the Company's dealings with customers such as
Volkswagen, BMW, Ford, GM, Peugeot and Renault.
FOCUS ON HIGHER VALUE-ADDED SYSTEMS. OEMs continue to seek suppliers
capable of manufacturing complete systems for a vehicle rather than suppliers
that produce only the component parts which comprise a system. Systems
manufacturing offers OEMs the opportunity for significant cost savings and
improved product quality and consistency. By capitalizing on Dura's existing
product portfolio and through the combination of multifunctional mechanical
and cable products, Dura intends to continue to expand its capabilities to
provide additional integrated systems. The acquisition of Excel adds window
and door systems to Dura's product offering, further increasing its ability
to supply fully integrated systems to it customers.
INCREASE PLATFORM AND CUSTOMER PENETRATION. Dura's strategy is to
increase volume by adding new customers and to strengthen existing customer
relationships by broadening its range of products through internal
development efforts and acquisitions. During 1997, Dura established
important new customer relationships with Mercedes, Volkswagen and BMW
through the acquisition of VOFA, while the Adwest acquisition further
broadens these relationships and increased Dura's business with Japanese OEMs
in Europe. While maintaining its strong relationships with Ford and GM, Dura
has also successfully increased its participation in the supply of its other
customers' model lines. For example, during 1991, Dura participated in only
a limited number of Toyota's production models. By 1997, Dura had
established a supply relationship that covers a full range of Toyota
vehicles, including two models manufactured in Japan. Dura has also
increased the sales content on popular vehicle platforms such as Ford's
Taurus/Sable and Escort, DaimlerChrysler's minivan, Grand Cherokee, Dodge Ram
and Dakota Pickups, Volkswagen's Golf and Audi's A3 by providing additional
products which were developed by Dura or added to its product line through
acquisition.
EXPAND PENETRATION OF INTERNATIONAL MARKETS. In 1998, over 70% of total
worldwide passenger vehicle production occurred outside North America. To
meet OEMs' increasing preference for suppliers with global capabilities, Dura
has expanded its manufacturing operations into new geographic markets through
strategic acquisitions and a joint venture. Consistent with this strategy,
Dura believes that the VOFA (Germany and Spain), Rockwell Light Vehicle
Systems France S.A. (France) and REOM (Australia) and Trident (United
Kingdom, France, and Germany) acquisitions as well as the Pollone
(Brazil) joint venture will expand its ability to serve its customers
globally. Following the acquisitions of Excel and Adwest, approximately 36%
of Dura's revenues will be earned outside of North America. Dura believes
that increased international sales will allow Dura to mitigate the effects of
cyclical downturns in
- 9 -
<PAGE>
a given geographic region and further diversify Dura's OEM customer base. In
addition, Dura believes that its increased international presence will
provide a competitive advantage in the pursuit of certain "world car" supply
opportunities.
PRODUCTS
Dura's product offerings include: (i) automotive cables (such as
parking brake, shifter, throttle, oil level, hood release, and fuel door);
(ii) parking brake mechanisms (foot and hand operated); (iii) transmission
shifter mechanisms (manual and automatic console-based and column-mounted);
(iv) latches (primary, secondary, and combination hood, deck lid and tail
gate); (v) lighting products; and (iv) other engineered mechanical components
(such as underbody tire carriers, jacks, hinges, brake, clutch and
accelerator pedals, and tilt lever and turn signal assemblies). Dura
believes that it is a leading North American supplier of parking brake
mechanisms, transmission shifter mechanisms and automotive cables. Dura
believes that it is a leading supplier of automotive cables in Europe. Dura
offers individual components as well as integrated parking brake, shifter and
latch systems, which consist of mechanisms and cables.
The following table sets forth the approximate composition by product
category of Dura's revenues for the last three fiscal years:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Automotive cables 38% 44% 39%
Parking brake mechanisms 18 26 39
Transmission shifter mechanisms 17 13 4
Other products 27 17 18
---------- ----------- -------
Total 100% 100% 100%
---------- ----------- -------
---------- ----------- -------
</TABLE>
With the acquisition of Excel and Adwest, Dura's product offering expanded
to include: (i) window systems (rear, vent, quarter, push-out and sliding) for
the automotive, recreational vehicle, heavy truck and mass transit markets; (ii)
door systems (window regulators, door frames and latches); (iii) seat systems
(seat and height adjuster and recliner mechanisms); (iv) exterior trim
components; (v) appliances and hardware for the recreational vehicle market; and
(vi) engine control products. On a pro forma basis, 1998 revenues by product
were as follows:
- 10 -
<PAGE>
<TABLE>
<S> <C>
Automotive cables 17%
Window systems 17
Door systems 10
Recreational vehicle, mass transit and heavy
truck products 9
Transmission shifter mechanisms 8
Parking brake mechanisms 6
Seat systems 5
Other products 28
--------
Total 100%
========
</TABLE>
CUSTOMERS AND MARKETING
Dura has a diverse customer base that includes Ford, GM,
DaimlerChrysler, Volkswagen, Toyota, Honda, Peugeot, Renault, Nissan and BMW.
In North America, Dura supplies its products primarily to Ford, GM,
DaimlerChrysler and Toyota. As a result of recent acquisitions, Dura has
expanded its global presence and has added certain customers and increased
its penetration into other customers such as Volkswagen and BMW.
The following is a summary of Dura's customers that accounted for a
significant portion of consolidated revenues in the past three fiscal years:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Ford 36% 42% 49%
GM 23 25 36
DaimlerChrysler 15 10 8
Volkswagen 4 4 --
Toyota 4 4 5
BMW 2 3 --
Honda 2 -- --
PSA (Peugeot and Citroen) 3 -- --
Renault 1 -- --
Other 10 12 2
---------- ----------- ------
Total 100% 100% 100%
========== =========== =======
</TABLE>
Following the acquisition of Excel and Adwest, Dura's 1998 pro forma
revenues by customer were as follows:
<TABLE>
<S> <C>
Ford/Jaguar 32%
GM 13
DaimlerChrysler 10
Volkswagen 9
BMW 5
PSA (Peugeot and Citroen) 3
Renault 2
Other 26
---------
Total 100%
=========
</TABLE>
Dura's customers award contracts for a particular car platform, which
may include more than one car model. Such contracts range from one year to
the life of the model, which is
- 11 -
<PAGE>
generally three to seven years, and do not require the purchase by the
customer of any minimum number of parts. Dura also competes for new business
to supply parts for successor models and therefore is subject to the risk
that the OEM will not select Dura to produce parts on a successor model.
Because Dura supplies parts for a broad cross-section of both new and mature
models, its reliance on any particular model is minimized. Dura manufactures
products for many of the most popular car, light truck, sport utility and
mini-van models in North America and Europe. Although not comprehensive, the
following table presents an overview of the major models for which Dura has
orders to supply products on current or new model vehicles:
<TABLE>
<CAPTION>
CUSTOMER CAR MODELS* TRUCK MODELS*
- -------------------------- ------------------------------------------------------ ------------------------------------
<S> <C> <C>
Ford Continental/Town Car, Contour/Mystique/ AUTOEUROPA MPV, Econoline,
MONDEO, Cougar, Thunderbird, Crown ESCORT VAN, Villager, Windstar,
Victoria/Grand Marquis, Escort/Tracer, Expedition/Navigator, F-Series,
FIESTA, Mazda 626, Mustang, Ka, Taurus/ Navajo/Explorer/Mountaineer,
Sable Excursion, Mazda pick-up,
PAMPA, Ranger, TRANSIT,
GM Malibu/Grand Am, ASTRA, Aurora/Park Blazer/Jimmy/Bravada, C/K
Avenue/Bonneville/LeSabre, Century, CORSA, Pickup/Tahoe/Sierra/Yukon/
Corvette, Deville/Seville/Eldorado, Firebird/ Escalade/Denali, GMT 800,
Camaro, KADETT, Lumina/Monte Carlo/ Silhouette/TransSport/Venture,
Regal/Intrigue/Grand Prix, Omega, Saturn, CORSA PICKUP, D-20, D-40, D-60,
Innovate, Sunfire/Cavalier, VECTRA Express, P-Truck Chassis, Postal,
S-10 Pickup/Sonoma, Safari/Astro
Savana, Silverado, Suburban, UPS
DaimlerChrysler Breeze, Cirrus, Interpid/Concorde/300M, Caravan/Voyager/Town & Country,
Neon, Prowler, Sebring, Viper, Stratus Cherokee/Grand Cherokee,
A, C, E, M AND S CLASS, CABRIO Dakota/Durango, EUROSTAR,
RamVan & Pickup, Wrangler
L-608 D, L709E, LS 1935, SKN,
SPRINTER
Toyota Avalon, Camry, Carina, COROLLA, LEXUS, Sienna, Toyota Pickup
PRIZM, SOLARA
Volkswagen A4, A8, GOL, GOLF, LUPO, PARATI, PASSAT, POLO, BUS, KOMBI, SAVEIRO, TRANSPORTER
QUANTUM, SANTANA, SUB-POLO
BMW 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 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 -
SEAT, S.A. AROSA, CORDOBA, IBIZA, TOLEDO -
</TABLE>
- ------------------------
* Models manufactured outside of North America are italicized.
- 12 -
<PAGE>
Most of the parts Dura produces have a lead time of two to five years from
product development to production. Although not comprehensive, the following
table presents an overview of the major models for which Dura has been awarded
new business (i.e., parts not currently supplied by Dura):
<TABLE>
<CAPTION>
MODEL YEAR MODEL*
---------- ------
<S> <C>
1999 GM Innovate shifter system
GM Lumina/Monte Carlo/Regal/Intrigue jack
GM C/K pickup hood latch
DaimlerChrysler Grand Cherokee parking brake system and shifter
and hood release cables
PEUGEOT T1 parking brake
Cami Sidekick shifter
BMW E53 hood and door cables
2000 GM Impala/Monte Carlo shifter
GM Deville hood latch
GM Bonneville/LeSabre/Antares hood latch
FORD TRANSIT parking brake system and cable
Ford T-Bird hood and deck hinges
Ford Equator hood hinge
Ford Explorer hood hinge and shifter
Ford SUV hood hinge
Ford P-207 park brake
DaimlerChrysler Mid Size hood hinge, shifter and brake
DaimlerChrysler Ram Van G/S lvr
Daimler Chrysler Dakota G/S lvr
PEUGEOT Z8 parking brake
Toyota Avalon 900T accelerator pedal
MERCEDES SPRINTER shifter cables
VOLKSWAGEN POLO shifter cables
2001 Ford Explorer shifter
Ford Lincoln LS seat release cable, parking brake and hood
latch systems
Ford Mustang hood hinge
Ford T-Bird park brake
Ford Navigator shifter
Ford U204 SUV window latch and hood release cable
GM GMX-320 park brake
GM GMX-240 jack and tire carrier
GM GMT-560 clutch
GM GMT-360 ATX and park brake
DaimlerChrysler Ram Truck hood hinge
Toyota 887T SUV accelerator pedal
Honda SUV tire carrier
Nissan Altima jack
</TABLE>
- --------------------------
* Models manufactured outside of North America are italicized.
DESIGN AND ENGINEERING SUPPORT
Dura believes that engineering service and support are key factors in
successfully obtaining new business. Dura utilizes program management with
customer-dedicated program teams, which have full design, development, test and
commercial issues under the operational control of a single manager. In
addition, cross-functional teams are established for each new program to ensure
efficient product development from program conception through product
- 13 -
<PAGE>
launch. The advanced technology development group focuses on enhancing
product and process technology.
Dura has six technical centers, two in Michigan, one in Germany, one in
the United Kingdom, one in France and one in Australia. A separate Advanced
Technology Group has been established to maintain Dura's position as a
technology leader. The Advanced Technology Group has developed many
innovative features in Dura's products, including many features which were
developed in conjunction with Dura's customers. Dura utilizes Computer Aided
Designs ("CAD") in the design process, which enables Dura to share data files
with its customers via compatible systems during the design stage, thereby
improving function, fit and performance within the total vehicle. Dura also
utilizes CAD links with its manufacturing engineers to enhance
manufacturability and quality of the designs early in the development process.
Dura has more than 360 patents granted or in the application process.
The patents granted expire over several years beginning in 1999. Although
Dura believes that, taken together, the patents are significant, the loss or
expiration of any particular patent would not be material to Dura.
MANUFACTURING
Dura uses a number of different manufacturing processes. Dura utilizes
flexible manufacturing cells in both the mechanism and cable assembly
processes. Manufacturing cells are clusters of individual manufacturing
operations and work stations grouped in a cylindrical configuration, with the
operators placed centrally within the configuration. This provides
flexibility by allowing efficient changes to the number of operations each
operator performs. When compared to the more traditional, less flexible
assembly line process, cell manufacturing allows Dura to maintain its
production output consistent with its customers' requirements and reduce the
level of inventory. In addition, Dura utilizes high volume production lines
for final assembly of its lighting products.
Mechanical assemblies consist of between five and 50 individual
components, which are attached to form an integrated mechanism. Dura's
assembly operations are performed on either dedicated, high-volume, automated
assembly machines or on low capital-intensive, flexible, cell-oriented
assembly units capable of low or high volume production runs. The assembly
operations construct the final product through hot or cold forging machines,
plastic injection molding, welding, staking and riveting the component parts.
A large portion of the component parts are purchased from outside suppliers
to Dura. However, Dura manufactures its own stampings, a process which
consists of passing sheet metal through dies in a stamping press to form the
metal into three-dimensional parts. Dura produces stamped parts using
single-stage and progressive dies in presses, which range in size from 150 to
600 tons. Through cell teams, which stress employee involvement, Dura's
processes are continuously upgraded to increase flexibility, improve
operating safety and minimize changeover times of the dies.
Cables are manufactured using a variety of processes, including plastic
injection molding, extrusion, wire flattening, spring making and zinc
diecasting. Wire is purchased from outside suppliers and then formed into
contra-twisted layers on tubular stranders and bunching machines to produce
up to 19-wire stranded cable. Corrosion resistance is provided by a
proprietary, ceramic coating applied during the stranding process. The cable
then is plastic-coated by an extrusion process to provide a smooth, low
coefficient surface that results in high efficiency and durability. Conduit
is then produced by flattening and coiling wire, which is then extruded with
a protective coating. Proprietary strand and conduit cutting machines enable
efficient processing. Assembly operations are arranged in cells to minimize
inventory, improve
- 14 -
<PAGE>
quality, reduce scrap, improve productivity and enhance employee involvement.
The cables are assembled with various attachments and end fittings that allow
the customer to install the cables to the appropriate mating mechanisms.
Headlamps and tail lamp housings are manufactured through injection
molding of a variety of resins on molding machines of various sizes and
types. The interior of the housings are then coated and at times vacuum
metalized to obtain the proper reflective qualities. Lenses are added to the
housings on a semi-automated production line.
Dura utilizes frequent communication meetings at all levels of
manufacturing to provide training and instruction as well as to assure a
cohesive, focused effort toward common goals. Dura encourages employee
involvement in all production activity and views such involvement as a key
element in the success of Dura. Dura also aggressively pursues involvement
from its suppliers, which is necessary to assure a consistent flow of raw
materials and components on a timely basis with consistently high quality.
Dura utilizes the component suppliers where practical in the design and
prototype stages of the new product development to facilitate the most
comprehensive, state-of-the-art designs available. Dura has made substantial
investments in manufacturing technology and product design capability to
support its 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 suppliers' 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 the French operation which is scheduled for certification
in 1999.
Dura's plants have been recognized by its customers with various awards,
such as the DaimlerChrysler Gold Pentastar Award, GM Target for Excellence,
Nummi Delivery Performance Award, Isuzu Quality Achievement Award and
Calsonic Supplier of the Year Award. Dura has also received an "A" rating at
Peugeot and Renault. Dura has received Ford Q-1 certification at all
facilities shipping current model Ford product.
COMPETITION
Dura principally competes for new business at the beginning of the
development of new models and upon the redesign of existing models. New
model development generally begins two to five years before marketing of such
models to the public. Once a producer has been designated to supply parts
for a new program, an OEM usually will continue to purchase those parts from
the designated producer for the life of the program, although not necessarily
for a redesign. Competitive factors in the market for Dura's products
include product quality and reliability, cost, timely delivery, technical
expertise and development capability, new product innovation and customer
service. Dura operates in a highly competitive environment. The number of
Dura's competitors has decreased due to the supplier consolidation resulting
from changing OEM policies. Dura's primary competitors in mechanisms are
Adwest Incorporated, Scharwaechter GmbH & Co., Teleflex Incorporated, Ficosa
International, S.A., Ventra Group, Inc. and Aries Industries. Dura's primary
competitors in cables are Teleflex Incorporated, Ficosa International, S.A.
and Nippon Cable Systems Inc.
- 15 -
<PAGE>
SUPPLIERS AND RAW MATERIALS
The principal raw materials used by Dura include (i) coil steel and
resin in mechanism production, (ii) metal wire and resin in cable production,
and (iii) resins and lighting components in automotive lighting production.
The types of steel Dura purchases include hot and cold rolled, galvanized,
organically coated and aluminized steel. In general, the wire used by Dura
is produced from steel with many of the same characteristics with the
exception that it has a higher carbon content. Dura utilizes plastic resin
to produce the protective coating for its cables and production of shifter
components, as well as its automotive lighting products. Dura employs
just-in-time manufacturing and sourcing systems enabling it to meet customer
requirements for faster deliveries while minimizing its need to carry
significant inventory levels. Dura has not experienced any significant
shortages of raw materials and normally does not carry inventories of raw
materials or finished products in excess of those reasonably required to meet
production and shipping schedules.
Dura typically negotiates blanket purchase orders or 12-month supply
agreements with integrated steel suppliers, mini-mills and service centers
that have demonstrated timely delivery, quality steel and competitive prices.
These relationships allow Dura to order precise quantities and types of
steel for delivery on short notice, thereby permitting Dura to maintain low
inventories. In addition, Dura occasionally may "spot buy" steel from service
centers to meet customer demand, engineering changes or new part tool trials.
Other raw materials purchased by Dura include dies, fasteners, springs,
rivets and rubber products, all of which are available from numerous sources.
EMPLOYEES
As of December 31, 1998, Dura had approximately 8,300 employees,
approximately 1,500 of whom are salaried and the balance of whom are paid on
an hourly basis. Approximately 3,400 employees located at Dura's facilities
are currently covered by collective bargaining agreements as follows:
<TABLE>
<CAPTION>
Collective Bargaining
Location Agreement Expiration
- --------------------- --------------------------------------------- --------------------
<S> <C> <C>
Australia Australian Metals Workers No term
Brazil Sindicato dos Metalungicos do ABC No term
Canada CAW June 1999
September 1999
June 2000
Germany IG-Metall Under negotiation
Mexico Confederacion de Trabajodores de Mexico Annually
Spain Comisiones Oberera December 1999
United Kingdom Managerial Scientific & Financial March 2000
AEEU March 2000
United States UAW December 2000
June 2000
Universal Employees December 2000
United Paper Workers June 1999
</TABLE>
Although management believes that Dura's relationship with its union
employees at these facilities is good, there can be no assurance that Dura
will be able to negotiate new agreements on favorable terms. In the event
Dura is unsuccessful in negotiating new agreements, these facilities could be
subject to work stoppages, which could have a material adverse effect on the
operations of Dura.
- 16 -
<PAGE>
(b) SAFE HARBOR PROVISIONS
Forward-looking statements included in this Form 10-K are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. There are certain important factors that could cause future results to
differ materially from those that might be anticipated based on some of the
statements made in this report. Investors are cautioned that all
forward-looking statements involve risks and uncertainty. Among the factors
that could cause actual results to differ materially are the following:
- RELIANCE ON MAJOR CUSTOMERS. Dura's two largest customers, Ford and
GM, represented approximately 36% and 23%, respectively, of Dura's 1998
revenues. The loss of Ford, GM or any of Dura's other significant customers
could have a material adverse effect on Dura.
- INDUSTRY CYCLICALITY AND SEASONALITY. The automotive market is
highly cyclical and is dependent on consumer spending. Economic factors
adversely affecting automotive production and consumer spending could
adversely impact Dura.
- FAILURE TO OBTAIN BUSINESS RELATED TO NEW AND REDESIGNED MODEL
INTRODUCTIONS. The failure of Dura to obtain new business on new models or
to retain or increase business on redesigned existing models could adversely
affect Dura.
- PRODUCT LIABILITY EXPOSURE. Dura faces an inherent business risk of
exposure to product liability claims in the event that the failure of its
products result in personal injury or death, and there can be no assurance
that Dura will not experience material product liability losses in the future.
- 17 -
<PAGE>
ITEM 2. PROPERTIES
FACILITIES
The following table provides information regarding Dura's principal
facilities. Dura believes that the productive capacity and utilization of
its facilities are sufficient to allow Dura to conduct its operations in
accordance with its business strategy. All of the owned facilities are
subject to liens under Dura's credit agreement.
<TABLE>
<CAPTION>
Square Type of
Location Footage Interest Description of Use
- --------------------------------------------- --------------- -------------- -----------------------
<S> <C> <C> <C>
Kentwood, Michigan 870,000 Leased Manufacturing
Stratford, Ontario, Canada (1) 250,000 Owned Manufacturing
Barcelona, Spain 179,000 Owned Manufacturing
Mancelona, Michigan 167,000 Owned Manufacturing
Moberly, Missouri 165,000 Owned Manufacturing
Butler, Indiana 162,000 Owned Manufacturing
Fremont, Michigan 160,000 Owned Manufacturing
Milan, Tennessee 152,000 Owned Manufacturing
Daun, Germany 140,000 Owned Manufacturing
East Jordan, Michigan 135,000 Owned Manufacturing
Gehren, Germany 129,000 Owned Manufacturing
LeMans, France 120,000 Owned Manufacturing
Dusseldorf, Germany 113,000 Leased European Headquarters/
Product Development
Romulus, Michigan 108,000 Leased Manufacturing
Sao Paulo, Brazil 108,000 75% Owned Manufacturing
Stourport-on-Severn, U.K. 100,000 Owned Manufacturing
Spring Lake, Michigan 95,000 Owned Manufacturing
Hannibal, Missouri (South) 90,000 Owned Manufacturing
Stourport-on-Severn, U.K. 85,000 Owned Manufacturing
Windsor, Ontario, Canada
(2 locations) 84,000 Owned Manufacturing
Livonia, Michigan 84,000 Owned Manufacturing
Melbourne, Australia 77,500 Leased Manufacturing
Brownstown, Indiana 68,000 Owned Manufacturing
Brantford, Ontario, Canada 66,000 Owned Manufacturing
Rochester Hills, Michigan 65,000 Leased Product Development/
Operating Headquarters
Hannibal, Missouri (North) 64,000 Owned Manufacturing
Gladwin, Michigan 60,000 Owned Manufacturing
Manchester, Michigan 57,600 Owned Manufacturing
Brookfield, Missouri 51,000 Owned Manufacturing
Aumenau, Germany 49,000 Owned Manufacturing
Matamoros, Mexico 42,000 Owned Manufacturing
Evry, France 12,000 Leased Manufacturing
Cluses, France 10,000 Leased Manufacturing
Melun, France 9,000 Leased Manufacturing
Lechlade, United Kingdom 7,700 Owned Manufacturing
Minneapolis, Minnesota 5,700 Leased Corporate Headquarters
</TABLE>
- --------------------------------------------
(1) The facility consists of approximately 100,000 sq. ft. occupied by Dura
for its production facilities, approximately 65,400 sq. ft. leased
to unaffiliated third parties and approximately 84,600 sq. ft. of
warehouse space.
Management believes that substantially all of its property and equipment is
in good condition and that it has sufficient capacity to meet its current
manufacturing needs.
- 18 -
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Dura faces an inherent business risk of exposure to product liability
claims in the event that the failure of its products results in personal
injury or death, and there can be no assurance that Dura will not experience
any material product liability losses in the future. In addition, if any of
Dura-designed products prove to be defective, Dura may be required to
participate in a recall involving such products. In late 1994, Ford issued a
recall of a series of manual-transmission Ford F-Series pick-ups to repair
the self-adjust parking brakes originally manufactured by the Brake and Cable
Business. Dura's 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 by Dura and Ford. Dura is also involved in a
product recall relating to the same issue with respect to the Mondeo in
Europe. Dura has agreed to pay 50% of the update costs of that recall not to
exceed $1.0 million, which payments totaled $0.4 million as of 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
$155 million (which has subsequently been reduced to $69 million and, to
Dura's knowledge, will continue to be contested by Ford on appeal). 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. Dura maintains
insurance against product liability claims, but there can be no assurance
that such coverage will be adequate for liabilities ultimately incurred or
that it will continue to be available on terms acceptable to Dura. In
November 1996, an insurance carrier of Dura brought a declaratory judgment
that its policy did not provide coverage for an allegedly defective parking
brake manufactured prior to August 31, 1994.
From time to time, in the ordinary course of its business, Dura receives
notice from a customer that a product may not be properly functioning. For
example, in November 1995, Dura was notified by DaimlerChrysler that it had
received reports of a number of parking brake failures in manual transmission
vehicles, particularly in Europe. DaimlerChrysler has notified Dura that as
many as 60,000 vehicles may be affected. Dura is working with
DaimlerChrysler to resolve this matter and does not believe the ultimate cost
of resolution will have a material effect on Dura's results of operations and
financial position. In addition, DaimlerChrysler has alleged that KPI
produced minivan brake pedals with improper pedal pad reinforcements,
resulting in some failures as a consequence of pedal pads bending. It is
possible that DaimlerChrysler could seek contribution from Dura for costs it
incurs if recalls were undertaken for these or similar matters or for costs
associated with possible repairs.
In June 1996, Dura was served with a complaint alleging a wrongful death
as the result of injuries purportedly caused by a defectively designed rear
latch on a DaimlerChrysler mini-van. DaimlerChrysler and two other suppliers
to DaimlerChrysler were also named as defendants in the complaint. The
lawsuit was referred to Dura's insurance carrier. DaimlerChrysler agreed to
assume the defense of, and to indemnify Dura with respect to, this claim as
long as the plaintiffs do not make any claim alleging a manufacturing defect
as it relates to Dura. The plaintiffs have not made such an allegation and
Dura was dismissed from the claim.
In early November 1996, Dura was served with a lawsuit brought by
affiliates of AIG, Dura's excess insurance carrier, in Toronto, Canada
seeking a declaratory judgment that the umbrella and excess liability
policies that it had issued to Onex do not provide coverage in
- 19 -
<PAGE>
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 Dura's $3 million primary policy
per year) for claims arising from August 31, 1994 to April 1, 1996 in the
amount of $20 million per year, and (b) an additional layer of excess
coverage at $33 to $53 million per year. In principal part, the AIG
affiliates claim that the policies do not provide coverage with respect to
products manufactured prior to August 31, 1994 or liabilities assumed by Dura
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.
Dura believes it maintains adequate insurance, including product
liability coverage, to cover the claims described above. Dura has also
established reserves in amounts it believes adequate to cover any adverse
judgments. However, any adverse judgment in excess of its insurance coverage
and such reserves could result in a material adverse effect on Dura.
In February 1998, Dura was contacted by an attorney for the Lemelson
Medical, Education & Research Foundation Limited Partnership (the
"Foundation"), alleging that Dura's operations implicate the fields of
machine vision, gauging, location analysis, flaw detection, verification and
recognition in a manner that allegedly infringes the Foundation's patents.
Attorneys for the Foundation have threatened to initiate litigation against
Dura unless Dura agrees to pay royalty fees pursuant to a negotiated license
agreement. Dura's investigation of this matter is still in its preliminary
stages.
Dura has received notice from an attorney representing Teleflex alleging
that a shifter cable manufactured by VOFA infringes a U.S. patent held by
Teleflex. Dura is currently in the process of investigating this matter and
believes, based on the information available at this time, that this matter
will not have a material adverse effect on Dura.
ENVIRONMENTAL MATTERS
Dura is subject to the requirements of Federal, state, and local
environmental and occupational health and safety laws and regulations. There
can be no assurance that Dura is at all times in complete compliance with all
such requirements. Although Dura has made and will continue to make capital
and other expenditures to comply with environmental requirements, Dura does
not expect to incur material capital expenditures for environmental controls
in 1998. If a release of hazardous substances occurs on or from Dura's
properties or any associated offsite disposal location, or if contamination
is discovered at any of Dura's current or former properties, Dura may be held
liable for remediation costs and expenses, and the amount of such liability
could be material.
In 1995, the Michigan Department of Environmental Quality ("MDEQ")
requested that Wickes and Dura investigate environmental conditions at Dura's
Mancelona facility and at an adjacent property retained by Wickes. The
investigations have detected trichloroethylene ("TCE") in groundwater at the
Mancelona facility and offsite locations. Dura does not believe it used TCE
since it acquired the Mancelona facility, although TCE may have been used by
prior operators. Dura has arranged and paid for the sampling of a number of
offsite residential drinking water wells and for the replacement of wells
found to contain TCE above drinking water standards. In March 1998, a ski
resort in the vicinity wrote to Dura asserting that Dura is liable for the
cost of installing a water supply system allegedly necessary because of
possible TCE contamination in the groundwater. Dura is seeking a negotiated
resolution of the ski resort's
- 20 -
<PAGE>
potential claims. Dura may incur additional costs to further investigate,
monitor or remediate the contamination, or to provide additional alternative
drinking water supplies.
In 1993, Dura received requests for information pursuant to CERCLA from
the U.S. Environmental Protection Agency ("EPA") with respect to two landfill
sites located in Toledo, Ohio. In 1994, Dura received a notice of potential
liability under CERCLA from the EPA with respect to one of the sites. Dura
responded to the requests and notice by explaining to the EPA that it had no
involvement with these sites, which ceased operations prior to the formation
of Dura in 1990. In October 1996, Dura received notice that a motion had
been filed to add Dura as a defendant in a suit by the City of Toledo
involving one of the sites. The complaint was never served on Dura. In
January 1998, the City of Toledo moved to file an amended complaint which no
longer named Dura as a defendant. Dura expects no further involvement in the
litigation. In April 1998, Dura received correspondence from Lucas County,
Ohio alleging that Dura is one of more than 60 entities with potential
liability under CERCLA with respect to the King Road Landfill in Lucas
County. Dura believes that the King Road Landfill ceased operations prior to
the formation of Dura in 1990. Accordingly, Dura intends to deny all
liability with respect to this matter.
In connection with Dura's acquisition of certain assets from Wickes in
1990, and subject to a $750,000 threshold (which has been reached) up to a
$2.5 million cap, Wickes agreed to indemnify Dura for environmental
liabilities arising from the operation of the acquired facilities prior to
the acquisition. Dura and Wickes subsequently agreed that Dura had provided
Wickes with timely and adequate notice with respect to certain matters
(including the matters described in the immediately preceding paragraphs) and
that, subject to the limitations set forth in the agreement, those matters
are covered by the Wickes indemnification. There can be no assurance,
however, that all costs associated with such matters will ultimately be
reimbursed by Wickes or that such costs will not exceed the indemnification
cap. Dura does not currently believe that any liability associated with the
foregoing matters will have a material adverse effect on Dura.
In December 1996, Dura acquired the stock of KPI from Sparton
Corporation ("Sparton"). In connection with the acquisition, the
subsidiaries of Sparton retained their liability under CERCLA with respect to
certain waste disposal sites, subject to indemnification by Sparton for
liability in excess of a $1 million aggregate threshold amount, up to a $15
million aggregate cap. Of these sites, the sites as to which the
subsidiaries' liability has not yet been resolved through a settlement are
the Third Site in Zionsville, Indiana and the Northeast Gravel Site in Grand
Rapids, Michigan. Based upon estimates provided by Sparton, the cost to
resolve the liability of the acquired subsidiaries at the Sparton-related
sites is not currently expected to be material to Dura.
In January 1997, Dura acquired the stock of VOFA. The sellers agreed to
indemnify Dura for environmental liabilities arising from the operation of
the acquired facilities prior to the acquisition up to a $10 million
aggregate cap. The sellers gave notice to Dura of potential environmental
liabilities at the Dusseldorf facility that, subject to the limitations set
forth in the agreement, should be covered by the indemnification. There can
be no assurance, however, that all costs associated with such matters will
ultimately be reimbursed by the sellers. Dura does not currently believe
that any liability associated with the foregoing matters will be material to
Dura.
In August 1997, Dura acquired GT Automotive. In connection with the
acquisition, a clean up report was commissioned to determine whether
hazardous materials or hazardous substances were present in the soil, surface
water or ground water at the Brantford and Windsor, Ontario facilities. Dura
believes that the cost of any environmental remediation with respect to this
matter will not be material to Dura.
- 21 -
<PAGE>
In March 1998, Dura acquired Universal. Universal is in the process of
addressing certain environmental concerns, including the remediation of
trichlorethylene contamination at or near its Butler, Indiana facility. The
sellers in the Universal acquisition have agreed to indemnify Dura for
environmental liabilities arising from the operation of the acquired
facilities prior to the acquisition of Universal, including the present
remediation efforts. There can be no assurance, however, that all costs
associated with such matters will ultimately be reimbursed by the sellers in
the Universal acquisition. Dura does not currently believe that any
liability associated with such matters will be material to Dura.
In connection with the acquisition of Trident from FKI (the "FKI
Acquisition"), Phase I environmental assessments were performed at Trident's
major facilities. The Phase I environmental assessments performed at the
Kentwood, Michigan facility leased by Trident from FKI, indicated that this
facility has chromium contamination of soil and groundwater, that is believed
to have resulted from leakage from plastic plating operations in the 1970s.
FKI has been performing remediation of chromium contamination in site
groundwater under the supervision of the MDEQ and is proposing to install an
expanded and upgraded groundwater containment system at the Kentwood
facility. Remedial activities associated with the chromium contamination
have been ongoing for approximately 15 years, and it is anticipated that such
activities will continue in the near future.
Under the terms of the Kentwood lease, FKI will be responsible for
capital expenditures for certain agreed improvements to the groundwater
containment system and Trident will pay the annual costs of operating and
monitoring that system. In addition, the Kentwood lease provides that FKI
will be solely responsible for the costs of remediation for any contamination
by all hazardous substances that FKI caused. Trident, in turn, will be
solely responsible for the costs of remediation for any contamination by all
hazardous substances that it causes subsequent to the FKI Acquisition.
However, if it cannot be determined whether FKI or Trident caused such
contamination, Trident and FKI will jointly share such remediation costs as
follows: (i) during the first five years of the Kentwood lease, Trident will
pay 20% of such costs and (ii) such percentage will increase to 30% in the
sixth year, 41% in the seventh year, 44% in the eighth year, 47% in the ninth
year and 50% in the tenth and any subsequent year in the Kentwood lease. The
Kentwood lease provides that Trident's remediation responsibility for such
joint remedial efforts will be capped at $3.0 million for the first seven and
one-half years and $5.0 million for the balance of the lease term. Under the
lease, FKI is responsible for such joint remediation costs in excess of these
caps.
With the exception of the Kentwood facility, the Phase I environmental
assessments conducted in connection with the FKI Acquisition did not reveal
environmental matters involving actual liabilities that Trident believes are
reasonably likely to be material to Dura. Under the terms of the FKI
Acquisition agreement, in addition to the indemnification and other
provisions contained in the Kentwood lease, FKI has agreed to indemnify
Trident for any liabilities related to pre-closing disposal of hazardous
materials at certain identified off-site locations by the Kentwood facility
and for certain potential environmental liabilities at the Stratford,
Ontario, Canada facility.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of Stockholders during the
fourth quarter of 1998.
PART II
- 22 -
<PAGE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Class A Common Stock has traded on the Nasdaq National Market under
the symbol DRRA since August 14, 1996. The following table sets forth, for
the periods indicated, the low and high closing sale prices for the Class A
Common Stock as reported on the Nasdaq National Market:
<TABLE>
<CAPTION>
Low High
1997 --- ----
----
<S> <C> <C>
First Quarter 23 1/8 27
Second Quarter 22 1/2 28 3/4
Third Quarter 27 33 3/8
Fourth Quarter 23 7/8 35 3/8
1998
-----
First Quarter 24 3/8 32 1/2
Second Quarter 30 3/8 40 1/4
Third Quarter 20 34 5/16
Fourth Quarter 20 5/8 34 1/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for Dura presented below for,
and as of the end of each of the years in the five-year period ended December
31, 1998, is derived from Dura Automotive Systems, Inc.'s Consolidated
Financial Statements which have been audited by Arthur Andersen LLP,
independent accountants. The consolidated financial statements at December
31, 1997 and 1998 and for each of the three years in the period ended
December 31, 1998 and the auditor's report thereon are included elsewhere in
this report. The consolidated financial statements at and for the years
ended December 31, 1994, 1995 and 1996 are not included herein. This
selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and
- 23 -
<PAGE>
Dura's Consolidated Financial Statements and Notes to Consolidated Financial
Statements, included elsewhere in this report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 189,675 $ 253,726 $ 245,329 $ 449,111 $739,467
Cost of sales 170,625 219,559 207,810 375,086 608,518
S, G & A expense 10,485 15,513 17,157 32,815 49,825
Amortization expense 690 1,094 1,036 3,600 9,868
Operating income 7,875 17,560 19,326 37,610 71,256
Interest expense, net 3,473 4,822 2,589 9,298 20,267
Gain on sale of window
regulator business -- (4,240) -- -- --
Provision for income taxes 1,822 6,852 6,609 11,670 20,933
Net income 2,580 10,126 10,128 16,642 26,024
- ---------------------------------------------------------------------------------------------------------
Basic earnings per share $ 0.75 $ 2.04 $ 1.57 $ 1.89 $ 2.43
Diluted earnings per share $ 0.75 $ 2.03 $ 1.57 $ 1.88 $ 2.37
<CAPTION>
Dec. 31, Dec. 31,
1997 1998
---------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital $ 50,304 $ 63,766
Total assets 419,264 929,383
Long-term debt 178,081 316,417
Stockholders' investment 101,708 238,037
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This discussion should be read in conjunction with Dura's Consolidated
Financial Statements and the Notes to Consolidated Financial Statements
included elsewhere in this report.
GENERAL
Dura ordinarily begins working on products awarded for new or redesigned
models two to five years prior to the marketing of such models to the public.
During such period, Dura incurs (i) costs related to the design and
engineering of such product, (ii) costs related to the production of the
tools and dies used to manufacture the new product and (iii) start-up costs
associated with the initial production of such product. In general, design
and engineering costs are expensed in the period incurred unless they are
reimbursed by the customer. Costs incurred in the production of the tools and
dies are generally capitalized and reimbursed by the customer prior to
production. Start-up costs, which are generally incurred 30 to 60 days
immediately prior to and immediately after initial production, are expensed
as incurred.
COMPARISON OF YEAR ENDED DECEMBER 31, 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 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. Dura estimates the strike
at GM decreased revenues by approximately $16.7 million for the year ended
December 31, 1998.
- 24-
<PAGE>
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 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 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 its joint venture
partner, Excel Industries, Inc., exercised an option to increase its joint
venture ownership interest in Pollone to 51%, and as of such date, began
consolidating the results of Pollone into the results of the 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 7 1/2% Convertible
Trust Preferred Securities ("Preferred Securities") which were issued 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 Dura's former credit facility.
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, the 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 margins are a result of continued cost reduction efforts, including
manufacturing process improvements such as cellular manufacturing, mistake
proofing, improved capacity utilization through rationalization and
consolidation of facilities and the
- 25 -
<PAGE>
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% 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.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, Dura's bank credit agreement consisted of a
$402.5 million secured credit facility. The facility provides 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. The facilities have terms of five years and borrowings bear
interest at the lender's reference rate or Eurocurrency rate. The credit
facilities contain various restrictive covenants which limit additional
indebtedness, investments, rental obligations and cash dividends. The credit
facilities also require Dura to maintain certain financial ratios including
minimum liquidity and interest coverage. Borrowings are collateralized by
the assets of Dura.
In January 1997, Dura acquired all of the outstanding common stock of
VOFA for approximately $38.0 million in cash and assumed indebtedness, plus
contingent payments. VOFA designs and manufactures shifter cables and other
light duty cables for the European automotive and industrial markets from
facilities in Dusseldorf, Gehren and Daun, Germany and Barcelona, Spain.
In May 1997, Dura acquired the automotive parking brake business from
Excel Industries, Inc. for approximately $2.9 million. The acquisition
increased Dura's penetration of the parking brake market and expanded Dura's
relationship with DaimlerChrysler.
In August 1997, Dura acquired GT Automotive for approximately $45.0
million in cash and assumed indebtedness, plus contingent payments. GT
Automotive designs and manufactures column-mounted shifter systems and turn
signal and tilt lever assemblies for North American OEMs. The acquisition of
GT Automotive, combined with Dura's existing position in console-based
shifter systems, increased Dura's share of the North American shifter market.
In addition, the acquisition added Nissan as a customer.
In December 1997, Dura purchased approximately 19% of the outstanding
common stock of Thixotech for approximately $0.5 million. Dura also loaned
Thixotech an additional $2.8 million pursuant to notes which are convertible
into additional common stock of Thixotech
- 26 -
<PAGE>
at Dura's option. Thixotech is currently pursuing the development of an
alternative manufacturing technology for component parts.
In December 1997, Dura acquired REOM, an Australian designer and
manufacturer of jacks and parking brakes, for approximately $3.7 million.
The acquisition added market penetration in parking brakes, added a new
product (jacks) and established a presence in the Pacific Rim.
In March 1998, Dura acquired Universal, a manufacturer of jacks for the
North American automotive industry, for approximately $19.5 million. The
acquisition provided Dura with a market presence for jacks in North America
and added Honda as a significant new customer.
In April 1998, Dura completed its acquisition of 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 has manufacturing and technical facilities in Michigan, Tennessee,
Arkansas, Canada, the United Kingdom, Germany, France and Brazil. Pursuant
to the terms of the agreement, Dura acquired all of the outstanding equity
interests of Trident for total consideration of $93.2 million in cash. In
addition, Dura assumed $75 million of Trident's outstanding 10% Senior
Subordinated Notes due 2005. Dura also repaid Trident's outstanding senior
indebtedness of approximately $53 million.
In August 1998, Dura acquired the Hinge Business for approximately $37.3
million. The Hinge Business has annual revenues of approximately $50.0
million and manufactures automotive hood and deck lid hinges.
On March 20, 1998, Dura Automotive Systems Capital Trust (the "Issuer"),
a wholly owned statutory business trust of Dura, completed the offering of
$55.3 million of its Preferred Securities, resulting in net proceeds of
approximately $52.5 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 Dura
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 consolidated statement of
operations.
On June 17, 1998, Dura 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 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 stock and sold such Class
A stock concurrent with the 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 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 from Dura
resulting in net proceeds of approximately $12.4 million to Dura.
- 27 -
<PAGE>
During 1998, Dura provided 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 is
primarily the result of the timing of cash receipts and cash payments.
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.
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, Dura received $52.5
million of net proceeds from the issuance of the Preferred Securities in
March 1998 and $107.8 million of net proceeds from the issuance of common
stock in June and July 1998.
At December 31, 1998, Dura had unused borrowing capacity of
approximately $72 million, under its most restrictive debt covenant. Dura
believes the borrowing availability under its credit agreement, together with
funds generated by operations, should provide liquidity and capital resources
to pursue its business strategy for the foreseeable future, with respect to
working capital, capital expenditures, and other operating needs. Prior to
any further acquisitions, Dura estimates its 1999 capital expenditures will
approximate $34 million. Under present conditions, management does not
believe access to funds will restrict its ability to pursue its acquisition
strategy.
QUARTERLY RESULTS OF OPERATIONS AND 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.
EFFECTS OF INFLATION
Inflation potentially affects Dura in two principal ways. First, a
portion of Dura's debt is tied to prevailing short-term interest rates which
may change as a result of inflation rates, translating into changes in
interest expense. Second, general inflation can impact material purchases,
labor and other costs. In many cases, Dura has limited ability to pass
through inflation-related cost increases due to the competitive nature of the
markets that Dura serves. In the past few years, however, inflation has not
been a significant factor for Dura.
- 28 -
<PAGE>
MARKET RISK
The Company is 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. The Company does not enter
into derivatives or other financial instruments for trading or speculative
purposes.
The Company manages its interest rate risk by balancing the amount of
fixed and variable debt. For fixed rate debt, interest rate changes affect
the fair market value but do not impact earnings or cash flows. Conversely
for variable rate debt, interest rate changes generally do not affect the
fair market value but do impact future earnings and cash flows, assuming
other factors are held constant. At December 31, 1998, the Company 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 decrease the unrealized
fair market value of the fixed rate debt by approximately $4 million. The
pre-tax earnings and cash flows impact for the next year resulting from a one
percentage point increase in interest rates would be approximately $2.5
million, holding other variables constant.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of Dura's revenues during 1998 were derived from
manufacturing operations in Europe, Latin America and Canada. The results of
operations and financial position of Dura's operations in these countries are
principally measured in their respective currency and translated into U.S.
dollars. The effects of foreign currency fluctuations in such countries are
somewhat mitigated by the fact that expenses are generally incurred in the
same currencies in which revenues are generated. The reported income of
these subsidiaries will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the respective foreign currency.
A significant portion of Dura's assets at December 31, 1998 are based in
its foreign operations and are translated into U.S. dollars at foreign
currency exchange rates in effect as of the end of each period, with the
effect of such translation reflected as a separate component of stockholders'
investment. Accordingly, Dura's consolidated stockholders' investment will
fluctuate depending upon the weakening or strengthening of the U.S. dollar
against the respective foreign currency.
Dura's strategy for management of currency risk relies primarily upon
conducting its operations in such countries' respective currency and may,
from time to time, engage in hedging programs intended to reduce Dura
exposure to currency fluctuations.
YEAR 2000
Dura is currently working to resolve the potential impact of the year
2000 on the processing of time-sensitive information by Dura's computerized
information systems. Any of Dura's programs that have time-sensitive
software may recognize the year "00" as 1900 rather than the year 2000. This
could result in miscalculations, classification errors or system failures.
While Dura's various operations are at different stages of Year 2000
readiness, Dura has completed its global compliance review. Based on the
information available to date, Dura does not anticipate any significant
readiness problems with respect to its systems.
- 29 -
<PAGE>
Dura's 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. Dura expects that
remediation activities for its internal systems will be completed during the
second quarter of 1999, and contingency plans, as needed, before the end of
the year.
The most reasonably likely worst case scenario that Dura 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 Dura needs to make its
products, which could result in delayed shipments to customers and lost sales
and profits for Dura. As the critical supplier assessments are completed,
contingency plans have been developed, as necessary, to address the risks
which were identified. These plans include resourcing materials or building
inventory banks. Dura has aggressively addressed this issue with all major
suppliers and believes contingency plan requirements have been properly
communicated.
Dura has spent approximately $2.1 million on Year 2000 activities to
date and anticipates that it will incur additional future costs not to exceed
$3.0 million in total in addressing Year 2000 issues.
The outcome of Dura'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 Dura will not incur
material remediation costs beyond the above anticipated future costs, or that
Dura's business, financial condition, or results of operations will not be
significantly impacted if Year 2000 problems with its 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, 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. Dura has not yet quantified the impacts of adopting SFAS No. 133
and has not yet determined the timing or method 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. Dura is currently in
the process of assessing the impact of adopting SOP 98-5 and will adopt this
new pronouncement in the first quarter of 1999.
- 30 -
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Market Risk" and "Foreign Currency Transactions" sections of Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Dura are hereby incorporated by
reference to Exhibit 99.1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. DIRECTORS OF THE REGISTRANT
The information required by Item 10 with respect to the directors is
incorporated herein by reference to the section labeled "Election of
Directors" which appears in Dura's 1999 Proxy Statement.
B. EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
Dura's executive officers as of December 31, 1998:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
S.A. Johnson..............................58 Chairman and Director
J. Richard Jones..........................56 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...........................36 Vice President and Director
John J. Knappenberger.....................52 Vice President
Milton D. Kniss...........................51 Vice President
Scott D. Rued.............................42 Vice President
</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, a private industrial management company based in
Minneapolis, Minnesota, which has provided certain management and other
services to Dura. Mr. Johnson is also the President of J2R Corporation
("J2R"). Prior to forming Hidden Creek, Mr. Johnson served from 1985 to 1989
as Chief
- 31 -
<PAGE>
Operating Officer of Pentair, Inc., a diversified industrial company. From
1981 to 1985, Mr. Johnson was President and Chief Executive Officer of Onan
Corp., a diversified manufacturer of electrical generating equipment and
engines for commercial, defense and industrial markets. Mr. Johnson served
as Chairman and a director of Automotive Industries Holding, Inc., a supplier
of interior trim components to the automotive industry, from May 1990 to
August 1995. Mr. Johnson is also Chairman and a director of Tower
Automotive, Inc., a manufacturer of engineered metal stampings and assemblies
for the automotive industry.
J. RICHARD JONES has served as Vice Chairman and a Director of Dura
since May 1998. Prior to the Trident Acquisition, Mr. Jones served as Group
President and Chief Executive Officer of Trident's predecessor from June 1992
until December 1997 and as Chairman, Chief Executive Officer and Director of
Trident from December 1997 until April 1998. From 1988 to June 1992, he
served as President and Chief Operating Officer of the Process Automation
Group of FKI (formerly known as the Process Control Group of FKI). In 1990,
while serving in such capacity, he assumed the responsibility for the
reorganization of the FKI Automotive Group. Prior thereto, Mr. Jones was
Division President of Bristol Babcock, Inc., a process control company
involved in the design and manufacture of telemetry equipment for 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 operation since June
1997. From October 1993 to May 1997, Mr. Bubenzer served as Vice President
Sales/Engineering and was named Senior Vice President in 1995. Prior to
joining 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 Automotive
Group's 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 June1997. 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.
- 32 -
<PAGE>
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, 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
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 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.
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
it Vice President--Finance and Corporate Development from June 1989 through
1993. Mr. Rued has served as Vice President, Corporate Development and a
director of Tower Automotive, Inc. since April 1993. Mr. Rued served as Vice
President, Chief Financial Officer and a director of Automotive Industries
Holding, Inc. from April 1990 to 1995. Mr. Rued is also a director of The
Rottlund Company, Inc., a corporation engaged in the development and sale of
residential real estate.
C. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The information required by Item 10 with respect to compliance with
reporting requirements is incorporated herein by reference to the section
labeled "Section 16(a) Beneficial Ownership Reporting Compliance" which
appears in Dura's 1999 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference
to the sections labeled "Compensation of Directors" and "Executive
Compensation" which appear in Dura's 1999 Proxy Statement, excluding
information under the headings "Compensation Committee Report on Executive
Compensation" and "Performance Graph."
- 33 -
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference
to the section labeled "Security Ownership" which appears in Dura's 1999
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference
to the section labeled "Certain Relationships and Related Transactions" which
appears in Dura's 1999 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT ON FORM 10-K
(1) FINANCIAL STATEMENTS:
- Report of Independent Public Accountants
- Consolidated Balance Sheets as of December 31, 1997 and 1998
- Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1997 and 1998
- Consolidated Statements of Stockholders' Investment for the
Years Ended December 31, 1996, 1997 and 1998
- Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998
- Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULES:
- Financial Statement Schedule II - Valuation and Qualifying
Accounts.
(3) EXHIBITS: See "Exhibit Index" beginning on page 36.
(b) REPORTS ON FORM 8-K
None.
- 34 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: February 25, 1999 By /s/ S.A. Johnson
--------------------------------
S.A. Johnson, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ S.A. Johnson Chairman and Director February 25, 1999
- ------------------------------------
S.A. Johnson
/s/ J. Richard Jones Vice Chairman and Director February 25, 1999
- ------------------------------------
J. Richard Jones
/s/ Karl F. Storrie President, Chief Executive February 25, 1999
- ------------------------------------ Officer (Principal Executive
Karl F. Storrie Officer) and Director
/s/ Robert R. Hibbs Vice President and February 25, 1999
- ------------------------------------ Director
Robert R. Hibbs
/s/ Robert E. Brooker, Jr. Director February 25, 1999
- ------------------------------------
Robert E. Brooker, Jr.
/s/ W.H. Clement Director February 25, 1999
- ------------------------------------
W.H. Clement
/s/ Jack K. Edwards Director February 25, 1999
- ------------------------------------
Jack K. Edwards
/s/ John C. Jorgensen Director February 25, 1999
- ------------------------------------
John C. Jorgensen
/s/ James O'Loughlin Director February 25, 1999
- ------------------------------------
James O'Loughlin
/s/ Robert J. Orscheln Director February 25, 1999
- ------------------------------------
Robert J. Orscheln
/s/ William L. Orscheln Director February 25, 1999
- ------------------------------------
William L. Orscheln
/s/ Eric J. Rosen Director February 25, 1999
- ------------------------------------
Eric J. Rosen
/s/ Stephen E.K. Graham Vice President and Chief February 25, 1999
- ------------------------------------ Financial Officer (Principal
Stephen E.K. Graham Accounting Officer)
</TABLE>
- 35 -
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC.
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Page Number in
Sequential
Numbering
of all Form 10-K
Exhibit and Exhibit Pages
------- -----------------
<S> <C> <C>
3.1 Form of Amended and Restated Certificate of Incorporation of Dura, *
incorporated by reference to Exhibit 3.1 of the Registrant's Form S-1,
Registration No. 333-06601 filed under the Securities Act of 1933 (the "S-1").
3.2 Form of Amended and Restated By-laws of Dura, incorporated by *
reference to Exhibit 3.2 of the S-1.
4.1 Stockholders Agreement, dated as of August 31, 1994, by and among the *
Company, Onex U.S. Investments, Inc., J2R, Alkin, the HCI Stockholders
(as defined therein) and the Management Stockholders (as defined therein),
incorporated by reference to Exhibit 4.1 of the S-1.
4.2 Amendment to Stockholders Agreement, dated May 17, 1995, by and between *
Dura, Onex DHC LLC, J2R, Alkin, the HCI Stockholders (as defined therein)
and the Management Stockholders (as defined therein), incorporated by reference
to Exhibit 4.2 of the S-1.
4.3 Registration Agreement, dated as of August 31, 1994, among 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 Investor Stockholder Agreement, dated as of August 31, 1994, by and among *
Dura, Onex U.S. Investments, Inc., J2R and certain other stockholders party
thereto, incorporated by reference to Exhibit 4.5 of the S-1.
4.6 Form of certificate representing Class A Common Stock of Dura, *
incorporated by reference to Exhibit 4.6 of the S-1.
4.7 Amended and Restated Multicurrency Credit Agreement, dated December 5, *
1996, among Dura Operating Corp., Kimanus Vermogensverwaltung GmbH, the various
financial institutions parties thereto, Bank of America NT&SA, as agent, and BA
Securities, Inc., as the arranger incorporated by reference to Exhibit 4.1 of
the Registrant's Form 8-K dated December 20, 1996.
4.8 Consolidated Amendment No. 1 to Amended and Restated Multicurrency Credit *
Agreement, dated August 29, 1997, by and among Dura Operating Corp., Kimanus
Vermogensverwaltung GmbH, the various commercial lending institutions parties
thereto, as lenders, and Bank of America NT&SA, as agent, incorporated by
reference to Exhibit 4.2 of the Registrant's Form 8-K dated September 12, 1997.
10.1 Joint Venture Agreement, dated as of August 31, 1994, by and among the *
Company, Alkin, MCHC, Onex and J2R, incorporated by reference to Exhibit 10.1
of the S-1.
10.2** Management Contribution Agreement, dated as of August 31, 1994, by and *
among Dura, Kim B. Clark and the Management Stockholders (as defined therein),
incorporated by reference to Exhibit 10.2 of the S-1.
- 36 -
<PAGE>
10.3** Management Agreement, dated as of August 31, 1994, by and between *
Hidden Creek and Dura Operating Corp. (formerly known as Dura Automotive Systems,
Inc.) ("Dura Operating"), incorporated by reference to Exhibit 10.3 of the S-1.
10.4** Stock Option Agreement, dated as of August 31, 1994, between Dura *
and Alkin, incorporated by reference to Exhibit 10.4 of the S-1.
10.5** Stock Option Agreement, dated as of August 31, 1994, between Dura *
and Kim B. Clark, incorporated by reference to Exhibit 10.5 of the S-1.
10.6 Subordinated Promissory Note, dated August 31, 1994, of Dura in the *
amount of $2,000,000 in favor of Alkin, incorporated by reference to Exhibit
10.6 of the S-1.
10.7 Subordinated Promissory Note, dated August 31, 1994, of MCHC in the amount *
of $1,800,000 in favor of Onex Ohio Holdings, Inc., incorporated by reference
to Exhibit 10.7 of the S-1.
10.8 Subordinated Promissory Note, dated August 31, 1994, of MCHC in the amount *
of $200,000 in favor of J2R, incorporated by reference to Exhibit 10.8 of the S-1.
10.9 Credit Agreement, dated as of August 31, 1994, among Dura Operating, certain *
commercial lending institutions, The Bank of Nova Scotia, Comerica Bank, The
Chase Manhattan Bank and Continental Bank, incorporated by reference to
Exhibit 10.9 of the S-1.
10.10 Security Agreement, dated as of August 31, 1994, between Dura Operating and *
Continental Bank, as agent, incorporated by reference to Exhibit 10.10 of the S-1.
10.11 Pledge Agreement, dated as of August 31, 1994, entered into by Dura Operating *
in favor of Continental Bank, as agent, incorporated by reference to Exhibit
10.11 of the S-1.
10.12 Guaranty, dated August 31, 1994, by Dura de Mexico S.A. de C.V. ("Dura *
Mexico") in favor of the Agents, the Co-Agents and the Lenders (each as
defined therein), incorporated by reference to Exhibit 10.12 of the S-1.
10.13 Accounts Receivable Pledge Agreement, dated as of August 31, 1994, by *
and between Continental Bank, as agent, and Dura Mexico, incorporated by
reference to Exhibit 10.13 of the S-1.
10.14 Corporate Guaranty, dated August 31, 1994, by MCHC in favor of the Agent, *
Co-Agents and Lenders (each as defined therein), incorporated by reference
to Exhibit 10.14 of the S-1.
10.15 Pledge Agreement, dated as of August 31, 1994, by MCHC in favor of *
Continental Bank, as agent, incorporated by reference to Exhibit 10.15 of the S-1.
10.16 Letter Agreement, dated August 25, 1994, between Dura and Ford, *
incorporated by reference to Exhibit 10.16 of the S-1.
10.17 Promissory Note, dated December 31, 1991, of Karl F. Storrie in favor of *
Continental Bank, as agent, incorporated by reference to Exhibit 10.17 of the S-1.
10.18 Asset Purchase Agreement, dated March 23, 1995, by and among Dura *
Operating, Dura and Rockwell International Corporation, incorporated by reference
to Exhibit 10.18 of the S-1.
10.19 Subscription Agreement, dated as of June 26, 1995, by and between the *
Company and the persons listed on the signature pages thereto, incorporated by
reference to Exhibit 10.19 of the S-1.
10.20 Subscription Agreement, dated as of June 26, 1995, by and between the *
Company, David P. Klosterman and Craig L. Lamiman, incorporated by reference
to Exhibit 10.20 of the S-1.
10.21** Letter Agreement, dated November 9, 1995, between Dura and John J. *
Knappenberger, incorporated by reference to Exhibit 10.21 of the S-1.
10.22** Letter Agreement, dated August 16, 1994, between Dura and Craig L. *
Lamiman, incorporated by reference to Exhibit 10.21.1 of the S-1.
10.23** Letter Agreement, dated September 1, 1994, between Dura and David *
- 37 -
<PAGE>
P. Klosterman, incorporated by reference to Exhibit 10.21.2 of the S-1.
10.24 Lease, entered into as of January 5, 1988, between the City of Moberly, *
Missouri and Alkin, incorporated by reference to Exhibit 10.22 of the S-1.
10.25 Net Lease, made as of March 16, 1995, by and between First Industrial *
Financing Partnership, L.P. ("First Industrial") and Dura Operating, incorporated
by reference to Exhibit 10.23 of the S-1.
10.26 First Addendum to New Lease, dated April 24, 1995, between First Industrial *
and Dura Operating, incorporated by reference to Exhibit 10.24 of the S-1.
10.27 Lease of Office Space, dated June 14, 1991, between 80 South Eight Street *
Limited Partnership ("Eighth Street") and Hidden Creek, incorporated by reference
to Exhibit 10.25 of the S-1.
10.28 Amendment and Renewal of Lease, made as of April 30, 1993, by and *
between Eighth Street and Hidden Creek, incorporated by reference to Exhibit
10.26 of the S-1.
10.29** Form of 1996 Key Employee Stock Option Plan, incorporated by reference to *
Exhibit 10.27 of the S-1.
10.30** Form of Independent Director Stock Option Plan, incorporated by reference to *
Exhibit 10.28 of the S-1.
10.31** Form of Employee Stock Discount Purchase Plan, incorporated by reference to *
Exhibit 10.29 of the S-1.
10.32 Form of Amended and Restated Stockholders Agreement, incorporated by *
reference to Exhibit 10.30 of the S-1.
10.33 Form of Amended and Restated Investor Stockholders Agreement, incorporated *
by reference to Exhibit 10.31 of the S-1.
10.34 Stock and Asset Purchase Agreement, dated October 3, 1996, among Sparton *
Corporation, Sparton Engineered Products, Inc., Lake Odessa Sparton Group and
Dura Automotive Systems, Inc. incorporated by reference to Exhibit 2.1 of the
Registrant's Form 8-K dated December 20, 1996.
10.35 Stock Purchase Agreement, dated August 1, 1997, by and among Dura Shifter *
Holding Corp. and the various selling shareholders, incorporated by reference to
Exhibit 2.1 of the Registrant's Form 8-K dated September 12, 1997.
23.1 Consent of Arthur Andersen LLP filed herewith. --
27.1 Financial Data Schedule filed herewith. --
99.1 Consolidated Financial Statements of Dura for the Year Ended --
December 31, 1998 together with Report of Independent Public Accountants
filed herewith.
</TABLE>
- ------------------------
* Incorporated by reference.
** Indicates compensatory arrangement.
- 38 -
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statement File Nos. 333-17821 and 333-17821-1.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
March 30, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS FOUND IN THE COMPANY'S
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 20,544
<SECURITIES> 0
<RECEIVABLES> 162,615
<ALLOWANCES> (4,150)
<INVENTORY> 50,498
<CURRENT-ASSETS> 275,431
<PP&E> 227,319
<DEPRECIATION> (38,587)
<TOTAL-ASSETS> 929,383
<CURRENT-LIABILITIES> 211,665
<BONDS> 0
0
0
<COMMON> 90
<OTHER-SE> 237,947
<TOTAL-LIABILITY-AND-EQUITY> 929,383
<SALES> 739,467
<TOTAL-REVENUES> 739,467
<CGS> 608,518
<TOTAL-COSTS> 608,518
<OTHER-EXPENSES> 59,693
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,267
<INCOME-PRETAX> 50,989
<INCOME-TAX> 20,933
<INCOME-CONTINUING> 26,667
<DISCONTINUED> 0
<EXTRAORDINARY> (643)
<CHANGES> 0
<NET-INCOME> 26,024
<EPS-PRIMARY> 2.43
<EPS-DILUTED> 2.37
</TABLE>
<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-2
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
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-3
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
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-4
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------
CLASS A CLASS B ADDITIONAL
---------------------- ----------------------- 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-5
<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-6
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
Dura Automotive Systems, Inc. (the "Company") and subsidiaries designs and
manufactures 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-7
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Excess of cost over billings on uncompleted tooling projects represents
costs incurred by the Company in the production of customer-owned tooling to be
used by the Company in the manufacture of its products. The Company receives a
specific purchase order for this tooling and is reimbursed by the customer
within one operating cycle. Costs are deferred until reimbursed by the customer.
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>
Buildings.................................................... 20 to 30 years
Machinery and equipment...................................... 3 to 20 years
</TABLE>
Accelerated depreciation methods are used for tax reporting purposes.
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements which extend the useful life of the item are
capitalized and depreciated. The cost and accumulated depreciation of property,
plant and equipment retired or otherwise disposed of are removed from the
related accounts, and any residual values are charged or credited to income.
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-8
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
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-9
<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-10
<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-11
<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-12
<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 increase, as defined in
F-13
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. STOCKHOLDERS' INVESTMENT: (CONTINUED)
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-14
<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-15
<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-16
<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 Company
does not believe the final allocation of purchase price will be materially
different from preliminary allocations. Any
F-17
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. ACQUISITIONS: (CONTINUED)
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-18
<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-19
<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-20
<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-21
<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
PENSION BENEFITS OTHER THAN PENSIONS
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-22
<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-23
<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-24
<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 January 19, 1999, the Company announced they had entered into a
definitive merger agreement with Excel. Subject to stockholder approval, each
share of Excel common stock will be converted into the right to receive either
(i) $25.50 in cash or (ii) 0.8 shares of Dura Class A common stock. This right
is subject to proration to ensure that 50 percent of the outstanding shares of
Excel is exchanged for cash and 50 percent is exchanged for shares of Dura Class
A common stock. The cash component of the offer will be financed under a new
bank credit agreement.
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 January 26, 1999, the Company announced an offer to acquire all of the
outstanding common stock of Adwest Automotive plc ("Adwest"), a leading European
designer and manufacturer of driver control mechanisms. The offer of L1.50 per
share (approximately $2.48 per share) has been recommended by the board of
Adwest and is subject to acceptance by at least 90% of Adwest's shareholders. In
the event all shares are ultimately tendered, the total consideration would be
approximately $210 million and will be financed under the Company's new bank
credit agreement. In addition, approximately $120 million of indebtedness will
be assumed as part of the acquisition. Adwest had revenues of $365 million for
its most recent fiscal year ended June 30, 1998.
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.
F-25
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
The Company expects these acquisitions to close during the first 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-26
<PAGE>
Dura Automotive Systems, Inc.
Schedule II: Valuation and Qualifying Accounts
ADDITIONAL PURCHASE LIABILITIES RECORDED IN CONJUNCTION WITH ACQUISITIONS:
The transactions in the additional purchase liabilities recorded in
conjunction with acquisitions for the years ending December 31, 1996, 1997
and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Balance, beginning of the year $ 4,598 $ 2,752 $ 27,934
Provisions - 30,204 66,038
Utilizations (1,846) (5,022) (13,017)
------- ------- --------
Balance, end of the year $ 2,752 $27,934 $ 80,955
------- ------- --------
------- ------- --------
</TABLE>
S-1
